由資源基礎觀點與社會交換理論探討績優企業如何獲取競爭優勢—台灣會展產業雙個案研究

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(1)國立臺灣師範大學翻譯研究所碩士論文 A Thesis Presented to the Graduate Institute of Translation and Interpretation National Taiwan Normal University. 指導教授：張琦雅博士 Advisor: Dr. Chi-Ya Chang. 由資源基礎觀點與社會交換理論探討績優企業如何獲取競爭優勢—台灣會展產業雙個案研究 An Exploration of How High-performing Corporations Create Sustained Competitive Advantages from Resource-based View and Social Exchange Theory – Two Cases Studied within the Industry of MICE in Taiwan. 研究生：賴諭萱 Advisee: Yu-Hsuan Lai. 中華民國九十八年六月. June 2009.

(2) Acknowledgements. There are so many people to whom I would like to extend my gratitude. If anyone whose name is missed out here, please do remember that my thanks also go to you. First of all, I would like to express my appreciation to my advisor, Dr. Chi-Ya, who guided me through the process of thesis writing and connected me with the employers of the studied firms. I am also very grateful to the employers of the two firms for allowing me to interview them and employees and for providing me with so much help and information. My special thanks go to Amanda Liu, who works at the company, which is a very important customer of Firm B. Without her, there would have been a void in my thesis left unfilled.. In addition, I want to thank my parents who have supported me, financially and psychologically, throughout the four years of study at GITI. Sally Wu, the important mentor of my life and one of my dearest friends, I owe you a great debt of gratitude. I am also grateful to the teachers at GITI for the things you taught me. Because of my friend, Rita Chen, and my classmates, Allie, Lily, Michelle, Ruby, Susan, Tia, Tony, and many more, the path to the completion of my study at GITI and my thesis seemed to be less ‘winding’ and harsh, and more interesting and meaningful. My long-time friend, Eunice, I thank you for being there for me and listening to me gripe. At last, I thank anyone who has helped me along the way..

(3) Abstract The global MICE industry is growsing at an unprecedented pace in the tourism industry. However, the MICE industry itself is not profitable. Tremendous economic growth lies in the peripheral industries such as translation and interpretation, travel-related services, and accommodation and catering services etc. Translators and interpreters are indispensable to the success of meetings and exhibitions. Nonetheless, little attention has been given by scholars of translation and interpretation related studies to the multi-faceted issues faced by the MICE industry in Taiwan. In view of this lack of research on the MICE industry, this study aims to fill the void in the literature by focusing on firm-level issues. By using resource-based view and social exchange theory, this study attempts to answer the two basic questions of what high-performing companies have and have done in order to have sustained competitive advantages and superior performance in the MICE industry. Moreover, this study will provide insight into existing and potential industry players as well as freelance translators and interpreters who are interested in this industry. The research methods adopted include case study and content analysis approaches. Twenty-one stakeholders, internal and external to the two study cases, participated in the study. The research results show that an organisational culture centering on the perception of quality leads the study cases to pursue better quality human resource practices. In order to bring out the best in employees, they have comprehensive and robust human resource, operations, project, and quality control management programmes, which later on become rooted and embedded in the companies. The two firms studied in this research convert key resources into a core competence, and hence sustained competitive advantages, by developing beneficial social exchanges with employees, suppliers, and customers, who will bring about more new customers. Ultimately, profits will result, and the two firms will outperform other competitors. Due to the close examination of the interaction among the studied cases and their suppliers (freelance interpreters/translators) and customers, the finding of the study extends Lawler’s (2001) generalised exchange by incorporating other types of exchange into it. Further studies on the macro market structure and micro customer relationships of the MICE Industry in Taiwan are suggested. Keywords: generalised exchange, resource-based view, social exchange theory, sustained competitive advantages, the MICE industry. i.

(4) 摘要全球會展產業是觀光業中成長速度最驚人的一環，然會展產業本身所包含的場地租借、專業會議籌辦人與專業展覽籌辦人的收益並不高，真正受惠的是周邊協力廠商，如口筆譯業者、旅遊業者、住宿餐飲業者等。口筆譯員為會議展覽中不可或缺之要素，唯口筆譯研究中觸及會展產業各議題的研究甚少。有鑑於會展產業研究之匱乏，尤以產業企業相關議題為最，本研究冀盼能提供會展產業業界企業、欲加入會展產業業者與自由口筆譯者參考。本研究以資源基礎理論與社會交換理論為理論基礎，探討會展產業表現優異之公司所應具備的條件與進行的活動，以發展永續競爭優勢，且創造出卓越的績效。本研究之研究方法採用個案研究與內容分析法，二十一位受訪者參與此次研究。研究結果顯示，個案之組織文化著重於品質，因而影響其人資源的選擇。兩個個案採用健全的人力資源管理、作業管理、專案管理與品質控制管理，以充分開發高品質的人力資源。經過長時間的積累，所有的運作深植於企業內部。本研究之個案廠商藉由與員工、供應商及客戶進行社會交換，將關鍵資源轉化為核心競爭力，終究成為永續競爭優勢。透過仔細審視個案與其供應商（本研究以自由口筆譯員為主）和客戶之關係，本研究延伸學者 Lawler（2001）所提出的一般化交換，納入其他形式的交換，以解釋三者互動之特殊情形。本文建議，未來的研究可將重心放在產業研究中的產業結構，以及產業內業者與客戶之關係。關鍵字：一般性交換、資源基礎理論、社會交換理論、永續競爭優勢、會議展覽產業. ii.

(5) Table of Contents Table of Contents …………………………………………...…………………… List of Tables ......................................................................................................... List of Figures ………………………………………..…………………………... iii vii ix. Chapter One: Introduction 1.1 Research Background ……………..……………………..…………….. 1.2 Research Motivation ……………………………………..……………. 1.3 Research Purpose and Questions …...………...………………………... 1.4 Research Limitations ……………………….…………..……………… 1.5 Research Processes ……………….………………….………….……. 1 2 4 4 5. Chapter Two: Literature Review 2.1 Structure-Conduct-Performance Paradigm …………...……………….. 2.2 Status Quo of Global and Taiwan’s MICE Industries ………....………. 2.2.1 Definition of MICE ………………………………..…………….. 2.2.2 Current Development of the Global MICE Industry ………..…… 2.2.3 Current Development of Taiwan’s MICE Industry ………..…….. 2.2.4 Current Development of the T&I Industry in Taiwan …….……... 2.3 Resource-based View ……………….…………………...…………….. 2.3.1 Definition of Firm Resources ………...………………………….. 2.3.2 Characteristics of Key Resources ….....………………………….. 2.3.3 Evaluation of Key Resources …………………….……………… 2.4 Social Exchange Theory ……………………………………….…….… 2.4.1 Definition of Social Exchange Theory ……….………………….. 2.4.2 Types of Exchange Structures …………………………………… 2.4.3 Intra-firm Relationships ……….………………………………… 2.4.3.1 Industrial Relations ……………….…………………….. 2.4.4 Inter-firm Relationships ……………………………….………… 2.4.4.1 Firm-customer Relationships ……….…….…………….. 2.4.4.2 Firm-supplier Relationships ……………..…..………….. 2.5 RBV, Social Exchange Theory, and Sustained Competitive Advantages …………….…..……...……….…..…………….…..……... 9 12 12 14 16 19 21 22 25 26 30 30 32 34 34 35 35 37 40. Chapter Three: Methodology 3.1 Research Methods: Case Study and Qualitative Content Analysis ……………............................................................................... iii. 42.

