The sustainable competitive advantage in the digital economy: value creation versus value recognition
Gabriele di Russo, Abraham Stefanidis, Panos MourdoukoutasPurpose
This study aims to investigate the competitive advantage in the digital economy, focusing on the Standard & Poor’s (Standard & Poor’s Financial Services (S&P) 500 companies. This study uses two measures, the Economic Value Added (EVA), an indicator of value creation and economic excellence, and Total Shareholder Return (TSR), as an indicator of value recognition and financial excellence, integrating business and investment strategy.
Design/methodology/approach
Recognizing the limitations of TSR as an indicator of corporate effectiveness in allocating capital, it highlights the importance of EVA as a metric of organizations’ economic potency based on a panel data set of 467 S&P 500-listed financial and non-financial companies for the decade 2013–2023.
Findings
The results indicate that EVA is a good, yet largely overlooked, measure of competitive advantage and capital allocation, serving as a robust antecedent of Wall Street firms’ value creation versus value recognition.
Practical implications
The study proposes an applied metric that helps business leaders assess how well listed companies create value by allocating capital across business opportunities, and how well that value is reflected in their market valuation.
Originality/value
The significance of the EVA is particularly evident when considering the competitive advantage of businesses operating at the core of the emergent digital economy and the integration of business and investment strategies in pursuit of superior market returns.