CHAPTER 4

IDENTIFYING ATTRIBUTES OF STRATEGIC

RESOURCES
 LEARNING OUTCOMES

• At the end of this class, students should be able to:

• Understanding the nature and type of resources
• Understanding the Resource-based View Theory
• Identify the attributes of strategic resources
 What is a RESOURCE?

• Any thing that is useful, tangible or intangible.

• Another characteristic -semi permanent or sticky; it
adheres to the venture and the entrepreneur.
• Resources can be property based or knowledge based.
• Property-based resources give the entrepreneur “rights”
and enable a firm to control its environment.
• Knowledge-based resources are more intangible, like
talent or skill. Knowledge-based resources enable the firm
to adapt to a changing environment.
 TYPE OF RESOURCES

Operatin
Financial Human
g
 Financial Resources

• Resources which take the form of, or can be readily

converted to cash (monetary form)
• Cash- most liquid and flexible, readily to buy other
resources
• E.g.: Cash in hand, overdraft facilities, loans,
outstanding debtors, investment capital, investment in
other businesses.
 Operating Resources

• The facilities which allow people to do their jobs and used

by business to deliver its outputs to the marketplace.
• E.g.: Premises, motor vehicles, production machinery, raw
materials, storage facilities, office equipment.
 Human Resources

• People and the efforts, knowledge, skill and insights they

contribute to the success of the venture
• Eg: Productive labour, technical expertise, provision of
business services, communication skills, strategic and
leadership skills
 Combination of Resources

Financial

Innovative
Human New value delivered
Combination

Operating
Source: Wickham (2006)

Figure 1: Entrepreneurship and the combination of resources

 Resource-Based View (RBV)
Theory of the Firm

• RBV-firms must access, mobilize and deploy resources

before they can generate strategic resources for firm
growth (Garnsey, 1988).
• Business performance and growth is achieved when the
firm has valuable resources and capabilities available as a
source of sustainable competitive advantages (Mahoney,
1995; Peteraf, 1993; Garnsey, 1988; Barney, 1986;
Wernerfelt, 1984).
 Resource-Based View (RBV)
Theory of the Firm

• Resource-based theory is holds that sustainable competitive

advantage related when firms posses and employ resources and
capabilities that are:
1. Valuable because they exploit some environmental
opportunity
2. Rare in that there are not enough for all competitors
3. Hard to copy, so that competitors cannot merely duplicate
them
4. Non-substitutable with other resources
 Strategic Resources

• Create competitive advantage.

• There is a distinction between strategic
and non-strategic, or common
resources.
• Not all capital resources and assets are
strategically important.
 Cont…

• Common - necessary for carrying out the firm’s usual

activities, but provide no specific advantage. E.g. Ordinary
desks, chairs, and office furniture.
• Some resources may prevent the formulation and
implementation of valuable strategies due to their
shoddiness (poor quality) and imperfections.
Attributes of Strategic Resources

1. Valuable

2. Rare

3. Imperfectly Imitable

4. Non-subtitutable
 Attributes of Strategic Resources

• Valuable resources
• Resources are valuable when they help the organization
implement its strategy effectively and efficiently, which means
that in a “strengths, weaknesses, opportunities, and threats in the
firm’s environment.
• A valuable resources is useful for the venture’s operation. E.g.
property, equipment, people, and skills such as marketing,
finance, and accounting
 Attributes of Strategic Resources

• Rare resources
• A unique and valuable resource clearly gives a firm source of
competitive advantage.
• A resource may be considered rare when it is not widely available to
all competitors.
• If supply and demand are in equilibrium, and the price of the
resource is generally affordable, the resource will cease to be rare.
• E.g. a good location, managers who are also considered good
leaders, or the control of natural resources like oil reserves.
 Attributes of Strategic Resources

• Imperfectly imitable (hard to copy) resources

• Firms which have rare and valuable resources clearly have
advantages over firms lacking such assets.
• However, even rare resources can be obtained at some price. If the
price is so high that the firm makes no profit, there is no source of
competitive advantage, because the firm has spent its advantage on
the resource.
• Where duplication is not possible at a price low enough to leave
profits, the resource is said to be imperfectly imitable or hard to
copy
 Attributes of Strategic Resources

• Non-subtitutable resources
• Non-substitutable resources are strategic resources that cannot be
replaced by common resources.
• E.g. Firm A has a rare and valuable resources, which it uses to
implement its strategy. If firm B has common resources that can be
substituted for firm A’s valuable resources, and these common
resources do basically the same things, then the rare and valuable
resources of firm A do not confer strategic advantage.
• In fact, if firm B can obtain common resources that threaten firm A’s
competitive advantage, then so can many other firms, thereby
ensuring that firm A has no advantage.
 Cont…

• Very different resources can be substitutes for each

other.
• For example, an expert-system computer programme
may substitute for a manager.
• A charismatic leader may substitute for a well-
designed, strategic-planning system.
•A well-designed, programmed-learning module may
substitute for an inspirational teacher.
 REFERENCES
• Barney, J.B. (1991). Firm resources and sustained competitive advantage.
Journal of Management, 17,1, 99-120.
• Barringer, B and Ireland, D (2012) Entrepreneurship – Successfully
Launching New Ventures (4th Ed.). Pearson Education, Global Edition.
• Dollinger, Marc J., (2003) Entrepreneurship: Strategies and Resources, 3rd
Edition, Prentice Hall International Edition.
• Mahoney, J. 1995. The management of resources and the resource of
management. Journal of Business Research, 33, 91-101.
• Peteraf, M. (1993). The cornerstones of competitive advantage: a Resource-
Based View. Strategic Management Journal, 14 (3), 179-191.
• Wernerfelt, B. (1984). A resource-based view of the firm. Strategic
Management Journal, 5, 171-80.
• Wickham, P. A. (2006) Strategic Entrepreneurship. (4th. Ed.). England:
Pearson Education Ltd.