(6) 3.2 Collection of Data …………………………………………………… 3.2.1 Secondary Data Collection ……………….…………………… 3.2.2 Primary Data Collection ............................................................. 3.2.2.1 Selection of Case ………………..……….…..………….. 3.2.2.2 Interview ………….......................……….…..………….. 3.2.2.3 Research Participants …........……….…..………………. 3.2.3 Design of Interview Questions ................................................... 3.3 Data Analysis ........................................................................................ 44 44 45 45 46 46 49 68. Chapter Four: Results & Discussions 4.1 Company Profile of Firm A ….………………………………………… 4.2 Case Analysis of Firm A …..…………………………………………. 4.2.1 Key Resources of Firm A and Sustained Competitive Advantages ………………………………………………………. 71 73. 4.2.1.1 Tangible assets …….…………………………………….. 4.2.1.2 Intangible assets ………………………………………… 4.2.1.3 Capabilities ………………………..…………………….. 4.2.2 Social Exchanges of Firm A and Sustained Competitive Advantages ……………………………………………………… 4.2.2.1 Employer vs. Employees ……………………………… 4.2.2.2 Project Manager vs. Suppliers ...………………………. 4.2.2.3 Industry Expert vs. Employer ………………………….. 4.3 Company Profile of Firm B …………………………………………. 4.4 Case Analysis of Firm B …………………….………………………..... 4.4.1 Key Resources of Firm B and Sustained Competitive Advantages …………………………………...……………..…... 4.4.1.1 Tangible Assets …………..........…..………………….... 4.4.1.2 Intangible Assets ………...........…..………………….. 4.4.1.3 Capabilities ……........…...........…..……………………. 4.4.2 Social Exchanges of Firm B and Sustained Competitive Advantages ….............................................................................. 4.4.2.1 Employer vs. Employees ..........…..………………….. 4.4.2.2 Project Managers vs. Suppliers ………………….……. 4.4.2.3 Customer vs. Employer …………..…………….……. 4.5 Cross-case Analysis …………………………………………………. 4.5.1 Key Resources and Sustained Competitive Advantages ……….. 4.5.1.1 Tangible Assets …………………………………….…... 4.5.1.2 Intangible Assets ………………………………….……. 74 76 78. iv. 74. 81 82 87 94 98 99 99 100 101 105 108 108 116 121 124 124 124 126.

(7) 4.5.1.3 Capabilities ……………………………………….……. 4.5.2 Social Exchanges of the Firm and Sustained Competitive Advantages ………………..………………...…………………. 4.5.2.1 Industrial Relations …………………..………….…... 4.5.2.2 Firm-supplier Relationships …….…………………… 4.5.2.3 Firm-customer Relationships ..………………….…… 4.5.3 Strategic Choices ………………………….……………………. 4.5.3.1 Diversification ………………...……………………... 4.5.3.2 Differentiation ………………...……………….……... 127 129 129 130 130 137 137 138. Chapter Five: Conclusions 5.1 Summary of the Research …………………………………………….. 5.2 Research Findings …………………………...……………………….. 5.3 Managerial Implications…………………………………….…………. 139 141 144. 5.4 Research Contributions and Suggestions for Future Study ………...…. 146. References ………………………………………………………………….... 148. Appendix Appendix A: Interview Questions for Employers (Chinese) ........................ -1Appendix B: Interview Questions for Employers (English) …....................... -3Appendix C: Interview Results for Firm A’s Employer (AR1) ...................... -5Appendix D: Preliminary Interview Results for Firm B‘s Employer (BR1) ……………………………………………. -44Appendix E: Interview Results for Firm B’s Employer (BR1) …................ -48Appendix F: Interview Questions for Employees (Chinese) ….................... -78Appendix G: Interview Questions for Employees (English) ….................... -81Appendix H: Interview Results for Firm A’s Employees …...................... -85Appendix I: Interview Results for Firm B’s Employees …......................... -113Appendix J: Interview Questions for Suppliers (Chinese) …..................... -170Appendix K: Interview Questions for Suppliers (English) …..................... -172Appendix L: Interview Results for Firm A’s Suppliers ….......................... -175Appendix M: Interview Results for Firm B’s Suppliers …......................... -198Appendix N: Interview Questions for Expert (Chinese) ..…...................... -216Appendix O: Interview Questions for Expert (English) …..…................... -218Appendix P: Interview Results for Expert …………….............................. -220Appendix Q: Interview Questions for Customers (Chinese) ...................... -244Appendix R: Interview Questions for Customers (English) …………… -246v.

(8) Appendix S: Interview Results for Customers …………......................... Appendix T: Interview Questions for Project Managers (Chinese) …........ Appendix U: Interview Questions for Project Managers (English) .…....... Appendix V: Interview Results for Firm A’s Project Manager …………. Appendix W: Preliminary Interview Results for Firm B’s Project Manager ………...………………........................... Appendix X: Interview Results for Firm B’s Project Manager …………. vi. -248-255-257-259-266-269-.

