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Foreword: The resource-based theory of the firm - Challenges, new and old

Article  in  International Journal of Learning and Intellectual Capital · January 2007

DOI: 10.1504/IJLIC.2007.013854

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 Introduction to the Special Issue:
The Resource-Based Theory of the Firm – Challenges, New and Old

Margaret A. Peteraf
Tuck School of Business at Dartmouth
100 Tuck Hall
Hanover, NH 03755
Phone: (603) 643-1944
Fax: (603) 646-1308
Margaret.Peteraf@Dartmouth.edu

with

Patricia Ordonez de Pablo and Juan Ventura Victoria

International Journal of Learning and Intellectual Capital, January 2007, vol. 4, pp. 1-10.

1
 Introduction to the Special Issue:
The Resource-Based Theory of the Firm – Challenges, New and Old

More than any other theoretical perspective in the field of strategic management, the

resource-based theory has drawn the attention of scholars and practitioners alike. This is

particularly evident if variants of the theory, such as dynamic capabilities (Teece, Pisano,

& Shuen, 1997), the knowledge-based view, (Kogut & Zander, 1992) and the relational

view (Dyer & Singh, 1998) are included. While the attention includes that of critics (e.g.

Priem & Butler, 2001; Bromiley & Fleming, 2002) as well as adherents, it is undoubtedly

one of the most influential theories in the field. As testimony to this, consider the

distribution of the Strategic Management Society best paper prize over the twelve years

that it has been awarded. This prize is awarded annually to a paper, published at least 5

years earlier, for its deep influence on the field. Seven out of the thirteen such prizes that

have been awarded so far have gone to papers advancing the resource-based view. 1

Moreover, according to a recent study of article impact, the two most highly cited articles

published in the SMJ during the 1990s were conceptual resource-based articles. 2 The

citation count of Barney’s (1991) classic resource-based article is even higher, exceeding

5224 as of January 2007. 3

The influence of resource-based theory undoubtedly can be attributed to a number of

factors. It concerns what is arguably the most central topic in the field of strategic

1
Wernerfelt (1984) won the first such prize in 1994, Peteraf (1993) in 1999, Amit & Schoemaker (1993) in
2000, Leonard-Barton (1992) in 2001, Teece, Pisano, & Shuen (1997) in 2003, Szulanski (1996) in 2004,
and both Spender (1996) and Grant (1996) in 2006.
2
These two articles are Peteraf (1993) and Teece, Pisano & Shuen (1997). While this is not revealed in the
published version of Bergh, Perry, & Hanke (2006), the information is contained in an earlier draft and was
shared with us prior to the article’s publication.
3
According to Google Scholar.

2
management – why some firms outperform others. In addition, it addresses a number of

other core topics, such as firm heterogeneity, growth, and diversification. It resonates

with scholars of strategy due to its connection to familiar strategy concepts, such as

distinctive competence (Selznick, 1957; Hofer and Schendel, 1978). Yet it brings an

unprecedented degree of rigor to these concepts by grounding them in economic

approaches that have more recently gained acceptance in the field.

Importantly, the economic undergirding of resource-based theory derives not from

neoclassical microeconomics, but from branches of economics, such as the Ricardian

(Ricardo, 1817), evolutionary (Nelson and Winter, 1982), and Penrosean (Penrose, 1959)

paradigms, which challenge neoclassical assumptions. This has been important for two

reasons. First, it has facilitated the acceptance of resource based theory, given the

distrust and antipathy with which neoclassical economics is regarded by many in the

strategy field (see, for example, Hirsch, Friedman, & Koza, 1990). Second, the eclectic

nature of this disciplinary foundation provided an opportunity for the development of a

paradigm unique to the strategy field. This is a significant factor, since many of the most

influential models in the strategy field, such as Porter’s (1980) 5-forces framework, are

viewed as having been imported from another disciplinary domain. As a theory

developed by scholars from the strategic management domain (e.g. Rumelt, Wernerfelt,

Montgomery, Barney), its perspective and concerns are coincident with the central the

central thrust and traditions of the strategy field. In contrast to Porter’s (1980)

framework, resource-based theory is focused squarely on the attributes of the firm, rather

than the industry. In contrast to industrial organization economics, it is concerned with

3
firm outcomes and normative implications for management practice, rather than public

policy implications. Like the Chicago School tradition (Demsetz, 1973), from which

resource-based theory takes inspiration, it explains performance differences in terms of

efficiency rather than market power.

