Wednesday, November 20, 2013

Dynamics of Resource Erosion

COOL Karel, DIERICKX Ingemar, ALMEIDA COSTA Luis
Dynamics of Resource Erosion in Palgrave Encyclopedia of Strategic Management Palgrave, M. Auger, D. Treece (Eds.) (2014)

This article 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 spillovers, customers leaving, expiration of a patent). The article discusses two patterns of erosion, linear and exponential, and explores their strategic implications. It 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.