(9) List of Tables Table 2.1 ICCA Country and City Ranking Measured by Number of Meetings Organised in 2007 …….…………………………………… Table 2.2 Classification of Key Resources ………...……………….…………… Table 3.1 Background Information of Interview Participants …….…………… Table 3.2 Semi-structured Questionnaire for Employers (Tangible Assets) ......... Table 3.2 Semi-structured Questionnaire for Employers (Intangible Assets) ....... Table 3.2 Semi-structured Questionnaire for Employers (Capabilities) ............... Table 3.3 Semi-structured Questionnaire for Employers (Industrial Relations) ... Table 3.3 Semi-structured Questionnaire for Employers (Firm-supplier Relationships) ........................................................................................ Table 3.3 Semi-structured Questionnaire for Employers (Firm-customer Relationships) ………………………………………………………… Table 3.4 Semi-structured Questionnaire for Employers (First-movers) ……….. Table 3.4 Semi-structured Questionnaire for Employers (Strategic Choices) ….. Table 3.5 Semi-structured Questionnaire for Employees (Commitment) ………. Table 3.5 Semi-structured Questionnaire for Employees (Communication) …… Table 3.5 Semi-structured Questionnaire for Employees (Injustice) …………… Table 3.5 Semi-structured Questionnaire for Employees (Respect) ……………. Table 3.5 Semi-structured Questionnaire for Employees (Reciprocity) ………... Table 3.5 Semi-structured Questionnaire for Employees (Trust) ……………….. Table 3.6 Semi-structured Questionnaire for Employees (Intangible Assets) …... Table 3.6 Semi-structured Questionnaire for Employees (Capabilities) ………... Table 3.6 Semi-structured Questionnaire for Employees (Performance) ……….. Table 3.7 Semi-structured Questionnaire for Suppliers (Communication) ……... Table 3.7 Semi-structured Questionnaire for Suppliers (Continuity of Exchange) …………………………………………………………….. Table 3.7 Semi-structured Questionnaire for Suppliers (Flexibility) …………… Table 3.7 Semi-structured Questionnaire for Suppliers (Frequency) …………… Table 3.7 Semi-structured Questionnaire for Suppliers (Initiation of Exchange) …………………………………………………………….. Table 3.7 Semi-structured Questionnaire for Suppliers (Reciprocity) ………….. Table 3.7 Semi-structured Questionnaire for Suppliers (Trust) ………………… Table 3.8 Semi-structured Questionnaire for Customers (Frequency) ………….. Table 3.8 Semi-structured Questionnaire for Customers (Trust) ……………….. Table 3.8 Semi-structured Questionnaire for Customers (Communication) ……. Table 3.8 Semi-structured Questionnaire for Customers (Flexibility) ………….. vii. 16 29 49 51 51 52 52 53 53 53 54 55 55 56 56 57 57 58 58 59 59 60 60 61 61 61 61 62 62 63 63.

(10) Table 3.8 Semi-structured Questionnaire for Customers (Reciprocity) ………… Table 3.8 Semi-structured Questionnaire for Customers (Continuity of Exchange) …………………………………………………………….. Table 3.8 Semi-structured Questionnaire for Customers (Initiation of Exchange) …………………………………………………………….. Table 3.9 Semi-structured Questionnaire for Industry Expert (Credibility) ……. Table 3.9 Semi-structured Questionnaire for Industry Expert (Market Information/Knowledge) ……………………………………………... Table 3.9 Semi-structured Questionnaire for Industry Expert (Market Structure – Concentration of Market Share) ……………………………………… Table 3.9 Semi-structured Questionnaire for Industry Expert (Success Factor) ... Table 3.10 Semi-structured Questionnaire for Project Managers (Criteria for Supplier Selection) ………………………………………………….. Table 3.10 Semi-structured Questionnaire for Project Managers (Reciprocity) .... 64 64 64 65 65 65 66 66 67. Table 3.10 Semi-structured Questionnaire for Project Managers (Stability) …… 67 Table 3.10 Semi-structured Questionnaire for Project Managers (Trust) ………. 67 Table 4.1 A Comparison of Data on Industrial Relations from Employer and Employees ………………...…….......................................................... 81 Table 4.2 A Comparison of Data on Firm-supplier Relationships from Project Manager and Suppliers …….....………………………………………. 88 Table 4.3 A Comparison of Data on Firm-customer Relationships from Industry Expert and Employer ………………………………..…….... 94 Table 4.4 A Comparison of Data on Industrial Relations from Employer and Employees …………………………………………………..…….. 108 Table 4.5 A Comparison of Data on Firm-supplier Relationships from Project Manager and Suppliers ………………………………..….…………. 116. viii.

(11) List of Figures Figure 1.1 Research Process Flowchart ………………………………………….. 7 Figure 2.1 The Structure-Conduct-Performance Paradigm ……….…………… 10 Figure 2.2 The MICE Industry Structure ……………………………………….. 14 Figure 2.3 A Resource-based Model of Sustainable Competitive Advantage …... 24 Figure 2.4 A Revised Resource-based Model of Sustainable Competitive Advantage ……………………………………………... 28 Figure 3.1 Case Study Method ………………………………………….………. 44 Figure 3.2 Data Collection Process ……………………………………………... 69 Figure 4.1 Organisation Structure Chart of Firm A ……………………………... 72 Figure 4.2 Organisation Structure Chart of Firm B …………………………… 98. ix.

(12) Chapter One Introduction. 1.1 Research Background. The MICE industry is now one of the fastest growing sectors among the global tourism industry (Hing et al., 1998). The acronym “MICE” stands for Meetings, Incentives, Conferences/Conventions, and Exhibitions. The MICE industry has been around in Europe and North America for more than 100 years (Weber and Ladkin, 2003) whereas in Taiwan it is an emerging industry that is slightly more than 20 years old (Department of Investment Services of Ministry of Economic Affairs, 2008). In the past few decades, the global MICE industry has grown at an unprecedented pace, and its economic contributions to local, state, and national levels have attracted much attention from countries around the world (Lee and Back, 2005).. As the Professional Convention Management Association (PCMA, 2009) reported, U.S. meetings and events have generated approximately US$40 billion in tax revenue accounting for 15% of all travel-related spending and have created job opportunities for more than 1 million people. Because of meetings, events, and incentive travels, the U.S. government has been able to keep the current unemployment rate at 7.6% instead of 8.2%, preventing U.S. households from paying additional taxes in the current economic downturn (PCMA, 2009). In Taiwan, it has been estimated that the buying power of overseas delegates is 3.9 times of that of leisure tourists, and the convention industry alone generates up to NT$1.3 billion in revenue each year (Wong et al., 2006). These figures clearly indicate how attractive the MICE industry appears to current players and potential entrants.. 1.

(13) 1.2 Research Motivation. It has been stated that the MICE industry has an economic multiplier effect, which means only 10% of its income derived from delegates, accompanying persons, exhibitors, and participants goes directly into its main operations. Expenditures on taxis, coaches, restaurants, hotels, retailers, pre- and post-convention tours and so on accounts for the remaining 90% of income (Department of Investment Services of Ministry of Economic Affairs, 2008). As Lee and Back (2005) stressed, the economic contribution is not the only merit of the MICE industry to host destinations, with one of the other benefits being a tremendous increase in all travel-related activities. The real beneficiaries of hosting exhibitions and conventions are the peripheral industries, meaning that the successful development of the MICE industry helps its peripheral industries prosper.. Translators and interpreters have their part to play in the rapidly developing MICE market. In their investigation into potential customers’ decision on choosing professional conference organizers (PCO’s), Wong et al. (2006) pointed out that the interpreting and translation services provided by a PCO has taken priority over other services when customers consider which one to hire. PCOs serve as coordinators between suppliers and clients and provide full service conference management, including the selection of interpreters and translators, conference design, venue selection and booking, printing and web services, etc. Translators and interpreters are indispensable to the success of international meetings and exhibitions. As the fast and strong growth of Taiwan’s MICE industry continues, PCO’s and translation agencies (who act as agents matching interpreters and translators to jobs) are likely to prosper, and their prosperity translates into more work opportunities for interpreters and 2.

