Wednesday, December 12, 2012

Economies of Resource Accumulation
INSEAD Working Paper 2012/127/ST

This paper discusses when firms may expect economies in the accumulation of resources (asset mass efficiencies). Specifically, we describe situations in which the accumulation of a resource benefits from a “success breeds success” dynamic that creates an exponentially growing gap between resource levels of early movers and imitators. Early movers can expect such an advantage where products or services have high evaluation costs, durability, trial costs, network value and cost, impulse characteristics, and dependence on complementary products. Where the accumulation of one resource depends on the level of another resource, accumulation economies may also be expected. The mechanisms are illustrated using stylized stocks-flows simulations with the iThink software.