While resource-based theory is far from being fully developed, the hope and promise of a

home-grown paradigm remains an exciting prospect for strategy scholars. Indeed, the

challenges inherent in developing a new paradigm may have much to do with the degree

of attention that the resource-based view has received. From a researcher’s perspective,

challenges of this sort present an opportunity to make a significant contribution to the

development of the field of strategic management – a field as yet young and unformed.

For some, resource-based theory presents an opportunity to develop a theory of the firm,

free from assumptions, such as opportunistic behavior, that many find distasteful

(Conner, 1991). For others, it presents an opportunity to open up the black box of firm

heterogeneity and sustainable advantage.

Many of the challenges associated with resource-based theory have to do with its

emerging and developmental state. For example, there is a lack of consensus regarding

the definitions of even basic concepts and the workings of the framework. (See, for

example, the alternative viewpoints of Foss & Knudsen, 2003 and Peteraf & Barney,

2003). This can present a challenge to the linear progression of the theory. Yet as

Winter (1995) suggests, the lack of consensus over basic terms can be an advantage in the

4
early developmental stages of theory building in that it allows for more flexible

theoretical development.

Initial challenges for the resource-based view have been identified by a number of critics.

See, for example, Priem & Butler (2001), Bromiley & Fleming (2002) and Foss &

Knudsen (2003). Progress on some fronts has been made, even though the process of

reaching consensus lags behind. For instance, the charge of tautology has largely been

answered (Barney, 2001; Peteraf & Barney, 2003; Helfat et al., 2006). Scholars have

demonstrated that many of the challenges concerning operationalizing the theory can be

met (e.g. Miller & Shamsie, 1996; Barney & Arikan, 2001). Moreover, the framework

itself has become more robust due to fine-tuning efforts, including a sharpening of the

concepts.

For example, the concept of rents is now better understood (Winter, 1995; Peteraf, 1994;

Lippman & Rumelt, 2003a). The nature of firm heterogeneity has been clarified

significantly in terms of how different firms create economic value (e.g. Hoopes, Madsen

& Walker, 2003). This has helped scholars to revisit the meaning of competitive

advantage in relation to a resource-based framework for achieving it (e.g. Barney &

Clark, 2007; Peteraf and Barney, 2003). Similarly, advances in resource-based theory

have been made in terms of disentangling notions of value creation from value capture

(e.g. Coff, 1999; Lippman & Rumelt, 2003b). Work has progressed in regard to

understanding substitutes through a resource-based lens (Peteraf & Bergen, 2003).

Significant advances have been made regarding our understandings of dynamic

5
capabilities and their relationship to resource based theory (e.g. Winter, 2003; Helfat and

Lieberman, 2002; Helfat & Peteraf, 2003; Helfat, et al, 2006).

Regardless of such progress, many longstanding challenges for resource-based theory

remain. Moreover, as old challenges are overcome and the theory progresses, new

challenges arise. The papers in this special issue, while just a small set, offer a sense of

the range of the challenges that are now commanding the attention of researcher working

in the domain of resource based theory. While each paper in this issue makes a distinct

contribution, there are recurring themes among them regarding the challenges and

opportunities within the resource-based research domain.

One such theme is the unfinished nature of the “revolution” in strategic management

thinking that resource-based theory has begun. The lead article by Foss introduces this

theme and argues, persuasively, that a renewed emphasis on the theoretical micro-

mechanisms of resource-based theory would do the most to advance scientific progress in

this arena. The paper by Kim and Mahoney is an attempt to do just what Foss advises

with respect to mechanisms involving the property rights to resources. The relevance of

property rights theory (Hart & Moore, 1990) for the resource-based view has only

recently begun to be recognized (e.g. Kim & Mahoney, 2002). In drawing out these

theoretical connections, Kim and Mahoney provide a richer resource-based understanding

of rent generation and capture. Evans is similarly concerned with rent generation and

distribution, but from the perspective of strategic human resource management. In

applying resource-based theory to a specific functional level, Evans takes on the

6
challenge of extending its contribution in a meaningful theoretical way to different levels

of analysis.