(14) translators.. In the light of the link between the development of the robust MICE industry and its influence over peripheral industries such as the translation and interpretation industry (T&I industry), translators and interpreters in Taiwan ought to realise the importance of the development of this emerging industry and place more attention on it. Scholars and experts in the T&I industry, however, have been absent from the ongoing research process in the study of the MICE industry. Since the establishment of the Graduate Institute of Translation and Interpretation Studies at Fujen Catholic University in 1988 and the Graduate Institute of Translation and Interpretation at National Taiwan Normal University in 1996, no graduate student has conducted research on the MICE industry. Previous research on Taiwan’s MICE industry has mostly been carried out by scholars in other fields such as business administration, tourism, or public administration, to name a few (Wang, 1996; Chuang, 2004; Chang, 2006). Furthermore, these studies focused mainly on the operating environment, i.e. issues surrounding the industry as a whole or MICE industry development in different countries, regions, or cities. There is scant research available in the literature on players in this industry.. Recognising the importance of developing the MICE industry to the prosperity of companies operating in its core and peripheral segments, its particular relevance to translators and interpreters, and the lack of past research on the firm level, the researcher aims to discover the key success factors of players with extraordinary performance as compared with their rivals in Taiwan’s MICE industry and add to the existing body of knowledge.. 3.

(15) 1.3 Research Purpose and Questions. While empirical and theoretical studies of the MICE industry cover a wide range of subjects, this research will focus on its meetings and convention aspects. The research scope is limited to two high-performing firms, one PCO and one translation agency, to whom translators and interpreters are closely related and whose services are very relevant to the meetings and convention industry. It is, however, noteworthy that most surveys and studies of Taiwan’s MICE industry tended to look at the industry level, and it is at times difficult to discuss the history and development of the meetings and convention industry without mentioning the incentive and exhibition sectors.. This study aims to examine the reasons how and why the two high performers have succeeded in the MICE industry. The study’s findings will serve as a reference for existing players and potential entrants who may then, hand in hand, create a perfectly competitive and robust MICE industry in Taiwan. To serve the purpose this study is intended for, the two following research questions will be addressed: Q1. What have the high performers possessed in order to gain sustained competitive advantages and therefore superior performance? Q2. What have they done to attain sustained competitive advantages which in turn confer superior performance?. 1.4 Research Limitations. The industry code of practice and concern for confidentiality made it difficult for the researcher to approach the customers of the studied firms for interviews. Data 4.

(16) from both firms’ customers were, therefore, limited. Only one of Firm B’s clients was willing to be interviewed by telephone. As a result, how firm-customer relationships are maintained relies heavily on statements made by the two employers of the selected cases. Furthermore, the latest survey of Taiwan’s MICE industry available to the public was published in 2008, yet there was scant elaboration on its market structure in terms of product differentiation, absolute cost advantage, and capital advantage, as well as the elements included in firm conduct and market performance. The dearth of reliable information on the convention and exhibition market hinders the researcher from getting a clearer picture of the structure of this market. Nonetheless, the researcher strived to collect primary data from in-depth interviews with 21 stakeholders of two outstanding firms in the Taiwanese MICE industry.. 1.5 Research Processes. The study is organized in five chapters. The first chapter covers research background, research motivation, research purpose and questions, and research limitations.. The second chapter briefly reviews the literature on the structure-conduct-performance paradigm, laying the groundwork for subsequent analysis in this paper. Its first section provides a review of the status quo of the MICE industry as well as that of one of its partner industries, the T&I industry. The following sections focus on the resource-based view (RBV) and social exchange theory, and the links among resource-based view, social exchange theory, and competitive advantages.. 5.

(17) The third chapter describes the research methodology that will be followed throughout the research and different stages of implementation. Also included are the research framework, research participants of choice, data collection, and data analysis procedures.. The fourth chapter reports the results of the study including a company profile for both Firm A and Firm B, case analyses of both firms, and cross-case analysis in terms of the determinants of sustained competitive advantages and hence superior performance. The fifth chapter summarises the major findings, implications, and research contributions and recommendations for future studies. The overall approach to the organisation of this study is illustrated in Figure 1.1.. 6.

(18) Identifying Research Purpose & Questions Chapter One. Defining Research Scope. Chapter Two. Secondary Data Collection  Literature Review  Non-literature Review. SCP Model Review:. Relationship. Relationship. Governmental print,. Definition of ‘MICE’. of RBV and. of SET and. electronic publications. and the Status Quo of. Competitive. Competitive. and news, industry. the MICE Industry. Advantages. Advantages. surveys, archives, company websites, etc.. Chapter Three. Research Methods  Case Study  Content Analysis. Research Design. Primary Data Collection. Content Analysis of Primary Data. Analyses of Results Chapter Five. Conclusions and Implications in terms of RBV, Social Exchange and Competitive Advantages Figure 1.1 Research Process Flowchart. 7. Chapter Four.

(19) Chapter Two Literature Review. This chapter aims to review literature on the current situation of global and Taiwan’s MICE industries and the factors exerting influence over firm performance. To explain firm performance, Morgan et al. (2004) stressed that the Structure-Conduct-Performance paradigm (SCP) and resource-based view (RBV) are the two major theories that researchers normally draw on.. In the light of the study carried out by Morgan et al. (2004), who integrated both RBV and SCP theoretical perspectives, which had been considered as competing theories, this research will follow suit by using the SCP paradigm to examine the current development of the MICE industry and the T&I industry and focus more on firm-level performance, which is when RBV and social exchange theory (SET) come into play. The resource-based view will be used to examine what firms ought to have while social exchange theory serves as a theoretical tool to explore what firms have done with what they have had in order to generate sustained competitive advantages.. This chapter will then be divided into five sections. The first section provides insight into SCP theory while the second section looks at the market structure of the MICE industry as well as encompasses the current situation of the T&I industry in Taiwan, followed by the third and fourth sections explaining inter-firm performance variations with RBV and SET, respectively. The last section briefly discusses the relations among RBV, social exchange theory, and competitive advantage.. 8.

(20) 2.1 Structure-Conduct-Performance Paradigm. Before analysing the MICE industry in detail, it is sensible to give a brief account of the SCP paradigm, which has been widely used in industrial organisation economics. It was originally the work of Mason in 1939 and further developed by many scholars such as Bain and Stigler (Chen et al., 2004). Structure is concerned with market structure defined primarily by the concentration of market shares; conduct refers to either the competitive or collusive behaviours of firms; performance is about the social efficiency defined by the level of market power (Chen et al., 2004). The paradigm describes the environmental conditions that determine levels of firm performance. The theory is based on two hypotheses: the structural characteristics of the locus in which a firm operates and effective and efficient execution of planned competitive strategies (Porter, 1985). In other words, a firm’s performance is determined by the structure of a firm’s market that defines the level of competitive intensity and by a firm’s ability to obtain competitive advantages with the implementation of competitive strategies.. Market structure is mainly determined by the number of sellers and buyers, concentration of market shares, economy of scale, barrier to entry and exit, absolute cost advantage, capital advantage, product differentiation, governmental policies, and distribution channels, whereas other basic market conditions such as demand and supply sides also have a minor influence on market structure. The behaviours of firms include pricing strategies, product development strategies, advertising, R&D, plant investment, legal strategies, etc. Performance consists of production and allocation efficiency, full employment, equity, quality and service, and so on (Mason, 1939; Scherer, 1979; Chen et al., 2004). The SCP paradigm is depicted in Figure 2.1. 9.

