The Dynamics of Resource Erosion
15 Pages Posted: 20 Jul 2013
Date Written: July 19, 2013
The paper discusses patterns of resource erosion (alternatively called resource decay, leakage, depreciation). Taking a stocks-flows perspective, erosion is conceptualized as the loss of value per period (e.g. a year) of an asset stock (e.g. R&D capital, brand loyalty) as a consequence of a variety of mechanisms (e.g. R&D spill-overs, customers leaving, expiration of a patent). The paper discusses two patterns of erosion, linear and exponential, and explores their strategic implications. The paper also discusses some unexpected outcomes that may result from the combined effect of common growth and decay patterns, as well as additional difficulties that stem from inference lags.
Keywords: Resource Erosion, Resource Decay, Resource Leakage, Competitive Advantage, Asset Stocks, Stocks and Flows, Exponential Decay, Spillovers, Resource Imitation, Resource Complementarity, Success-Breeds-Success, Aggregate Stocks, Word-of-mouth
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