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Appropriability - Sustainability of Competitive Advantage
Strategic Management
One of the factors affecting sustainability of Competitive Advantage is appropriability. Appropriability refers to the ability of the firm’s owners to appropriate the returns on its resource base. Even where resources and capabilities are capable of offering sustainable advantage, there is an issue as to who receives the returns on these resources. This means, that rewards are directed to from where the funds were invested, rather than creating an advantage with no actual reward to people to invested capital Im not able to understand what this means. Could someone explain? An example would be useful
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Best Answer
Appropriability ensures that those who invest resources (capital providers, shareholders) receive commensurate rewards, aligning incentives for sustained investment and innovation. Without appropriability, even strong competitive advantages may become unsustainable, as the lack of reinvestment or the siphoning of returns diminishes long-term value creation. Say a company gets a technology which would help it to generate good revenues. But a lot of that money goes off in employees salary and marketing. so investors are left with nothing. This means the ones who invested are not able to get reward.