(21) Demand Side Price elasticity Substitutes Market growth Type of good Method of Purchase. Basic Market Conditions. Market Structure Number of sellers and buyers Product differentiation Barrier to entry and exit Absolute cost advantage Capital advantage Distribution channels Government Policies Antitrust policy Regulation Taxes and subsidies Trade regulations Price controls Wage regulations Investment incentives Employment incentives Macroeconomic policies. Conduct Pricing strategies Product development strategies Advertising R&D Plant investment Legal strategies. Performance Production efficiency Allocation efficiency Full employment Quality and service Equity. Figure 2.1 The Structure-Conduct-Performance Paradigm Source: Chen et al. (2004, p. 6). 10. Supply Side Technology Raw materials Unionisation Product durability Location.

(22) Nevertheless, the secondary data on firm behaviours and performance in the MICE industry and the peripheral T&I industry have been fairly scarce. A survey on Taiwan’s MICE industry was carried out in 2008 by the Department of Investment Services of Ministry of Economic Affairs. The survey has limited information about the market structure, and is short on details about the conduct of firms and industry performance. As for the peripheral T&I industry, the Survey of Translation and Interpretation Industry in Taiwan was released by the Government Information Office in 2004, detailing the market structure in terms of number of sellers and buyers, barrier to entry and exit, and absolute cost advantages as well as government policies. No updated surveys concerning the two industries have been available since then.. In the absence of sufficient secondary data on the MICE industry, especially with regard to firm conduct and market performance, the researcher was unable to examine firm conduct and market performance through SCP paradigm. Instead a qualitative research method using the case study approach is adopted to delve into the factors contributing to the superior performance of two firms, one in the MICE industry and the other in its peripheral T&I industry. It is based on the two theoretical perspectives: resource-based view of the firm and social exchange theory. For the same reason, market performance will be replaced by the performance of the two chosen firms in this research.. One of the ultimate goals of firms is to generate superior performance. Firms use different methods and criteria to measure performance. The term ‘performance’ itself is comparative because it is measured against a set of standards or that of a competitor. When performance is to be measured, two questions have to be addressed, why and what to measure (Crowther, 1996). There are financial and non-financial measures, or 11.

(23) a combination of the two to evaluate performance. For instance, Morgan et al (2004) measured the performance of export ventures against economic (market shares, profitability, etc.) and strategic (establishment and maintenance of relationships with key members of the value chain) dimensions. Another example is Clulow et al. (2003) using the average rate of return of funds in their study with a financial services firm. They pointed out that the alternative criteria utilised to evaluate performance could be market share or rankings in the market. As access to the financial data is unattainable for the cases studied, this research will use both quantitative and qualitative performance measures to substantiate that the performance of the firms studied here is superior to their rivals.. 2.2 Status Quo of Global and Taiwan’s MICE Industries. Prior to the description of the current situation of international and domestic MICE markets, this section will first provide an overview of the concept of MICE and the industry.. 2.2.1 Definition of MICE. The International Association of Professional Congress Organisers (IAPCO) defines MICE as follows: 1) Meeting: it is a general term referring to a number of people who gather together in one place to confer or carry out a particular activity. A meeting can be held on a regular or ad hoc basis. 2) Incentive: it is a meeting event that is offered by an institute to its participants to reward previous performance. For example, a company organises a city visit for its 12.

(24) employees as a reward. 3) Conference/Convention: it is a participatory meeting designed for fact-finding, problem solving, discussion, consultation, etc. Generally speaking, a conference is smaller in scale, and features facilitation of information exchange. In terms of time scale, conferences are usually of limited duration with specific objectives. 4) Exhibitions: an event where products and services are displayed.. As the data from the International Congress and Convention Association (ICCA) indicated, there are around 400,000 conferences and exhibitions annually with a total value of the global meetings market (association and corporate) at $280 billion (see Camus, 2008). The MICE industry is a tremendously lucrative node because its development and buoyant prospects benefit industry partners.. The MICE industry’s supply chain or value system, which refers to the set of inter-organisational links and relationships required to produce a product or service (Johnson and Scholes, 2002), consists of main bodies: venues, professional convention organisers (PCO’s) and professional exhibition organisers (PEO’s), and partners of the industry (Department of Investment Services of Ministry of Economic Affairs, 2008). Other peripheral industries include but are not limited to translation and interpretation, retail (for shopping), communications and broadcasting, audio, video and communication devices, travel-related services, logistics and transportation, printing and publishing, stand construction contractors, accommodation and restaurants, centre rentals, etc. (see Figure 2.2 for detail).. 13.

(25) Figure 2.2 The MICE Industry Structure Source: translated from Tabei, S. (1997, p. 25) Convention: A Guide to a Flourishing Industry. Tokyo. The Simul Press Inc. 161.. 2.2.2 Current Development of the Global MICE Industry. The rapidly changing international economic situation has posed challenges to the MICE industry. For example, several U.S. enterprises have cancelled corporate meetings in order to avoid negative press coverage like that once targeted at American International Group (AIG) for their lavish meetings for top executives despite receiving bailout money (TBA, 2009). A study conducted for the PCMA (2009) has shown that as the U.S. economy weakens, company travel budgets will be expected to 14.

(26) fall by 3 to 6% in 2009. U.S. delegate attendance at international meetings in 2009 and 2010 will be affected as well. The U.K. has reported that it foresees a similar decline in the MICE sector. According to Travel Daily News (2009), Grass Roots HBI, a venue sourcing specialist, released their third edition of the Meetings Industry Report. It provides insights into the current and future situations of the U.K. meetings industry. Their predictions for the market in 2009 include a 6% drop in meeting and event budgets, a 9% drop in corporate meeting volume, and a focus on domestic meetings instead of international ones. Both studies indicated that the competition in the MICE industry has heated up leading to price cuts by airlines and venue rates with reductions of between 5% and 10%. Grass Roots HBI reiterated, however, that the industry has remained strong regardless of the economic downturn since face-to-face meetings have still been favoured for its highest return on investment among all marketing tools.. Many destinations, defined as a city, area or country which can be marketed to groups or individuals as a place to visit or hold an event (Convention Industry Council, 2005), have striven to build market presence in the industry. Most of them have made huge investments in building meeting and exhibition venues. It is anticipated that by 2010 there will be 1,104 venues (with a minimum of 5,000 square metres of indoor exhibition space) with a capacity of 31.1 million square metres. The ICCA rankings of 2007 showed that there were over 6,500 events, up from 5,700 in 2006 (ICCA, 2008), while the Union of International Associations (UIA, 2008) reported 10,318 meetings (8,864 meetings of international organisations and 1,454 other international meetings) in 2007. The Asia-Pacific region, in particular, has enjoyed significant growth in market demand and is expected to grow 20% by 2010 from 2006 (Department of Investment Services of Ministry of Economic Affairs of Republic of China, 2008). In 15.