While the papers in this issue by Foss, Evans, and Kim & Mahoney concern that side of

resource-based theory that is more equilibrium-based, there is another side focused more

on growth and change. As Foss argues, the challenge to unearth the “deep structure”

upon which scientific progress depends is, perhaps, even greater in this arena. Pitelis’s

response to this challenge is to return to the Penrosean roots of resource-based theory.

He shows, on the one hand, that a Penrosean version of resource-based theory answers

three of the major criticisms of resource-based theory, namely that it is lacking a theory

of the firm, that it is tautological, and that it is difficult to operationalize. He proceeds,

on the other hand, to point to remaining challenges as well possible opportunities to

extend a Penrosean version of the resource-based view.

Other papers in the special issue take on, more explicitly, the challenges inherent in

providing more theoretical structure to our understandings of the dynamic capabilities

model (Teece, Pisano & Shuen, 1997). Verona, Vicari & Cillo develop a theoretical

framework that views dynamic capabilities in terms of processes for knowledge creation,

integration, and reconfiguration. Their paper highlights the critical role of both senior

and middle managers in marshalling four primary categories of organizational resources

in support of these processes. Mariani & Dagnino bring attention to the challenge that

the coevolutionary interplay between a firm’s capability space and its opportunity space

presents for managers trying to close the strategy gap separating theses spaces. Building

7
upon the capability lifecycle model of Helfat & Peteraf (2003), they introduce the notion

of a “Modal Capability Lifecycle” to assess the effectiveness of firm strategies and

suggest normative implications.

Just as there are challenges with respect to developing the content side of the dynamic

capabilities perspective, there are similar challenges on the process side. While there is a

general understanding that there is an intimate connection between organizational

processes and dynamic capabilities (Eisenhardt & Martin, 2003), significantly less is

known about the precise nature of that connection. There is a need to understand the

processes involved in creating, changing, and deploying dynamic capabilities, in terms of

their underlying micro-mechanisms.

In this special issue, several of the papers concern different types of processes and their

link to dynamic capabilities and the resource-based view. Bahru’s paper is an effort to

understand more deeply the micro-processes regarding the creation and development of

organizational capabilities. Her research presents the field with a new challenge: that of

understanding the degree to which processes of capability development share

characteristics across firms. Pirolo & Presutti take a knowledge-based approach to the

innovation process. In the context of an industrial cluster, they explore the role of social

interactions in the processes driving innovation. Widding’s paper is similarly concerned

with processes of knowledge management, but in the context of new ventures. He delves

into the processes involved in accumulating and exploiting knowledge, as well as the

mechanisms used to protect a young firm’s knowledge reservoirs. Kunc's concern, in

8
contrast, is with understanding the processes involved in managerial decision-making.

He derives his insights regarding dynamic managerial capabilities from a case study of a

dynamic consumer good industry.

If resource-based theory is “revolutionizing” thinking in strategic management, as Foss

and Pitelis both suggest, then it may present a challenge to management thought in other

domains. Ghanam & Cox’s paper discusses the transformation of thought occurring in

human resource management as a result of the influence of resource-based theory. They

show how a dynamic capabilities perspective could further transform both thought and

practice in this domain. As a highly fungible theory, with low specificity (to use the

Montgomery & Wernerfelt, 1988, terminology), resource-based theory transfers widely.

It is applicable to the entire range of strategic decisions that managers face. It has

relevance for managerial decision-making by top management teams as well as middle

level managers, as Verona, Vicari & Cillo and Evans argue. (See also Castanias &

Helfat, 2001, and Peteraf, 2005). It has relevance for many types of management

decisions within many different functional areas, as Ghanam & Cox suggest. (See, for

example, Maritan, 2001). It is relevant for strategic decisions both within and across

organizations, as Kim & Mahoney show. It is relevant for organizations large and small,

new and old, as Widding’s and Pitelis’s research indicates. Moreover, it may even have

relevance in fields as far from strategic management as macro growth theory,

international trade, and public policy, as Pitelis intriguingly posits.

9
As these examples suggest, there is a tremendous opportunity to shape thought and

generate new insights through fruitful extension of the resource-based view. But there is

a challenge that accompanies this opportunity. Without providing a robust foundation in

terms of both the theoretical micro-mechanisms that Foss calls for as well as a deeper

understanding of the process micro-mechanisms, the fullness of this opportunity will

never be realized. This special issue is a call to meet that challenge.

10
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