Economic measures of competitive advantage compare a firm's level of return to its costs of capital instead of to the average level of return to the industry.

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Economic measures of competitive advantage, such as Economic Value Added (EVA) and Return on Invested Capital (ROIC), compare a firm's return to its cost of capital, which represents the minimum rate of return required to compensate investors for the risks they take by investing in that company. This approach measures a firm's profitability relative to the funds invested in the business. It is different from measures that compare a firm's performance to the industry average, such as market share, growth rate, or profit margin.

Economic Measures of Competitive Advantage Compare a Firm's Level of Return