Firm-Level Competitive Advantage: Concepts and Theories

In the perspective of 21st century, the firms have settled in a competitive and complicated position influenced by various factors such as globalization, technological development and overwhelming spread of new technologies. In the framework of this new perspective, the firms should act differently than before for the sake of their survival and advancement. Especially, the firms should look for new resources of competitive advantage, and use new forms of competition which in turn needs clear understanding of the nature and dynamism of competition. This paper tries to present competitive advantage theories as well as rendering concepts of competitive advantage. Specifically, there are three major theories on competitive advantage: Industrial Organization (IO) theory, Resource Base View (RBV) and Schumpeterian theory. IO theory concentrates on the behavior of an attractive industry, RBV focuses on attractive resources’ group, and Schumpeterian theory concentrates on the existence of uncertainty and the necessity of continuous innovation from the firms. Thus, any of these theories possess their own specific characteristics and conditions, such that currently, competitive advantage theories emphasis on combining views and attention to both external and internal factors, for the success of the firms. The results of this paper are important for distinguishing the concepts of comparative, absolute and competitive advantage, as well as for the theoretical analysis of the competitive advantage.