(27) terms of market share, the region came in second (19.9%) after Europe (53.8%) in 2007 (ICCA, 2008). At the same time, four Asian countries ranging from Japan, China, Singapore, and South Korea made it to the top 20 and seven Asian cities. Singapore, Beijing, Hong Kong, Seoul, Bangkok, Taipei, and Kuala Lumpur took seven places in the top 20.. Table 2.1 ICCA Country and City Ranking Measured by Number of Meetings Organised in 2007 Rank 1 2 3 4 5 6 7 8 9 10 11 13 14 15 16 17 18 19. Country U.S.A. Germany Spain United Kingdom France Italy Japan Brazil Austria Canada Netherlands China-P.R. Australia Switzerland Portugal Sweden Belgium Finland Singapore Republic of Korea. Meetings # 467 429 303 281 255 250 215 209 204 197 195 195 194 175 153 137 124 122 120. Rank 1 2 3 4 5 6 8 9 10 11 12 14. 17 18 19. 120. City Vienna Berlin Singapore Paris Barcelona Budapest Lisbon Beijing Amsterdam Madrid Copenhagen Prague Hong Kong Seoul Stockholm Bangkok London Taipei Kuala Lumpur. Meetings # 154 123 120 115 106 90 90 87 82 77 76 72 72 70 70 70 69 67 66. Istanbul Brussels. 66 66. Source: ICCA, 2008. 2.2.3 Current Development of Taiwan’s MICE Industry. This is the first time Taiwan has made the top 20 of the ICCA ranking. “Taiwan is a remarkable newcomer in the top 20 as it only took fortieth place in 2006” 16.

(28) commented the ICCA (2008). Nevertheless, Taiwan was relatively late in developing the MICE industry as compared to other Asian countries (Department of Investment Services of Ministry of Economic Affairs, 2008). It was not until 2002 that Taiwan’s government started to focus on this industry by listing the MICE industry as a major plan in its ‘Guidelines and Action Plans for Service Industry Development’ (Taiwan Institute of Economic Research, 2008). In November 2004, the Executive Yuan of the Republic of China established the first ad hoc team responsible for the MICE industry under the Tourism Development and Promotion Committee (Department of Investment Services of Ministry of Economic Affairs, 2008). Starting from 2009, the Board of Foreign Trade of the Ministry of Economic Affairs has taken over the mission of developing the industry from the Commerce Department of Ministry of Economic Affairs.. So far, the government has invested $680 million in building large-scale exhibition venues such as the newly completed Nangang Exhibition Hall and Kaohsiung Business Exhibition Centre (Department of Investment Services of Ministry of Economic Affairs, 2008). Additionally, local governments have recently launched subsidy programmes for public or private sectors which host conferences or events (Cian, 2008; Taiwan Institute of Economic Research, 2008). The government offers a series of incentive programmes including tax preferences, R&D subsidies, low-interest loan, etc. in order to facilitate the rapid growth of the MICE industry. The year 2008 was declared as the Year of Action for Conventions and Exhibitions and 2009 as the Year of the Expansion for Conventions and Exhibitions (Department of Investment Services of Ministry of Economic Affairs, 2008).. In accordance with SCP theory, the concentration of market share is a key 17.

(29) determinant of market structure. An analysis of the MICE industry in Taiwan performed by the Department of Investment Services of Ministry of Economic Affairs (2008) reported that there were eleven PCO’s and approximately twenty-five PEO’s, which specialise in organising international or local exhibitions on the market. The ICCA estimated that 67 international meetings took place in Taiwan in 2007. Taiwan’s Tourism Bureau under Ministry of Transportation and Communications has also estimated that the total number of visitors to Taiwan in 2008 at 3,845,187. Among them, 59,226 visited Taiwan for the purpose of participating in conferences, accounting for only 1.54% of all visitors. By way of contrast, it is conspicuous that the market size, to the ratio of the number of PCO’s and PEO’s in Taiwan, is relatively small whereas the competition is heating up, implying high market concentration.. As set forth by Dwyer and Kim (2003), to be attractive, a destination must first possess core resources which are divided into endowed and created resources. They identified natural resources (climate, flora and fauna, and so on) and heritage and culture (history, customs, cuisine, artwork, music, etc.) as endowed resources. Regarding created resources, there are at least five types including tourism infrastructure, range of available activities, entertainment, shopping, and special events. Taiwan has both natural and created resources. The evidence provided by the Tourism Bureau found that food and scenery are the primary attractors of Taiwan. To international tourists, the must-see attractions are night markets, Taipei 101, and the National Palace Museum.. Taiwan’s MICE industry is not off limits. It has its own strengths as well as weaknesses. As the report performed by the Department of Investment Services (2008) pinpointed, Taiwan has faced four shortcomings in developing the industry. First, 18.

(30) Taiwan has limited exhibition space and dispersed facilities as compared to other Asian countries. Secondly, private professional exhibition organisers lack expertise in organising international exhibitions. What is more, many countries have allotted substantial marketing and advertising budgets to attract buyers whereas Taiwan still has not. Under the previous three premises, Taiwan appears less competitive. Lastly, there has been an imbalance between Northern and Southern Taiwan in the development of the MICE sector.. To sum up, friendliness, food, and scenery are three influential indicators of Taiwan’s competitiveness as a destination (Department of Investment Services of Ministry of Economic Affairs, 2008). Taiwan has been successful in bidding for the right to host international events including the World Games 2009, Deaflympics 2009, and the 2011 International Design Alliance Congress, to name a few.. 2.2.4 Current Development of the T&I Industry in Taiwan. As Figure 2.1 indicates, the T&I industry is a MICE peripheral industry. Whether an international convention or exhibition is successful relies on interpreting and translation services to bridge the gap between participants from diversified cultural backgrounds. This subsection gives a profile of the T&I industry in Taiwan in order to disclose the shared secrets of success of high-performing firms across the MICE industry in Taiwan... The Survey of the Translation and Interpretation Industry in Taiwan published by the Government Information Office (2004) concluded that as of December 2004 there were roughly 227 registered translation agencies/vendors of various sizes and other 19.

