Untangling the Origins of Competitive Advantage

Iain Cockburn, Rebecca Henderson, and Scott Stern


This paper begins to reconcile competing perspectives on the origins of competitive advantage by examining the adoption of "science-driven" drug discovery, a performance-enhancing organizational practice. Science-driven drug discovery diffused slowly, allowing us to disentangle alternative theories of organizational heterogeneity. Adoption is driven by initial conditions, time-varying internal and external environmental conditions, and convergence (firms positioned least favorably adopt most aggressively). While accounting for initial conditions is critical, managers are sensitive to idiosyncratic environmental cues. The origins of competitive advantage may therefore lie in the ability to identify and respond to environmental cues well in advance of observing performance-oriented payoffs.