On the explanation of competitive advantages of firms: three alternative approaches

Abstract

The survival, the development or the superiority of firms in an industry are determined by the firm’s competitive advantages relative to its competitors. This article reviews the theories on the definitions and sources of competitive advantages of firms. Three approaches to explain competitive advantages of firms which will be discussed include: (1) Porter’s theory of Five Forces competitive strategy, (2) resource-based view theory and (3) theories of entrepreneurship.