Synergistic Effects of Differentiation and Cost Leadership on Economic Value Add: A Sustainable Competitive Advantage Perspective

Document Type : applicative

Author

Assistant Professor of Economics, Management and Economics Faculty, Payame Noor University, Tehran, Iran.

10.30473/jier.2026.75921.1514

Abstract

This study investigates the primary determinants of sustainable competitive advantage and Economic Value Added (EVA) for publicly traded firms. Beyond assessing their individual impacts, the research explicitly evaluates the interactive (hybrid) effects of differentiation and cost leadership strategies on firm EVA. Financial data were systematically extracted from the statements of 141 listed companies over the period from 2014 to 2023. These data were then analyzed using the two-stage System Generalized Method of Moments (SYS-GMM) estimator. The findings reveal that the differentiation strategy exerts a positive and significant impact on EVA. Conversely, cost leadership alone does not yield a significant effect. Crucially, the hybrid effect of combining both differentiation and cost leadership strategies is found to enhance value creation and increase EVA. Interestingly, the individual effect of differentiation promotes EVA with greater intensity than the synergistic effects of the combined strategies. Regarding control variables, cash flow shows a positive but statistically insignificant effect. However, the remaining control variables exert a negative and statistically significant influence on value added, reflecting institutional and managerial characteristics of the firm. Consequently, the study recommends that corporate managers prioritize investment in intangible assets—such as branding and product innovation—as the principal drivers of value creation. Furthermore, firms should leverage the synergistic effects of differentiation and cost leadership to achieve a more sustainable EVA.

Keywords

Main Subjects

References

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Journal of Industrial Economics researches
Volume 9, Autumn & Winter , vol. 33
October 2025
Pages 146-168

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History

  • Receive Date: 24 September 2025
  • Revise Date: 06 November 2025
  • Accept Date: 19 January 2026

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