(31) non-translation agency firms providing translations and eight software localisation companies. Nevertheless, there are many more smaller and unregistered translation agencies on the market that are not included in the said research. In addition, since there are no distinct barriers to entry or exit, and entry to market requires little amount of fixed capital, anyone who is equipped with Chinese and English proficiency can become a market player. At times, translation agencies and non-translation agency firms offering translation services find themselves trapped in a price war with small translation agencies staffed by one or two people charging extremely low rates.. The ninety-eight translation agencies participating in the research reported NT$ 655,930,000 of annual revenues; 85 non-translation agency firms generated NT$ 13,008,000 of annual revenues, and eight software localisation firms estimated NT$ 277,055,000 of annual revenues. With respect to the sources of translation jobs, 92.8% of all the projects for translation vendors were from the domestic market and only 7.2% from countries abroad; for non-translation agency firms, 76% from the local market and 24% from the offshore market; for software localisation firms, 41.25% and 58.75% from domestic and international markets, respectively.. In the face of globalisation and internationalisation, global demands for translation and interpreting services have been growing. Pure translation and interpreting services, however, are no longer what clients need now. They want services integrated with IPR services, project management, communications, publishing, etc. Clients opt for one-stop shopping, and those translation vendors or non-translation agency firms who have conducted vertical integration and diversification activities across sectors are more likely to stand out from others (Government Information Office, 2004). 20.

(32) 2.3 Resource-based View. The SCP paradigm touches upon firm behaviours in response to market structure for better performance. Despite such behaviours as pricing strategies, product development strategies, advertising, R&D, plant investment, and legal strategies laid out in Figure 2.1, this research draws on RBV and social exchange theory to explore the factors contributing to firm performance superior to others in the MICE industry because previous studies have found out that analysis of intra-firm information provides more conducive insights into how competitive advantages can be gained than environmental analysis (Bharadwaj et al., 1993; Morgan et al., 2004).. To attain superior performance, firms need to achieve sustained competitive advantages (SCA’s) since they enable firms to make above-average profits (Bharadwaj et al., 1993). It has been claimed by Barney (1991, p. 102) that “a firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy.” To formulate and implement competitive strategies, and consequently maximise returns, the RBV stressed that it was critical for a firm’s management to identify, develop, and deploy key resources (Fahy, 2000).. Before digging into the notion of how key resources lead to competitive advantages, resources in a firm are to be defined.. 21.

(33) 2.3.1 Definition of Firm Resources. Wernerfelt (1984), the scholar who first coined the term ‘resource-based view,’ defined resources as anything that could be a strength or weakness of a firm. He placed firm assets into tangible and intangible resources that do not last forever. Barney (1991, p. 101) divided firm resources further into three categories: physical capital resources, human capital resources, and organisational capital resources. Physical capital resources are, for example, land, plant and equipment, geographic location, raw materials, or technology used in a firm. Human capital resources include the training, experience, judgement, intelligence, relationships, and insight of individual managers and workers in a firm. It is interesting to note that human resources are thought by some to be mobile because employees might be hired away or poached by other companies (Smart and Wolfe, 2000), but Johnson and Scholes (2002) emphasised that whether or not human resources are a source of SCA is dependent on the extent to which the knowledge of employees is personal to and owned by them or firms.. As for a firm’s formal reporting structure, formal and informal planning, coordinating systems, and informal relations with inter-firm and intra-firm stakeholders, they fall into the category of organisational capital resources. As set forth by Johnson and Scholes (2002), there are four types of resources which are (1) physical resources (buildings, location, machines, etc. ), (2) human resources such as skills of people, and knowledge of human resources, (3) financial resources including capital, cash, debtors and creditors, and monetary suppliers, and (4) intellectual capital (patents, brands, business systems, customer databases, etc.). From this standpoint, a firm has, in a broader sense, both tangible and intangible resources. 22.

(34) The resources per se, however, are not sufficient to produce superior performance. Routine and processes, which are similar to the organisational capital resources proposed by Barney (1991), are required to convert the resources into positional advantages and in turn a sustainable competitive advantage (Fahy, 2000; Johnson and Scholes, 2002). This shows why Fahy (2000) distinguished a firm’s resource bundle into three groups: tangible assets, intangible assets, and capabilities (also known as competencies by other researchers) (see Figure 2.3). In the similar vein, Clulow et al. (2003) noted that people in and outside firms use variable, idiosyncratic, and complex resources to create value offerings of goods and services and interact with one another in repeatable and firm-specific patterns of actions and routine, which result in capabilities.. 23.

(35) MANAGEMENT’S STRATEGIC CHOICES Resource Identification Resource Development/Protection Resource Deployment. KEY RESOURCES Tangible. Intangible. Capabil-. Assets. Assets. ities. Value Barriers to. Sustainable Competitive Advantage Value to. Duplication. Customers. Appropriability. Superior Performance Market Performance Sales Performance Financial Performance. Figure 2.3 A Resource-based Model of Sustainable Competitive Advantage Source: Fahy (2000, p. 100). Not all resources, however, are strategically relevant to obtaining competitive advantages (Barney, 1991). A firm needs ‘threshold resources and competencies’ to create, produce, and offer products/services to a market and support particular strategies in order to stay in business in a given marketplace (Johnson and Scholes, 2002, p. 149). Threshold resources and competencies only provide competitive parity for the firm, whereas key resources and core competencies confer sustained competitive advantages to the firm. That brings to the question of what resources are key resources. Prior to unravelling the answer, it is important to find out what attributes key resources and capabilities need to possess in order to enable a firm to. 24.

(36) conceive of and implement valuable strategies and confer competitive advantages.. 2.3.2 Characteristics of Key Resources. A number of researchers have focused their attention on the characteristics of key resources. First of all, Barney (1991) suggested that a firm’s key resources should be heterogeneous and immobile, or not tradable, for they inhibit other players in the marketplace from implementing the same strategies as well as pose entry and mobility barriers to potential competitors into the system. In addition, key resources must have four properties, which are value, rarity, inimitability, and non-substitutability. How the characteristics are relevant to sustainable competitive advantages is elaborated as follows: 1) Value: strategic resources enable firms to formulate and execute strategies so as to improve effectiveness and efficiency and, in turn, gain positional advantages, which competitors are unable to duplicate. Those resources are considered valuable by firms. 2) Rarity: valuable firm resources are not necessarily rare. As mentioned earlier, firms need to have threshold resources, which should be valuable, in order to stay in business. If valuable firm resources are simultaneously rare, rivals do not have access to those resources, and therefore, cannot implement the same value-creating strategies. 3) Inimitability: firms enjoy sustained competitive advantages only when their competitors cannot obtain the same valuable and rare resources. Barney (1991) explained that firm resources are inimitable for the either or all of the following reasons: unique historical conditions, causally ambiguous, and socially complex (Barney, 1991). 25.

