Invited Editorial: The Four Theories of Profit and Their Joint Effects

Abstract

As a theory of profit, resource-based theory is focused on a single causal mechanism—competitive advantage. Although this focus has been useful in helping to understand some sources of interfirm profit differentials, it is nevertheless highly limiting because competitive advantage is not the only causal mechanism by which profit can be generated. Three other mechanisms, labeled here as rivalry restraint, information asymmetry, and commitment timing, have also been extensively studied as sources of profit. Rather than continuing to examine each of these four mechanisms’ main effects on profit in isolation, and thereby generate increasingly incremental knowledge over time, the author proposes an alternative agenda for future research—namely, to synthesize multiple mechanisms in order to focus on their relatively unexplored interaction effects on profit. This article reviews the small but emerging literature of research that has already begun to pursue this agenda and outlines some logical next steps for further development.