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Resource-Advantage Theory: Foundational Premises
Resource-Advantage theory: Foundational premises

All theories are derived from their foundational postulates. Table 5.1 displays the foundational premises underlying the standard treatment of perfect competition found in microeconomics texts (e.g., Gould & Lazear 1989) and compares them with those that are posited for resource-advantage theory. Foundational, as used here, implies not that the premises are the minimum set of axioms required for deriving theorems but that these premises are centrally important for understanding the two theories. Epistemologically, each premise in R-A theory—contrasted with perfect competition—is considered a candidate for empirical testing. Those found false should be replaced with ones more descriptively accurate.

TABLE 5.1 Foundational Premises of Perfect Competition and Resource-Advantage Theory
Perfect CompetitionResource-Advantage Theory Theory
P1. Demand is:Heterogeneous across industries, homogeneous within industries, and ...

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