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Introduction
Resource Based View (RBV) analyzes and interprets resources of the organizations
to understand how organizations achieve sustainable competitive advantage. The
RBV focuses on the concept of difficult-to-imitate attributes of the firm as sources
of superior performance and competitive advantage (Barney, 1986; Hamel and
Prahalad, 1996). Resources that cannot be easily transferred or purchased, that
require an extended learning curve or a major change in the organization
climate and culture, are more likely to be unique to the organization and,
therefore, more difficult to imitate by competitors. According to Conner,
performance variance between firms depends on its possession of unique inputs
and capabilities (1991).
Example
Honda, the world’s largest engine manufacturer is following a RBV strategy.
Honda built its business strategy around the firm’s strength, capability and
expertise in building petrol-based engines. Honda initially started with small
clip-on engines for bicycles then moved to two wheelers such as scooters and
motorbikes, marine engines, generators, lawn and garden equipment, and cars
(Honda and Acura automobiles) and even jet planes. Each of these products
competes in quite different product verticals, but leverages a unique resource and
capability of Honda to build world class petrol-based engines.
Origin of RBV
The RBV takes an ‘inside-out’ view or firm-specific perspective on why
organizations succeed or fail in the market place (Dicksen, 1996). Resources that
are valuable, rare, inimitable and non substitutable (Barney, 1991) make it possible
for businesses to develop and maintain competitive advantages, to utilize these
resources and competitive advantages for superior performance (Collis and
Montgomery, 1995; Grant, 1991; Wernerfelt, 1984).
Lippman and Rumelt (1982) Sustained competitive advantage results from rich
connections between uniqueness and causal
ambiguity
Rumelt (1987), Dierickx and Cool (1989) Summary article on imitability barriers (e.g., causal
ambiguity and isolating mechanisms like asset
interconnectedness, asset stock efficiencies, etc.)
that impede (or make very costly) imitation from
other competitors
Day and Wensley (1988), Aaker (1989), Strategic formulation models that have firm
Grant (1991), Wernerfelt (1989) resources as the central concept and as the sources
of sustainable competitive advantage
Contd...
Hansen and Wernerfelt (1989), Empirical studies that support the hypothesis that
Rumelt (1991) firm-specific resources or organizational factors are
more important than industry variables for
explaining firm superior performance
Mata et al., 1995). Examples of resources are brand names, technological abilities,
efficient procedures, among others (Wernerfelt, 1984; Olavarrieta and Ellinger,
1997; Spanos and Lioukas, 2001). Other researchers have classified different
resources as tangible and intangible (Itami and Roehl, 1987; Hall, 1992; Hall,
1993). When identifying resources, several researchers have grouped specific types
of resources that may enable firms to conceive and implement value creating
business strategies (e.g., Hitt and Ireland, 1985; Grant, 1991; Amit and
Schoemaker, 1993; Black and Boal, 1994; Bogaert, Maertens and Van
Cauwenbergh, 1994; Wade and Hulland, 2004).
Wernerfelt, 1984; Barney, 1991; Peteraf, 1993). As such, resources and capabilities
are fundamental underpinnings of any source of advantage (Rumelt, Schendel
and Teece, 1991). Valuable resources are termed strategic assets (Barney, 1991;
Amit and Schoemaker, 1993). The RBV asserts that ownership and control of
strategic assets determines which organizations will earn superior profits and enjoy
a position of competitive advantage over others. Three major questions are asked
of resources to identify the impact they have:
10 RESOURCE BASED VIEW: CONCEPTS AND PRACTICES
No
Yes
Is it heterogeneously
distributed across
competing firms?
Yes No Competitive
Disadvantage
Is it
imperfectly
mobile?
No Competitive
Yes Parity
Sustained Temporary
Competitive Competitive
Advantage Advantage
The third and final question measures the degree of competitive advantage
which may be gained from the given resource. This is achieved by questioning
the mobility or inimitability of a resource. If the resource is perfectly mobile
then the resource is likely to be only a source of temporary competitive advantage,
at best (Mata et al., 1995). This temporary nature is attributed to the advantage
because the resource could, due to its mobile nature, change hands. Michalisin
et al., (1997) states that since a firm’s advantage is based on a firm having strategic
assets that are superior to one’s competitors, therefore, the ability to sustain the
advantage is a function of the heterogeneity of such resources.
continues to hold after efforts of others to duplicate the advantage have ceased
(Barney, 1991). Barney’s (1991) definition of sustained competitive advantage
does not mean it will last forever. Rather, it suggests that it will not be competed
away or easily duplicated by the efforts of others (Barney, 1991). Barney states
that sustained advantages may be challenged when unanticipated changes in the
economic structure of an industry occur. Such unanticipated changes therefore,
can make what was a source of sustained advantage no longer a source of advantage.
