A Resource-based View of the Firm
BIRGER WERNERFELTGraduate School of Business Adfnitiistration, The University oi
Michigan, Ann Arbor, Michigan, U.S.A.
Strategic .Management Journal, Vol.5, 171-180 (1984)
The resource-based view of the Firm provides a basis for addressing some key issues in the formulation of strategy for diversified firms, such as:
(a) On which of the firm's current resources should diversification be based?
(b) Which resources should be developed through diversification?
(c) In what sequence and into what markets should diversification take place?
(d) What types of firms will it be desirable for this particular firm to acquire?
Specifically, the following propositions will be argued:
1. Looking at firms in terms of their resources leads to different immediate insights than the traditional product perspective. In particular, diversified firms are .seen in a new light.
2. One can identify types of resources which can lead to high profits. In analogy to entry barriers, these are associated with what we will call resource position barriers.
3. Strategy for a bigger firm involves striking a balance between the exploitation of existing resources and the development of new ones. In analogy to the growth-share matrix, this can be visualized in what we will call a resource-product matrix.
4. An acquisition can be seen as a purchase of a bundle of resources in a highly imperfect market. By basing the purchase on a rare resource, one can ceteris paribus maximize this imperfection and one's chances of buying cheap and getting good returns.
A resource position barrier to be valuable, it should translate into an entry barrier in at least one market. So, an entry barrier without a resource position barrier leaves the firm vulnerable to
diversifying entrants, whereas a resource position barrier without an entity barrier leaves the
firm unable to exploit the barrier. There is thus a nice duality between the two concepts, corresponding to the duality between products and resources.
The firms need to find those resources which can sustain a resource position barrier, which no one currently has, and where they have a good chance of being among the few who succeed in building
one. They have to look at resources which combine well with what they already have and in
which they are likely to face only a few competitive acquirers.
This paper has attempted to look at firms in terms of their resources rather than in terms of their products. .Resource position barriers were defined as partially analogous to entry barriers. On the
basis of this definition, a model of firms as trying to develop such barriers perhaps through products in which already strong resources support less strong resources is indicated. This mechanism is extended to the resource-product matrix.
The author added that nothing is known as yet about the practical difficulties involved in identifying resources (products are easy to identify), and also to what extent one in practice can combine capabilities across operating divisions, or about how one can set up a structure and systems which can help a firm execute these strategies. The new focus on technology in strategy, the increasing tendency for firms to define themselves in terms of technologies, and the setting up of cross-divisional strategic
organizations (Texas Instruments, 1971), technology groups, and arenas (General Electric, 1981) seem to indicate that objectives like the above are strived for, although perhaps implicitly, in several firms.
Firm Resources and Sustained Competitive Advantage
Jay Barney, Texas A&M UniversityJournal of Management
1991, Vol. 17, No. 1,99-120
The research which focused on identifying attractive external opportunities, implicitly has adopted two simplifying assumptions. First, these environmental models of competitive advantage have assumed that firms within an industry (or firms within a strategic group) are identical in terms of the strategically relevant resources they control and the strategies they pursue (Porter, 1981;
Rumelt, 1984; Scherer, 1980). Second, these models assume that should resource heterogeneity develop in an industry or group (perhaps through new entry), that this heterogeneity will be very short lived because the resources that firms use to implement their strategies are highly mobile (i.e., they can be bought and sold in factor markets). These two assumptions have been very fruitful in clarifying our understanding of the impact of a firm's environment on performance.
The resource based view of the firm, which is investigating the role of internal factors (strengths and weaknesses) substitutes two alternate assumptions in analyzing sources of competitive advantage. First, this model assumes that firms within an industry ( or group) may be heterogeneous with respect to the strategic resources they control. Second, this model assumes that these resources may not be perfectly mobile across firms, and thus heterogeneity can be long lasting. The resource-based
model of the firm examines the implications of these two assumptions for the analysis
of sources of sustained competitive advantage.
A firm is said to have a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors or when some firms using the strategy are unable to duplicate the benefits of this strategy.. A firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy over a long period of time. Following Lippman and Rumelt (1982) and Rumelt (1984) a competitive advantage is sustained only if it continues to exist
after efforts to duplicate that advantage have ceased. In this sense, this definition of sustained competitive advantage is an equilibrium definition (Hirshleifer 1982)
In his recent work, Porter (1985) introduced the concept of the value chain to assist managers in isolating potential resource-based advantages for their firms. The resource-based View of the firm
developed in this papger pushes this value chain logic further by examining the attributes that resources isolated by value chain analyses must possess in order to be sources of sustained competitive advantage (porter, 1990).
Not all firm resources hold the potential of sustained competitive advantages. To have the potential, a firm resource must have four attributes: (a) it must be valuable (must have utility to exploit opportunities and/or neutralizes threats in a firm's environment), (b) it must be rare among a firm's current and potential competition, (c) it must be imperfectly imitable, and (d) there cannot be strategically equivalent substitutes for this resource that are valuable.
