Resource Based View of the Firm

Knowledge Center

   

Earning sustainable supra-normal returns by superior resources. Explanation of Resource Based View (Perspective) of Barney. ('91)

Contents

  1. Summary
  2. Forum
  3. Best Practices
  4. Expert Tips
  5. Resources
  6. Print

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.


VRIN Barney Resource Based ViewJay 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.


Resource Based View of the Firm Forum
  Relationship Between Isolating Mechanisms / Barriers of Imitation and Company Size
Does anyone know an article that deals with the re...
     
 
  Can 'Product Design Capability' be a Resource for an Organization?
I am trying to fit Product (or Service) Design fro...
     
 
  RBV in Day to Day Planning
RBV is used in during our daily operation although...
     
 
  Resource Based View Indentifies Core Competences
The RBV can be viewed as an internal strategic ana...
     
 
  RBV and Comparative Advantage
RBV is also about  
   
 
  Extended RBV Approach
The problem of resource based theory lays in restr...
     
 
  Conditions RBV are Seemingly Non-Complementary
The two limiting conditions for RBV to be earning ...
     
 
  Resource Based View of the Firm and SWOT
Resource-based view of the firm is a bit like a
     
 
  Example RBV - Engineering Firm
I am writing a thesis on RBV. One case study is a ...
     
 
  RBV in Micro Business?
How is the RBV concept applied in micro business?...
     
 
  Strategic Resource Planning
Are there models exercises / solutions available o...
     
 
  Resource Based View Industries?
What industries can be said to be heavily based on...
     
 
  Barney Changed VRIN into VRIO
Barney developed the VRIN framework (1991) to V...
     
 
  Challenges of Managing Conglomerates...
I am currently dealing with following question: wh...
     
 
  Relevance of RBV to Healthcare SMEs
What could one describe as core competences of a s...
     
 
  Relevance of RBV when facing Low Cost Competition
Is the RBV still relevant given the rise of compet...
     
 

Resource Based View of the Firm Special Interest Group


Special Interest Group

Resource Based View of the Firm Education & Events


Find Trainings, Seminars and Events


Best Practices - Resource Based View of the Firm Premium
  Sources for Resource Based View
In order to find possible / potential sources for ...
     
 
  RBV & Financial Capability
The Chinese security regulation commission regulat...
     
 
  Advantages of RBV (benefits)
The resource based view of the firm is a terrific ...
     
 
  Limitations of Resource Based View of the Firm
What are the limitations of RBV? Can anyone clearl...
     
 

Expert Tips - Resource Based View of the Firm Premium
 

How to Measure Resource Based View of the Firm

Does anyone have an idea of how to measure the exi...
Usage (application): Measuring the Existence of RBV in an Organization
 
 
 

How to Avoid Imitation?

How can barriers to imitation be created?
Ho...
Usage (application): Protection of your Strategic Resources Against Imitation
 
 
 

Three Schools of Thought for Firm-internal Factors for Sustainable Competitive Advantage

Three schools of thought have now been identified ...
Usage (application): Achieving Sustainable Competitive Advantage
 
 
 

Differences Between Resources and Capabilities

These are the main differences between resource...
Usage (application): The 4 Main Differences
 
 
 

Key Challenges of Internet Age for Management and for Product and Service Development

The Internet age represents a huge challenge for m...
Usage (application): R&D, Product Development, Service Development, Strategy, Marketing, Innovation, Visioning
 
 
 

A Corporate Theory: Long-term Handhold and Guidance in Turbulent Times?

According to Professor Todd Zenger, companies shou...
Usage (application): Inside-out Corporate Strategy, Corporate Visioning
 
 
 

What are Smart Creatives? Traits

To accommodate the strategic demands of the intern...
Usage (application): R&D, Product Development, Service Development, Strategy, Innovation, HR, Career Management
 
 
 

Distinguish Resources and Capabilites

Scholars Silja Korhoen and Juha S. Niemela argue t...
Usage (application): Why the Difference Matters
 
 
 

Dynamic Capabilities View

Click on More for an explanation of Dynamic Capabi...
Usage (application): VRIN: Strategic Learning
 
 
 

Usages of the Resource Based View

Note that RBV may be used in several distinct dime...
Usage (application): Application Areas of RBV
 
 

Resources - Resource Based View of the Firm Premium

Resource-based View and Barney's Adapted VRIO Framework In-depth

Presentation about the Resource-based view focusin...
Usage (application): Resource-based View, Barney, VRIO-framework, Internal Analysis
 

Theory Behind Barney's Resource-based View of Exemplar Returns

Comprehensive Powerpoint presentation on the backg...
Usage (application): Understanding / Presenting RBV of the Firm
 

Why Resources are Important?

Humorous picture clearly shows why resources are i...
Usage (application): Funny Picture
 

Definition, Differences and Relationships between Resources, Capabilities, Competencies and Core Competencies

Javidan (1998) has made a great contribution to an...
Usage (application): Core Competencies
 

Porter's Industrial Organization Versus Barney's Resource Based View

This presentation compares Porter's competitive ad...
Usage (application): Business Strategy, Value Chain Management
 

Capability Lifecycles

Article by Constance E. Helfat and Margaret A. Pet...
Usage (application): Maturity Management
 

The Resource Based View, Comparative Advantage and Competitive Heteroginity

This paper by Anoop Madhok and Sali Li is primaril...
Usage (application): Resource Based View, Comparative Advantage
 

The Networked Firm and RBV

This conceptual paper by Nick Wills-Johnson provid...
Usage (application): Networks, Social Capital
 

Resource Based View Diagram

Download and edit this 12manage PowerPoint graphic...
Usage (application): Business / Corporate Strategy
 
 

News about Resource Based View Theory


     
 

News about Resource Based View Opinion


     
 

Videos about Resource Based View Theory


     
 

Videos about Resource Based View Opinion


     
 

Presentations about Resource Based View Theory


     
 

Presentations about Resource Based View Opinion


     
 

More about Resource Based View Theory


     
 

More about Resource Based View Opinion


     

Compare with the Resource Based View of the Firm: Core Competence  |  Delta Model  |  Parenting Advantage  |  Strategy Dynamics  |  SWOT Analysis  |  Prahalad  |  Porter Five Forces  |  Distinctive Capabilities  |  3C's  |  Bricks and Clicks  |  Twelve Principles of the Network Economy  |  Blue Ocean Strategy  |  Product/Market Grid  |  Three Dimensional Business Definition


Return to Management Hub: Decision-making & Valuation  |   Finance & Investing  |   Knowledge & Intangibles  |   Marketing


More Management Methods, Models and Theory

Special Interest Group Leader

You here


About 12manage | Advertising | Link to us | Privacy | Terms of Service
Copyright 2017 12manage - The Executive Fast Track. V14.1 - Last updated: 22-9-2017. All names tm by their owners.