Performance forecasts in uncertain environments: examining the predictive power of the VRIO-framework

Abstract

Strategy tools are widely used in the practice of strategic management to yield a good solution with an acceptable problem-solving effort. This paper presents results of an experimental research project that assesses the practical effectiveness of a theory-based decision-making tool, the VRIO- Framework, in predicting the stock-market performance of different companies. The VRIO’s predictive power is compared to the predictions derived from Analyst Ratings that are a widespread and commonly used tool in the decision- making context of this study. Our results suggest that the VRIO-Framework is a particularly effective forecasting tool whereas the power of Analyst Ratings is disputable. The results also provide support for the practical usefulness of resource-based theory.