(37) a. Unique historical conditions: a firm’s valuable and rare resources are developed through a long history that competitors cannot imitate. For example, first-mover advantages. b. Causally ambiguous: the link between a firm’s key resources and its sustainable competitive advantages is vague. c. Socially complex: a firm’s resources may be complex social phenomena over which rivals cannot exert control. 4) Non-substitutability: there should be no equivalent resources or strategic equivalents for other current or potentially competing companies to exploit and adopt the same strategy.. Other scholars have provided different interpretations of key resource characteristics. For example, Fahy (2000) proposed three other similar characteristics for key resources which include value, barriers to duplication and appropriability. Appropriability refers to the value which is distributed within the firm instead of suppliers, employees, or customers. Although there is a variance in the properties of key resources, the various interpretations are consistent with Barney’s (1991) version of key resource characteristics.. 2.3.3 Evaluation of Key Resources. The evaluation of key resources of firms is now made possible against the characteristics of key resources laid out in the previous section. Apart from Fahy (2000), who believed that tangible and intangible assets as well as capabilities are key resources with different levels of value to firms, Clulow et al. (2003) only recognised intangible assets (client trust and reputation for example) and capabilities (knowledge, 26.

(38) organisational culture, formal and informal planning, etc.) as key resources and revised Fahy’s (2000) resource-based model of sustainable competitive advantage with the reason being that tangible assets are valuable, but they are causally explicit and easily replicated, so they are not considered key resources, whereas intangible resources have value and are appropriable and inimitable, and hence, satisfy the criteria for a sustained competitive advantage.. “The main difference between the characteristics of tangible assets and intangible assets is that the latter are developed over a long time by implementing a consistent strategy that achieves high returns and this is difficult for rivals to replicate (Clulow et al., 2003, p. 229).”. Key capabilities cover a broad range from skills, knowledge, and informal relations with stakeholders to formal and informal planning, organisational culture, philosophy, coordinating systems, and control are embedded in the firm which gives rise to difficulties for competitors to capture and imitate, and therefore are key resources (Johnson and Scholes, 2002; Clulow et al., 2003) (see Figure 2.4). Furthermore, in a follow-up study that investigated the customer-based view of key firm resources, Clulow et al. (2007) found that to the customer, capabilities are of the greatest importance, followed by intangible resources, and then tangible resources. Moreover, Hall (1993) and Galbreath (2005) offered some evidence that capabilities are said to be the most strategic resources because they are the most difficult to replicate.. 27.

(39) Management’s strategic role . Key resources identification. . Key resources development. Key Resources. Value. Tangible Assets. Intangible Assets. Capabilities. Value recognized in. Value results from. Value is embodied in. the balance sheet. reputation and client. the culture of the firm. trust. and the combined knowledge and skills of the employees. Easy for rivals to Barriers to. Unique and complex. identify and duplicate resources create. Duplication. inimitability. Tacitness and causal ambiguity create inimitability. Sustainable competitive advantage Value to clients- consistently high performance. Superior performance Market performance- rate of return relative to competitors. Figure 2.4 A Revised Resource-based Model of Sustainable Competitive Advantage Source: Clulow et al. (2003, p. 230).. 28.

(40) Morgan et al. (2004) whose research showed stronger support for the RBV than SCP perspective shed light on the causes of positional advantages and excellent performance. They discovered four kinds of resources (experiential, scale, physical, and working capital and financial liquidity requirements) and three types of capabilities (informational, relationship-building, and product development capabilities) that were of particular importance in their fieldwork. Experiential resources such as market knowledge and the three types of capabilities presented by Morgan et al. (2004) also provide insight into the classification of key resources. For the purpose of this discussion, the researcher adapted the classification of the key resources of Clulow et al. (2003) revised from Fahy’s (2000) original work and added them in the categories set forth by Morgan and his fellow researchers. The categories of firm resources were re-organised and re-named. The complete set of resource classification is illustrated in Table 2.2:. Key Resources Intangible assets Informational Intellectual property Databases Relational. Capabilities Team-embodied knowledge Learning-by-doing Management/ Formal rules and Operational structures Managerial skills Experiential. Client trust Reputation Networks/communication systems. Attitudinal. Organisational culture Organisational history Ideology Value Attitude. Table 2.2 Classification of Key Resources Adapted from Clulow et al. (2003) and Morgan et al. (2004). 29.

(41) 2.4 Social Exchange Theory. An investigation on economic value drivers in convention tourism by Lee and Back (2005, p. 416) showed that the key to success in destination marketing is ‘relationships.’ Clulow et al. (2003) also added that a unique bond, which cannot easily be imitated by competitors or removed from the marketplace and replicated in other places, is likely to result from a good relationship generated through the close interactions a firm has with its clients. Informal relations among groups within a firm and between firms are said to be source of SCA because they are developed through a unique historical path or are socially complex (Barney, 1991).. Van Laere and Heene (2003, p. 253), however, contended, “While scholars developing the resource-based perspective have highlighted the importance of social factors, no attention has been given to network resources that emerge from firm’s participation in the network of embedded relationships.” It is for this reason that social exchange theory is adopted in this section to assess a firm’s relationships with employees, suppliers, and customers.. 2.4.1 Definition of Social Exchange Theory. Social exchange theory posits that all human relationships are formed based on a subjective cost-benefit analysis and the comparison of alternatives. Yet, social exchange theory is not purely economic. In order to understand the social behaviour of humans in economic undertakings. Homans (1958) stated that social exchange theory was developed out of the intersection of economics, psychology, and sociology. Instead, social exchanges can be social or both social and economic at the same time. 30.

(42) Social relations and personal ties among the actors that shape the voluntary transfer of resources and benefits are also central to the theory. Social relations and personal ties founded upon trust, reciprocation, and reward, are the bonds that result from successful, mutually rewarding interactions over time (Bignoux, 2006). In addition to social exchange theory, Lawler (2001) in his study of an affect theory of social exchange stressed the influences of emotions, both positive and negative, over exchange partners, and incorporated them as a core feature in social exchange theory. The rewarding or punishing reactions from exchange actors determine the actions between them. The theory has evolved from a dyadic model to a network model with market properties (Bignoux, 2006). Homans’ own words can best capture the essence of the theory (1958, p.606):. “Social behavior is an exchange of goods, material goods but also non-material ones, such as the symbols of approval or prestige. Persons that give much to others try to get much from them, and persons that get much from others are under pressure to give much to them. This process of influence tends to work out at equilibrium to a balance in the exchanges. For a person in an exchange, what he gives may be a cost to him, just as what he gets may be a reward, and his behavior changes less as the difference of the two, profit, tends to a maximum.”. The distributive justice proposition made by Homans (1958) indicates that two actors in an exchange expect a balance between input and outcome, and they adapt their resources for each other’s expectations. In elaborating the relationship between the actors, Emerson (1962) utilised power as the mechanics. In either a dyadic relation or a network exchange system, dependency on the other’s resources creates a power difference, and the weaker party will attempt to shorten this gap because it can lead to 31.