The model presented by J.B. Barney is
Assumptions
1. Firm Resource Heterogeneity
2. Firm Resource Immobility
Characteristics of resources that provide competitive advantage
Value
Rareness
Imperfect Imitability
-History Dependent
-Causal Ambiguity
-Social Complexity
Substitutability
THE RESOURCE-BASED VIEW OF THE FIRM: TEN YEARS AFTER
BIRGER WERNERFELTSloan School of Management, Massachusetts Institute of Technology, Cambridge,
Massachusetts, U.S.A.
Strategic Management Journal, Vol. 16, 171-174 (1995)
During 1988 - 1989, the 1984 paper started to have an impact on the academic side of the field. This happened after a couple of other papers had clarified the nature of the 'markets' for resources (Barney,
1986a; Dierickx and Cool, 1989; Wernerfelt, 1989). Shortly thereafter, survey papers were
written (Connor, 1991; Mahoney and Pandian, 1992), In the year 1990, the Harvard Business
Review published an article ( Prahalad, C. K. and G. Hamel (May-June 1990).
'The core competence of the corporation'. HBR, pp. 79-91) which presented many of the ideas on
a compelling managerial style. In particular, Prahalad and Hamel picked up the 'stepping stone' strategy advocated by Wernerfelt (1984) and elaborated in the NEC example (originally from Business Week, 1981)
RBV became popular because it was consistent with classic business policy in the Harvard Business School tradition (Andrews, 1971). The resource based view 1984 paper was an attempt to build a consistent foundation for the classic theory of business policy. Consistent with this, many central aspects of strategic reasoning have been reinterpreted in light of a resource-based perspective (Peteraf, 1993; Amit and Schoemaker, 1993; Connor, 1991;
Is the resource-based view here to stay?
Many aspects of strategic management can be thought about without reference to firm heterogeneity.
But there are some aspect which need to take account differences in resource endowments. Therefore, one can do better strategic management by also taking into account differences in firms' resource
endowments.
THE RESOURCE-BASED VIEW OF THE FIRM IN TWO ENVIRONMENTS: THE HOLLYWOOD FILM STUDIOS FROM 1936 TO 1965
DANNY MILLER Ecole des Hautes Etudes Commerciales, Montreal, and Columbia University JAMAL SHAMSIE New York UniversityAcademy of Management Journal 1996, Vol. 39, No. 3. 519-543.
Categorizing Resources
Several researchers have attempted to derive resource categorization schemes. Barney (1991) suggested that resources could be grouped into physical, human, and capital categories. Grant (1991) added to these financial, technological, and reputational resources.
In this article we revisit a pivotal one of these criteria—barriers to imitability—to develop our own typology: Property-Based and Knowledge-Based Resources
Examples of property-based resources are enforceable long-term contracts that monopolize scarce factors of production, embody exclusive rights to a valuable technology, or tie up channels of distribution.
Knowledge-based resources allow organizations to succeed not by market control or by precluding competition, but by giving firms the skills to adapt their products to market needs and to deal with competitive challenges. Economic rents accrue to such skills in part because rivals are ignorant of why a firm is so successful. It is often hard to know, for example, what goes into a rival's creativity or teamwork that makes it so effective. Such resources may have what Lippman and Rumelt (1982) called "uncertain imitability": they are protected from imitation not by legal or financial barriers, but by knowledge barriers.
Themes of the Paper
A key theme of this article is that the benefits of property-based resources are quite specific and fixed and thus, the resources are appropriate mostly for the environment for which they were developed.
Knowledge-based resources, on the other hand, often tend to be less specific and more flexible. For example, a creative design team can invent products to meet an assortment of market needs. Such resources can help a firm respond to a larger number of contingencies (Lado & Wilson, 1994). Many knowledge-based resources are in fact designed to cope with environmental change.
Two varieties of each category: discrete resources and bundled, or systemic, resources are proposed. Discrete resources stand alone and have value more or less independent of their organizational contexts. Exclusive contracts or technical skills are examples of such resources. Systemic resources, on the other hand, have value because their components are part of a network or system.
Because property-based resources are primarily designed to provide an organization with a high degree of control, they are likely to be of most value in stable or predictable settings where the objects of control maintain their relevance
Hypothesis 1: Discrete property-based resources will produce superior financial performance in predictable environments but will not do so in uncertain environments.
Hypothesis 2: Systemic property-based resources will produce superior financial performance in predictable environments but will not do so in uncertain environments.
Hypothesis 3: Discrete knowledge-based resources will produce superior financial performance iri uncertain environments but will not do so in predictable environments.
