Strategic Responses to Shocks: Comparative Adjustment Costs, Transaction Costs, and Opportunity Costs

Shocks, whether they derive from shifts in demand, supply, regulation, or innovation, can create the need for competitive repositioning by industry participants when they disrupt established sources of competitive advantage. Such situations can therefore create a canonical strategic problem: whether, where, and how to (re-)position following an industry shock. In this paper, we explore the role of comparative adjustment costs in determining competitive advantage in dynamic environments. In so doing, we synthesize contributions from Penrose, Porter, and Williamson we conceptualize the relationship between adjustment costs and related concepts such as resources/capabilities, dynamic capabilities, transaction costs, and opportunity costs.