Rumelt and Wensley (1981), and Barney (1997) call these unanticipated changes
‘Schumpeterian Shocks’. Therefore, a firm enjoying a sustained competitive
advantage when faced with a Schumpeterian Shock may experience a major shift
in the nature of competition and any sources of sustained competitive advantage
may be nullified. A sustained competitive advantage may only be made when
resources are strategic and valuable, are heterogeneously distributed and
imperfectly mobile and firms should sustain the advantage notwithstanding
periods of Schumpeterian Shock.
on the dynamic capabilities and is outcome of RBV (Teece, Pisano and Shuen,
1997). Dynamic capabilities have been defined as firm’s processes that use
resources specifically the processes to integrate, reconfigure, gain, and release
resources. While RBV primarily concentrates on types of resources and capabilities
for its strategic importance, the dynamic capability concentrates on how these
resources and capabilities need to change or update over a period of time to keep
their relevance in the changing marketplace.
The RBV considered resources and competencies as static that can be pointed
as stationary at certain time framework and will remain so over a period of time
also. The focal point is that when firms are having resources that are valuable,
rare, inimitable and non substitutable, it enables firms to develop value enhancing
strategies that are not easily copied by competing firms (Barney, 1991; Conner
and Prahalad, 1996; Peteraf, 1993; Wernerfelt, 1984). However in this era of
dynamic economy, there is need for firms to build up new capabilities or
competencies for sustaining such competitive advantage (Teece, Pisano and
Schuen, 1997). Dynamic capabilities thus are the organizational processes or
strategic routines by which firms develop new configuration for updating resources
as per market requirement (Eisenhardt and Martin, 2000). Such dynamic
capabilities require that organizations establish processes that enable them to
change their routines, services, products, and even markets over time.
The RBV, MBV and dynamic capabilities perspective all focus on different
unit of analysis and degree of change as shown in Figure 1. Initially to cope with
market forces, MBV was conceptualized, subsequently focus shifted to RBV.
Finally, to respond to challenges of ever changing globalized world, concept of
Dynamic Capabilities became popular. This transition is shown by direction of
arrow in Figure 2.
Static
Market Dynamic
Forces Capabilities
Dynamic
Market Unit of Analysis Firm
base of the firm. This means dynamic capabilities alter resource bases by creating,
integrating, recombining, and releasing resources (Eisenhardt and Martin, 2000).
Tautological Nature
Another significant assessment of the RBV is that the view is essentially a tautology
(Porter, 1991; Foss, Knudsen, and Montgomery, 1995; Mosakowski and
McKelvey, 1997; Priem and Butler, 2001; Bromiley and Fleming, 2002) in nature.
Porter claims that ‘at its worst, the resource based view is circular’ (1991, p 108).
The researchers also challenge the premise of the RBV suggesting that the view
“seems to assume what it seeks to explain” (Hoopes et al., 2003, p 891).
Furthermore, the researchers posit that the lack of clarity about core aspects of
the RBV impede the development of theory and fruitful debate.
Methodological Issues
Each of the studies of resources and firm performance vary substantially in terms
of the methodology employed and the way the RBV research is designed. Rouse
and Daellenbach (1999) question the strong bias towards quantitative research
methods suggesting that such a methodology is not appropriate for RBV research
in general. The researchers suggest that the nature of advantages in organizations
should be firm based and complex and, as such, qualitative and field based
methodologies are much appropriate. Chan (2000) supports this position
suggesting that the field of research may not be fully understood until more
qualitative contributions are added to the conversation.
competitive advantages. The RBV draws upon the resources and capabilities that
reside within the organizations in order to develop sustainable competitive
advantages. Resources may be considered as inputs that enable firms to carry out
its activities.
According to RBV, not all the resources of firm will be strategic resources and
hence sources of competitive advantage. Competitive advantage occurs only when
there is a situation of resource heterogeneity (different resources across firms) and
resource immobility (the inability of competing firms to obtain resources from
other firms). If the resource is not perfectly mobile (i.e., the resource is not free to
move between firms, or if a firm without a resource faces a considerable cost
burden in developing, acquiring or using it, that a firm already using it does
not), then the resource is likely to be a source of sustained competitive advantage.
If a resource is imitated or substituted then any advantages gained may be short
lived. In short, the more mobile a resource is, the less sustained the advantage
gained from that resource will be. In this current era of fast changing globalized
world, if an organization is able to change swiftly and be more alert to changes in
the competitive market, then they are more likely to gain and sustain competitive
advantage.
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