1. Resource Based View
Resource Based View
A model of firm performance that focuses on the resources and capabilities controlled by a
firm as sources of competitive advantage. Relies on a few assumptions:
● Heterogenous: skills, capabilities and other resources that organizations possess
differ from one organization to another. They are unable to employ different strategies
to outcompete each other (real markets are not perfectly competitive → assume
competitive advantage by using different bundles of resources).
● Immobile: resources are not mobile (do not move from company to company in a
short run). Companies cannot replicate rivals' resources.
Resource Heterogeneity (Diverseness)
Whether a firm owns a resource or capability that is also owned by numerous other
competing firms (resource cannot provide a competitive advantage)
Resource Immobility
Resource that is difficult to obtain by competitors because the cost of developing, acquiring
or using that resource is too high
Tangible Resources
Physical items including cash, inventory, machinery, land or buildings. These items can be
easily liquidated and have a set value. Used to conceive and implement a firm’s strategies.
Intangible Resources
Resource that has no physical presence and has long-term value for a business. Copyright
and a company’s reputation are considered intangible assets. These resources are usually
immobile.
Capabilities
Tangible and intangible resources that enable a firm to take full advantage of the other
resources it controls (i.e. the return process in e-commerce companies like eBay).
1
, VRIO
If a firm has resources that are:
● Valuable: help organizations to increase the value offered to customers
● Rare: can only be acquired by one or few companies
● Imperfect Imitability: difficult, complex and costly to imitate or acquire
● Organized: firm is organized to exploit these resources and capabilities
Valuable? Rare? Imperfect Imitability? Organized? Implications
No No No No Competitive Disadvantage
Yes No No No Competitive parity
Temporary competitive
Yes Yes No No
advantage
Sustained competitive
Yes Yes Yes Yes
advantage
Industrial Organization (I/O) Economics
Contrasting approach to resource based view, industry characteristics determine profitability,
external considerations drive strategies, resource acquisition depends on strategies. Relies
on a few assumptions:
● Environment presents threats & opportunities
● All organizations have equal control/access of/to resources
● Resources are mobile between firms
● Organizational success achieved by offering goods/services at lower costs or
differentiating products to bring premium prices
Sources Of Competitive Advantage
● Dynamic Capabilities
● Slack Resources
● Order Of Entry
● Network Effects
● New Resource Configuration in Relation to New Needs
Dynamic Capabilities
Organizational and strategic routines by which firms achieve new resource configurations as
markets emerge, collide, split, evolve and die. Requires a combination of varied skills and
functional backgrounds
● Willingness to adopt and upgrade
● Strategic decision-making routings
● Gain and release of resources
● Alliance and resource acquisition routines and capabilities
● Product and process development routines and capabilities
● IT capability is a source of competitive advantage advantage in 1990s but no in
2000s
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Resource Based View
A model of firm performance that focuses on the resources and capabilities controlled by a
firm as sources of competitive advantage. Relies on a few assumptions:
● Heterogenous: skills, capabilities and other resources that organizations possess
differ from one organization to another. They are unable to employ different strategies
to outcompete each other (real markets are not perfectly competitive → assume
competitive advantage by using different bundles of resources).
● Immobile: resources are not mobile (do not move from company to company in a
short run). Companies cannot replicate rivals' resources.
Resource Heterogeneity (Diverseness)
Whether a firm owns a resource or capability that is also owned by numerous other
competing firms (resource cannot provide a competitive advantage)
Resource Immobility
Resource that is difficult to obtain by competitors because the cost of developing, acquiring
or using that resource is too high
Tangible Resources
Physical items including cash, inventory, machinery, land or buildings. These items can be
easily liquidated and have a set value. Used to conceive and implement a firm’s strategies.
Intangible Resources
Resource that has no physical presence and has long-term value for a business. Copyright
and a company’s reputation are considered intangible assets. These resources are usually
immobile.
Capabilities
Tangible and intangible resources that enable a firm to take full advantage of the other
resources it controls (i.e. the return process in e-commerce companies like eBay).
1
, VRIO
If a firm has resources that are:
● Valuable: help organizations to increase the value offered to customers
● Rare: can only be acquired by one or few companies
● Imperfect Imitability: difficult, complex and costly to imitate or acquire
● Organized: firm is organized to exploit these resources and capabilities
Valuable? Rare? Imperfect Imitability? Organized? Implications
No No No No Competitive Disadvantage
Yes No No No Competitive parity
Temporary competitive
Yes Yes No No
advantage
Sustained competitive
Yes Yes Yes Yes
advantage
Industrial Organization (I/O) Economics
Contrasting approach to resource based view, industry characteristics determine profitability,
external considerations drive strategies, resource acquisition depends on strategies. Relies
on a few assumptions:
● Environment presents threats & opportunities
● All organizations have equal control/access of/to resources
● Resources are mobile between firms
● Organizational success achieved by offering goods/services at lower costs or
differentiating products to bring premium prices
Sources Of Competitive Advantage
● Dynamic Capabilities
● Slack Resources
● Order Of Entry
● Network Effects
● New Resource Configuration in Relation to New Needs
Dynamic Capabilities
Organizational and strategic routines by which firms achieve new resource configurations as
markets emerge, collide, split, evolve and die. Requires a combination of varied skills and
functional backgrounds
● Willingness to adopt and upgrade
● Strategic decision-making routings
● Gain and release of resources
● Alliance and resource acquisition routines and capabilities
● Product and process development routines and capabilities
● IT capability is a source of competitive advantage advantage in 1990s but no in
2000s
2
