Value-Capture in the Face of Known and Unknown Unknowns

40 Pages Posted: 24 Aug 2019

See all articles by Kevin Bryan

Kevin Bryan

University of Toronto - Strategic Management

Michael D. Ryall

University of Toronto - Rotman School of Management

Burkhard C. Schipper

University of California, Davis - Department of Economics

Date Written: August 16, 2019

Abstract

A large theoretical literature on value capture following Brandenburger and Stuart Jr. (1996) uses cooperative games under complete information to study how and why firms earn supernormal profits. However, firms often have different information, beliefs, or creative foresight. We extend value capture theory to incomplete information (“known unknowns”) or unawareness (“unknown unknowns”), and illustrate some conceptual issues with that extension. Using the case study of Cirque du Soleil, we show how an entrepreneurial firm can profit even when it does not contribute materially to value creation.

Keywords: Value-capture theory, business strategy, cooperative games, unawareness, incomplete information, coarse core

JEL Classification: D21, D83, C71

Suggested Citation

Bryan, Kevin and Ryall, Michael D. and Schipper, Burkhard C., Value-Capture in the Face of Known and Unknown Unknowns (August 16, 2019). Available at SSRN: https://ssrn.com/abstract=3442024 or http://dx.doi.org/10.2139/ssrn.3442024

Kevin Bryan

University of Toronto - Strategic Management ( email )

Canada

Michael D. Ryall

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Burkhard C. Schipper (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-6142 (Phone)
530-752-9382 (Fax)

HOME PAGE: http://www.econ.ucdavis.edu/faculty/schipper/

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