Do Firms Earn Rents from the Intangible Assets of Their Owners? Institution‐Based Insights from the Energy Sector
| Published date | 01 October 2023 |
| Author | Murod Aliyev,Mario Kafouros |
| Date | 01 October 2023 |
| DOI | http://doi.org/10.1111/1467-8551.12704 |
British Journal of Management, Vol. 34, 2354–2373 (2023)
DOI: 10.1111/1467-8551.12704
Do Firms Earn Rents from the Intangible
Assets of Their Owners? Institution-Based
Insights from the Energy Sector
Murod Aliyev 1and Mario Kafouros 2
1Centre for International Business at the University of Leeds (CIBUL), University of Leeds, Leeds, LS2 9JT,
UK 2Alliance Manchester Business School, University of Manchester, Manchester, M15 6ER, UK
Corresponding author email: m.aliyev@leeds.ac.uk
Firms can earn rents not only from their own intangible assets (FIAs), but also from the
intangible assets of their owner organizations (OIAs). Although the literature has es-
tablished that rent creation from FIAs depends on the quality of institutions, it remains
unclear how institutional quality inuences rents fromOIAs. This study examines how the
rents from OIAs and FIAs change when they aredeployed in environments with different
institutional quality. Combining insights from the resource-based view and institutional
economics, we develop and test a set of predictions using a sample of over 6000 energy
rms from 23 European countries. The studyshows that the effect of institutional quality
on rent creation is asymmetric, being positive for FIAs and negative for OIAs. In ad-
dition, OIAs drawn from multiple owners create higher rents than OIAs from a single
owner. Such ‘multiplicity-of-ownership’ advantages are stronger in countries with better
institutional quality.The contribution of the study lies in explaining how the twotypes of
intangible assets generate rents for the focal rm, and in clarifying why the creation of
such rents is contingent on the institutional context in which they aredeployed.
Introduction
Intangible assets (IAs), such as technology and
brands, are characterized by pathdependency that
makes their accumulation and imitation difcult
(Dierickx and Cool, 1989), therefore helping rms
to create sustained competitive advantages and
rents in a market (Huang et al., 2015; Peteraf,
1993). Extant research focuses on how rms cre-
ate such rents from their own intangible assets
(FIAs) (He and Wang, 2009; Kafouros and Aliyev,
2016b) and recognizes that sharing assets through
ownership links (e.g., in family rms, business
groups, multinational enterprises and other types
of corporate diversication) can be benecial
for the owners of such assets (Anderson et al.,
2022; Hautz, Mayer and Stadler, 2013). Yet, what
remains unclear is whether and how a focal rm
can create rents by accessing the intangible assets
possessed by its domestic and/or foreign owner
organizations (hereafter owners’ intangible assets,
OIAs), and how the creation of these rents is
inuenced by the institutional context in which
the focal rm deploys such OIAs.
To address this limitation, we examine how the
economic rents that OIAs and FIAs generate for
the focal rm are inuenced by the institutional
quality – the effectiveness of rules in governing
transactions between organizations (North, 1991)
– of the country in which they are deployed. Ad-
dressing this limitation is important for three rea-
sons. First, the rent-generating potential of OIAs
and FIAs may differ considerably, depending on
the country and the institutional context in which
they are employed (i.e. they may generate rents at
a different rate in different institutional contexts)
(Fuentelsaz, Garrido and Maicas, 2015; Hughes
et al., 2017). Second, a focal rm that is owned
© 2023 The Authors.British Journal of Management published by John Wiley & Sons Ltd on behalf of British Academy
of Management.
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commercial and no modications or adaptations are made.
Do Firms Earn Rents from the Intangible Assets of Their Owners? 2355
by other organizations can access and potentially
prot fromOIAs without incurring the costs of de-
veloping such assets itself.However, since FIAs are
internal assets and OIAs are not, it would be incor-
rect to assume that rents fromOIAs and FIAs gen-
erate economic rents in similar waysand that these
rents are inuenced similarly by institutional qual-
ity. Third, while some rms are owned by a sin-
gle organization, other rms havemultiple owners.
