Sustained Competitive Advantage and the Modern Labour Theory of Value

The paper argues that the principal components of the Resource- Based View (R-BV) as a theory of sustained competitive advantage (SCA) are not a sufficient basis for a complete and consistent theory of firm behaviour. Two important missing elements are governance arrangements and value theory. Specifically the paper proposes a link between governance and value theory through a ‘modern labour theory of value’ (MLTV). The link operates first from the labour process, where value is created but is imperfectly observable by firm governance mechanisms and imposes monitoring costs. Second it operates through contractual arrangements which impose fixed cost structures on activities with variable revenues. The paper thereby explains how value originates in risky and difficult to monitor productive processes and is transmitted as rents to organizational and capital market constituents. It then reviews other recent contributions to the R-BV arguing that the SCA-MLTV approach overcomes some of the gaps inherent in the alternatives, and thus offers a more complete and integrated view of firm behaviour.