Developing the Competitive Advantage Evaluation Model (CAEM) Using Network DEA

During the last three decades, studies on the nature and sources of a firm’s competitive advantage and sustainability have been the core of strategic management. However, studies that measure competitive advantage and develop analytical frameworks via systematic quantitative methodologies remain sparse. The key objective of this paper is to develop a model to measure the competitive advantage of firms and provide an analytical framework for business-level strategic decision making from which further studies can proceed. We achieve this objective by developing the competitive advantage evaluation model (CAEM) applying a centralized network DEA, which separates competitive advantage into two sub-advantages - cost and differentiation. From computational experiments, we demonstrate the utility of our model as an analytical framework by applying it to the Korean airline industry with a panel dataset covering the period from 2011 to 2016.