Wernerfelt, Birger

Birger Wernerfelt is the J.C. Penney Professor of Management and a Professor of Marketing at the MIT Sloan School of Management.

General Expertise

Branding; Competitive strategy; Corporate strategy and policy; Customer incentives; Customer satisfaction; Europe; Game theory; Industrial organization; Marketing strategy; Microeconomics; Research, academic; Signaling; Supply chain management.

Wernerfelt has held teaching positions and done research in marketing at MIT Sloan, in economics at the University of Copenhagen, and in strategy at Northwestern University and the University of Michigan. His current research compares alternative ways of trading services.

Wernerfelt is best known for “A Resource-based View of the Firm” (1984), which is one of the most cited papers in the social sciences. Based on the premise that firms are heterogeneous, the article characterizes sustainable differences, or resources; suggests that optimal competitive strategies are based on these resources; and describes how current resources can be used to develop new ones. In the last several years, Wernerfelt has been working on the implications and foundations of the “Adjustment-cost Theory of the Firm” (1997).

The theory portrays the employment relationship as an attempt to exploit economies of scale in bargaining costs: the employer and the employee share the benefits of negotiating a single average price (wage) for a sequence of transactions instead of individual prices for each of them. The wedge in costs allows the parties to sustain an implicit contract with at-will options to fire and quit. The original article proposes that the scope of the firm be defined by the employment relationship. In later works, Wernerfelt has developed the theory to show that the employer should own most of the productive assets, that incentives are weaker inside firms, and that more information is communicated within than between firms.

Wernerfelt holds a BA in philosophy and an MA in economics from the University of Copenhagen and a DBA in managerial economics from Harvard University.