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Economic theory holds that in the normal course, and in the absence of
market imperfections, abnormal economic rents will get competed away by rivals
or new entrants to an industry. The Resource Based View holds that firms can
earn sustainable supra-normal returns if and only if they have superior resources
and those resources are protected by some form of isolating mechanism preventing
their diffusion throughout industry.
Early adopters of the Resource Based View
Edith Penrose contributed to the RBV field as early as 1959, when
she argued: "a firm is more than an administrative unit; it is also a collection
of productive resources the disposal of which between different users and
over time is determined by administrative decision. When we regard the function
of the private business firm from this point of view, the size of the firm
is best gauged by some measure of the productive resources it employs". And
Birger Wernerfelt coined the term in 1984.
 Jay Barney's Resource Based View of the Firm
However most scholars consider Jay Barney as the father of the modern
Resource-Based View of the Firm (RBV). His theory ('91) suggests that there
can be heterogeneity or firm-level differences among firms that allow some
of them to sustain competitive advantage. Therefore, the RBV emphasizes strategic
choice, charging the management of the firm with the important tasks of identifying,
developing and deploying key resources to maximize returns.
Barney (1991: "Firm resources and sustained competitive advantage")
made clear that abnormal rents can be earned from resources to the extent
that they are VRIN:
- Valuable (when they enable a firm to conceive or implement strategies
that improve its efficiency or effectiveness)
- Rare (valuable firm resources possessed by large numbers of competing
firms can not be sources of either a competitive advantage or a sustainable
competitive advantage)
- Imperfectly Imitable (because of {a combination of} three reasons: unique
historical conditions, causally ambiguous, social complex)
- Non-Substitutable (there must not be strategically equivalent valuable
resources that are themselves either not rare or imitable)
Other strategists on the Resource Based view of the firm
Differences may occur in the form of resources such as patents, properties,
proprietary technologies, or relationships. Most scholars claim that it is
only/mainly intangible resources that explain performance heterogeneity among
firms and thus are the likely sources of competitive advantage. (Galbreath
and Galvin recently discovered that while RBV theory largely associates
firm performance with intangible resources, the association may not always
hold true empirically. One explanation may be that the strength of some resources
are dependent upon interactions or combinations with other resources and therefore
no single resource - intangible or otherwise - becomes the most important
to firm performance. (Academy of Management Best conference Paper 2004 BPS:
L6))
'VRIN
resources' are tough to find. This becomes especially clear when we look
at the work done on strategies sometimes characterized as 'economizing' (Porter,
1996). These include reengineering, enterprise
systems, benchmarking, downsizing,
and other similar approaches of efficiency. Unfortunately, such techniques
are available to all competitors in an industry. They merely raise the bar
for everyone, usually in a transparent way, and do not produce long-term competitive
advantage.
There is a dilemma in attainable resources not being sustainable. Clearly
valuable resources that sustain advantage must be hard or impossible to imitate
-and therefore not available to those who do not already have them. Imitable
resources, on the other hand, can be attained by their aspirants. But as soon
as they show clear promise, they risk being competed away: their strength
becomes their weakness. Thus attainable resources are not sustainable.
Recent developments on the Resource Based View
More recently, the dynamic capability perspective has extended the Resource
Based View to the realm of evolving capabilities. By developing capabilities
based on sequences of path-dependent learning, a firm can stay ahead of its
imitators and continue to earn superior returns (Dierickx and Cool,
1991; Teece et al., 1997). There is nothing to say, however, that most
firms have the capacity to place themselves on a learning curve that would
prevent rivals from leapfrogging them. To do so they would have to pick an
optimal capability development trajectory that is (a) strictly path dependent
to sustain first mover advantage, and (b) nonsubstitutable with an equally
efficient trajectory. Bounded rationality conditions might obstruct the first
aim, conditions of equifinality the second. Again the goal of inimitability
is highly demanding, and asks the question of how to achieve it with assets,
resources, or capabilities the firm does not already have. Thus notwithstanding
major advances in the field of strategy, practitioners are left with a dilemma:
how to develop sustainable advantage that they do not possess, but is nonetheless
attainable.
A study by Danny Miller of a number of firms shows how some of them
were able to build not so much on resources and capabilities as on asymmetries.
Asymmetries are typically skills, processes, or assets a firm's competitors
do not and cannot copy at a cost that affords economic rents. They are rare,
hard or impossible to imitate and non-substitutable, although not connected
to any engine of value creation, and, in fact, often act as liabilities. By
discovering and reconceptualizing these asymmetries, embedding them within
a complementary organizational design, and leveraging them across appropriate
market opportunities, many firms were able to turn asymmetries into sustainable
capabilities.
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 RBV in Day to Day Planning
RBV is used in during our daily operation although we give different names. Just an example: grade mix during sales and operation planning. - optimum ...
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Compare with the Resource Based View of the Firm:
Core Competence |
Delta Model |
Parenting Advantage |
Strategy Dynamics
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Prahalad |
Porter Five Forces |
Distinctive Capabilities |
3C's |
Bricks and Clicks |
Twelve Principles
of the Network Economy |
Blue Ocean Strategy
| Product/Market Grid
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Three Dimensional Business Definition |
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Return to Management Hub: Decision-making & Valuation |
Finance & Investing |
Knowledge & Intangibles |
Marketing
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Resource-based View and Barney's Adapted VRIO Framework In-depth
Why Resources are Important?
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