Systemic knowledge-based resources may take the form of integrative or coordinative skills required for multidisciplinary teamwork
Hypothesis 4: Systemic knowledge-based resources will produce superior financial performance in uncertain environments but will not do so in predictable environments
The sample consisted of the seven major Hollywood film studios from 1936 through 1965. These studios included MGM, Twentieth Century-Fox, Warner Brothers, Paramount, United Artists, Universal, and Columbia.
Hypothesis 2 was borne out for three of the four performance measures:
Hypothesis 3 was borne out for all four indexes of performance:
PARADOX AND THEORIZING WITHIN THE RESOURCE-BASED VIEW
AUGUSTINE A. LADO, Clarkson UniversityNANCY G. BOYD, University of North Texas
PETER WRIGHT, University of Memphis
MARK KROLL, Louisiana Tech University
Academy of Management Review
2006, Vol. 31, No. 1, 115–131.
Our overarching claim is that, as a theoretical perspective, the RBV is attuned to addressing
the paradoxical challenges of creating and sustaining superior firm performance. This claim is
grounded in an alternative view holding that paradox in scientific inquiry is “intrinsic and
indelible” (Poundstone, 1988: 18). Some of the RBV paradoxes might reflect endogenous factors—that is, they are embedded in RBV logic itself, reflecting the paradoxical nature of theory
building and science (e.g., Poundstone, 1988; Rosen, 1994). Additionally, other RBV paradoxes
might reflect exogenous factors—that is, the paradoxes within the theory enable scholars to
explore and gain a better understanding of our surrounding world (e.g., DiMaggio, 1995; Quinn
& Cameron, 1988; Starbuck, 1988). Thus, we identify and explain various RBV paradoxes and discuss how their use can foster knowledge and understanding.
VALUE, RARENESS, COMPETITIVE ADVANTAGE, AND PERFORMANCE: A CONCEPTUAL-LEVEL EMPIRICAL INVESTIGATION OF THE RESOURCE-BASED VIEW OF THE FIRM
SCOTT L. NEWBERT*Villanova School of Business, Villanova University, Villanova, Pennsylvania, U.S.A.
Strategic Management Journal
Strat. Mgmt. J., 29: 745–768 (2008)
Tested the following hypotheses
Hypothesis 1: The value of the resource capability combinations that a firm exploits will
be positively related to its competitive advantage.
Hypothesis 2: The rareness of the resource capability combinations that a firm exploits will
be positively related to its competitive advantage.
Hypothesis 3: A firm’s competitive advantage will be positively related to its performance.
Hypothesis 4: A firm’s competitive advantage will mediate the relationship between the value
of the resource-capability combinations that the firm exploits and its performance.
Hypothesis 5: A firm’s competitive advantage will mediate the relationship between the rareness
of the resource-capability combinations that the firm exploits and its performance.
A sample of micro- and nanotechnology firms was surveyed from the fall of 2003 through the spring of 2004.
Due to its widespread use, Barney’s (1997) typology (financial, human, organizational, and physical resources and capabilities) was identified as an appropriate starting point. After consulting with five
senior-level executives at five different technology firms, the category ‘intellectual resources and
capabilities’ was added to the typology to make it more comprehensive and relevant to micro- and
nanotechnology firms.
A questionaire was developed.
From these
511 respondents, 117 completed surveys were received, reflecting a response rate of 22.9 percent,
a response rate that compares favorably with similar studies in the field (Alreck and Settle, 1985).
Factor analysis was done to identify valuable, rare, inimitable and non substitutable resources possessed by the firms from the answers to the questionaire items.
Support is concluded for Hypotheses 1, 2 and 3.
No support for hypothesis 4.
Partial support for hypothesis 5.
New directions of development of resource-based view in creating a competitive advantage
Iwona Otola, Zuzanna Ostraszewska and Agnieszka TylecBusiness Management Dynamics
Vol.3, No.2, Aug 2013, pp.26-33
The conceptual model presented in the paper:
Resources - dynamic capabilities - relations – competitive advantage
In the a three dimensional conceptual model is proposed. The first dimension is
the base of resources and competencies in the firm. However, there are no universal sets of resources and competencies that would guarantee and maintain the permanent competitive advantage. Furthermore, variability and turbulent environment necessitates and elastic and adaptive approach to strategic management of firms. Configuration of the resources and competencies should be flexible and variable in time in order to ensure best possible adjustment to variable conditions in the environment. In consequence, the second dimension is represented by the dynamic processes that occur in the firm. The dynamic processes which allow for reconfiguration and replenishment of the resources and their integration and renewed creation point to the ability of firm's learning in order to generate competitive advantage. The third dimension is the partnership with firms in creating supply chains. The relationships allow for synergy effects in the form of combined resources and competencies of the firms involved in these relationships. Functioning of organization in the network of inter-organizational relationships is regarded as an important element of the process of organizational learning since the entities learn by cooperation with others, observation and importing good practices from others (Nowicka-Skowron and Pachura, 2009).
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