Once again, it would be unwarranted to assume
that the advantagesof OIAs are the same in single-
and multiple-ownership settings.
Focusing on the context in which IAs are de-
ployed (while distinguishing between FIAs and
OIAs) enables us to explainthe institutional condi-
tions under which a focalr m can createrents from
such assets. The literature suggests that rents from
IAs are typically higher whenthe quality of institu-
tions in a country is stronger (Kafourosand Aliyev,
2016b; Qian et al., 2017). However, in the case
of OIAs, ownership links offer access to such as-
sets but the extent to which these represent a com-
petitive advantage for the focal rm depends on
whether its rivals can access such IAs throughmar-
ket mechanisms (e.g. through licencing). Conse-
quently, we expect the rent-enhancing advantages
of OIAs to be stronger when the costs of transact-
ing in the market are very high (i.e. when institu-
tional quality is low).
This prediction about OIAs stands in contrast
to the established view aboutFIAs, which suggests
that rents from such assets increase in high-quality
institutional environments. We argue that the the-
oretical predictions about FIAs are not applica-
ble to OIAs because institutional quality affects
the rents created from FIAs and OIAs asymmet-
rically. To this end, this study explains the mech-
anisms through which institutional quality makes
the exploitation of FIAs more effective and in-
creases rent creation, while it has the opposite ef-
fect on OIAs, decreasing the rents they create. It
therefore reveals how the advantages that OIAs
provide to the focal rm change depending on the
institutional contexts in which such assets are de-
ployed.
Furthermore, recognizing that some rms can
access OIAs from multiple owners, we develop
the premise that multiplicity-of-ownership advan-
tages change the usefulness of accessing OIAs
(vis-à-vis OIAs from single owners). However, the
relationships between multiple owners are, once
again, subject to institutional forces because ex-
ante agreements about combining IAs from mul-
tiple owners and ex-post sharing of the associated
proceeds among the rm and its multiple owners
require complex contracts. We thus theorize that
institutional quality widens the difference between
the rents created from multiple-owner OIAs and
those from single-owner OIAs.
To explain how rents are created from OIAs
and how such rents are conditioned by the institu-
tional context, our framework combines theoret-
ical insights from the resource-based view (RBV)
(to specify the sources of VRIN1characteristics;
Barney, 1991) and new institutional economics
(to explain how institutional quality inuences
the VRIN characteristics of OIAs and the asso-
ciated rents; North, 1991; Williamson, 2000). We
test our hypotheses in the context of the Euro-
pean energy sector,using 54,520 observations from
6005 rms and 23 European countries (during
2003−2019). The deregulation of the energy sec-
tor has encouraged rms to invest in new tech-
nologies and build their reputation, increasing
their reliance on IAs (Allen et al., 2021; European
Commission, 2012, 2017; Liu et al., 2021). More-
over, due to long-term agreements between energy
companies,governments and nancial institutions,
there is strong dependence on institutions (Allen
et al., 2021). Finally, technological complexity,
large-scale projects and long-term pay-off schemes
increase the prominence of multiple-ownership ar-
rangements, making the energy sector a suitable
context for our analysis.
This study makes three key contributions. First,
it claries the mechanisms through which OIAs
create rents for the focal rm. It therefore ad-
vances research thatexamines the rent-creating po-
tential of IAs (Huang et al., 2015; Knott, Bryce
and Posen, 2003), but focuses only on FIAs with-
out exploring the effects of OIAs. Its second con-
tribution lies in showing thatthe institutional qual-
ity inuences the competitive advantagesand rent-
creating potential of FIAs and OIAs in a differ-
ent way. This suggests that the institutional mech-
anisms that affect the IAs that a rm owns and
those that it can access through ownership links
hinge on different forces. Unlike prior conceptu-
alizations that view institutional quality only as
a facilitator for the better exploitation of rms’
own IAs, we show that it also determines the
1VRIN =valuable, rare, imperfectly imitable, non-
substitutable (Barney, 1991).
© 2023 The Authors.British Journal of Management published by JohnWiley & Sons Ltd on behalf of British
Academy of Management.
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