Estimating Value Creation from Revealed Preferences: Application to Value-Based Strategies

HEC Paris Research Paper No. SPE-2016-1156

Strategic Management Journal, Forthcoming

41 Pages Posted: 1 Jul 2016 Last revised: 17 Apr 2019

See all articles by Olivier Chatain

Olivier Chatain

HEC Paris - Strategy & Business Policy

Denisa Mindruta

HEC Paris - Strategy & Business Policy

Date Written: December 28, 2016

Abstract

We develop and apply a new set of empirical tools consistent with the tenets of value-based business strategies, leveraging the principle that “no good deal comes undone” and the methods of revealed preferences, to empirically estimate drivers of value creation. We demonstrate how to use these tools in an analysis of value creation in buyer–supplier relationships in the UK corporate legal market. We show that our approach can uncover evidence of subtle mechanisms that traditional methods cannot easily distinguish from each other. Furthermore, we show how the estimates can be used as parameters of biform games for out-of-sample analyses of strategic decisions. With readily available data on relationships between firms, this approach can be applied to many other contexts of interest to strategy researchers.

Managers need to understand the drivers of value creation for customers in order to make competitive positioning decisions and understand when they can capture value under competition. However, estimates of the relative importance of each driver are typically difficult to obtain. In this paper, we help remedy this problem by demonstrating a novel method that obtains estimates of the contribution of various drivers of value creation from commonly available data of buyer–supplier relationships. These estimates can then be used to inform the strategy-making process. Word count: 84 words.

Keywords: Value-based strategy, Revealed preferences, Cooperative game theory, Buyer–supplier relationships, Client-specific economies of scope

Suggested Citation

Chatain, Olivier and Mindruta, Denisa, Estimating Value Creation from Revealed Preferences: Application to Value-Based Strategies (December 28, 2016). HEC Paris Research Paper No. SPE-2016-1156, Strategic Management Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2801518 or http://dx.doi.org/10.2139/ssrn.2801518

Olivier Chatain (Contact Author)

HEC Paris - Strategy & Business Policy ( email )

1, rue de la Libération
Jouy-en-Josas Cedex, 78351
France

HOME PAGE: http://www.olivierchatain.com

Denisa Mindruta

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
150
Abstract Views
876
Rank
352,794
PlumX Metrics