Internally Generated Goodwill: A Resource-based Competitive Advantage Perspective

It's generally accepted that internally generated goodwill is a kind of special resource that contributes to enterprises' excess earnings capacity. However, in accounting academic area, the nature and accounting treatments of internally generated goodwill have not yet been properly interpreted from the perspective of resource. From the resource-based theory of the strategic management realm, the dissertation puts forward the "resource-based competitive advantage view" about internally generated goodwill and explores the nature, recognition, measurement and disclosure of internally generated goodwill. Finally, some fundamental suggestions are given for subsequent accounting treatments for purchased goodwill.The dissertation consists of seven parts:Introduction. In this part, the background, incentive and arrangement of this dissertation are described.Chapter One literature Review. Based on the review of the literature about the nature of goodwill, the chapter points out the main characteristics and limitations of the existing literature, and then discusses the key problems to be resolved in this dissertation. It is indicated that the literature about the nature of goodwill has evolved in three different ways, which intends to explore the main components of goodwill, to measure goodwill directly, and to measure goodwill indirectly respectively. Moreover, the first one harmonizes with the other two gradually. The author argues that accounting researchers generally accept "excess-earnings resource view", however, accounting standards setters always insist on "residuum view" to analyze purchased goodwill. The existing literature has not yet reasonably analyzed the characteristics of internally generated goodwill from the standpoint of resource; what's more, many accounting researchers accept both of the different views mentioned above.Chapter Two The resource-based theory. Based on the review of the development of the resource-based theory, the chapter describes the basic framework of the theory. Resource-based theory is a newly arising school in strategic management realm since 1980's. The theory states that the enterprise is a resource system and different enterprises possess different resources. Thereason that some enterprises can acquire sustainable competitive advantage and excess earnings is that they have acquired valuable, rare, imperfectly imitable, and non-substitutable distinctive resources. Among the different kinds of resources an enterprise possesses, only part of the intangibles and capabilities have the potential to acquire sustainable competitive advantage and excess earnings.Chapter Three Resource-based competitive advantage view of internally generated goodwill. Based on the resource-based theory, this chapter first puts forward "resource-based competitive advantage view" of internally generated goodwill, which interprets the internally generated goodwill as a comprehensive reflection of enterprises' sustainable competitive advantage. At the same time, the view argues that the internally generated goodwill is composed of valuable, rare, imperfectly imitable, and non-substitutable distinctive resources and capabilities that could not been recognized by financial accounting singly. The chapter also analyzes the differences and relationships between "resource-based competitive advantage view" and other views about internally generated goodwill. Finally, this chapter analyzes the characters and main components of internally generated goodwill from the "resource-based competitive advantage view", and argues that the characteristics of internally generated goodwill are indeed the comprehensive reflection of those valuable, rare, imperfectly imitable, and non-substitutable distinctive resources and capabilities.Chapter Four Recognition and measurement of internally generated goodwill based on resource-based competitive advantage view. From the "resource-based competitive advantage view", internally generated goodwill should not be recognized. This is not only because it doesn't conform to the c...