Value Creation, Value Capture, and Supply Chain Structure: Understanding Resource–Based Advantage in a Project–Based Industry

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Abstract

This study uses resource-based theory concerning the interplay between value creation and value capture (Priem & Swink, 2012) to explain supply chain structure in a project-based industry. Taking this approach has the potential to change the focus of resource-based thinking from competition between industry rivals to the tension between buyers and suppliers that structures supply chains. Value creation, which is the function of product market strategy, determines which supplier resources are critical and thus determines which suppliers should be in a position to capture value. When supplier capabilities are critical, buyers have incentives to maintain value creation while structuring the supply chain to reduce supplier power. I test the resulting hypotheses by applying multivariate analysis of variance techniques to data from the worldwide motion picture industry. Because the production companies that make movies enact a variety of product market strategies to create value for consumers, suppliers of visual and special effects have a range of opportunities for value capture. I find support for the hypotheses, suggesting that some buyers structure supply chains in counter-intuitive ways when suppliers have high levels of resource-based bargaining power.

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