ToS Session 2.1 – RBV I: The High Church
ToS Session 2.1 – RBV I: The High Church
Oct 6, 2026 · @Nikki
Session 2.1 in one paragraph
The High Church of the resource-based view (RBV) explains performance differences by
imperfections in factor markets: firms earn above-normal returns (Ricardian rents) when
they control superior, scarce resources that they acquired below their full economic
value, and that rivals cannot copy or bid away. Barney (1991) gives the resource checklist
(VRIN/VRIO); Peteraf (1993) gives the four economic conditions (heterogeneity, ex-post
limits, imperfect mobility, ex-ante limits). The underlying logic is David Ricardo's theory of
land rent.
Place in the course: Block 2 (positional views), between Porter's IO view (1.2) and the
added value view (2.2). It is study question 3: How does the High Church of the RBV
explain differences in performance among firms?
Sources used: Barney (1991); Peteraf (1993); Reading guide (meeting 2.1); Study guide (key
concepts 2.1); Lecture 3 slides ("Theories of Strategy 2.1 – RBV I: The High Church");
prerecorded slides Overview of RBV, The main RBV papers, Ricardian logic; your Notes on
lectures (Lecture 3); Case Manchester United.
1. The big picture: Porter vs. the RBV
The RBV developed as a reaction to Porter. Wernerfelt (1984) started it with the idea that,
for firms, products and resources are two sides of the same coin (Overview of RBV
slides). Porter looks at the product side; the RBV looks at the resource side. Both still treat
the firm itself as a black box.
View of the firm in the early RBV (Lecture 3 slide 20)
Page 1 of 16
,ToS Session 2.1 – RBV I: The High Church
Resources flow in from factor markets, products flow out to product markets; what
happens inside the firm is not explained by either view.
Porter / IO perspective RBV perspective
Direction Outside-in Inside-out
Unit of analysis Industry (and strategic group) Firm (its resources)
Source of Product market imperfections Factor market imperfections
advantage (market power) (superior resources)
Type of rent Monopoly / monopolistic rent Ricardian (efficiency) rent
Key tools Five Forces, generic strategies, VRIN/VRIO, Peteraf's cornerstones
strategic groups
Product market = the market where firms compete for customers for their products.
Factor market = the market where firms compete for the resources (land, labour, capital,
know-how) they need to make those products (Reading guide 2.1).
Empirical support (McGahan & Porter 1997, Lecture 3): business-unit effect 32%,
industry effect 19%, corporate parent effect 4%, year effect 2%, unexplained 43%. The
business-unit (firm) effect is larger than the industry effect, which is often used as an
argument for looking inside the firm (RBV) rather than only at industries (Porter). Note:
Porter would say the firm effect is also explained by his generic strategies.
The simple RBV logic (based on Conner 1991, Lecture 3 slide 28): costly-to-copy
resources → higher value minus cost than competitors → profit. Compare this to Porter:
industry structure (Five Forces) + generic strategy (differentiation or cost leadership) →
profit. Both end up defining competitive advantage as a better value–cost position; they
differ in where it comes from.
2. The RBV family: High Church vs. Low Church
The High Church stays close to neoclassical economics and its equilibrium logic; the Low
Church departs from it and opens the black box (terminology from Gavetti & Levinthal
2004, Reading guide).
Page 2 of 16
, ToS Session 2.1 – RBV I: The High Church
High Church (this session) Low Church (sessions 5.1–5.2)
Papers Factor market competition: Barney Capabilities: Dierickx & Cool
(1986). Core RBV: Barney (1991), (1989). Knowledge-based view:
Peteraf (1993), Peteraf & Barney Grant (1996). Dynamic capabilities:
(2003) Teece et al. (1997). Popular:
Prahalad & Hamel (1990), Stalk et
al. (1992)
Logic Static, equilibrium (neoclassical) Dynamic, process, disequilibrium
Focus Owning/acquiring unique resources Building and using resources
("resource picking") ("capability building")
Firm Black box, unitary, rational Opened up: routines, knowledge,
learning
Outcome Rent (value appropriation) Profit, growth, adaptation
explained
Business example: buying a mine with the richest ore deposit (High Church: superior
resource, rent) versus Toyota's production system built over decades (Low Church:
accumulated capability that cannot be bought).
3. Barney (1991): Firm Resources and Sustained Competitive
Advantage
Barney argues that sustained competitive advantage (SCA) comes from resources that
are valuable, rare, imperfectly imitable and non-substitutable (VRIN). It is the most cited
RBV paper, but was later criticised as tautological (Priem & Butler 2001): "valuable"
resources create advantage, and advantage proves they were valuable.
Starting point. Traditional strategy combines a SWOT: environmental models (Porter)
cover opportunities and threats; the RBV covers internal strengths and weaknesses.
Two core assumptions (the opposite of Porter/IO, which assumes identical firms and
mobile resources):
1. Resource heterogeneity – firms in an industry control different bundles of strategic
resources.
2. Resource immobility – these resources cannot move freely between firms, so
differences last.
Key definitions
Page 3 of 16
ToS Session 2.1 – RBV I: The High Church
Oct 6, 2026 · @Nikki
Session 2.1 in one paragraph
The High Church of the resource-based view (RBV) explains performance differences by
imperfections in factor markets: firms earn above-normal returns (Ricardian rents) when
they control superior, scarce resources that they acquired below their full economic
value, and that rivals cannot copy or bid away. Barney (1991) gives the resource checklist
(VRIN/VRIO); Peteraf (1993) gives the four economic conditions (heterogeneity, ex-post
limits, imperfect mobility, ex-ante limits). The underlying logic is David Ricardo's theory of
land rent.
Place in the course: Block 2 (positional views), between Porter's IO view (1.2) and the
added value view (2.2). It is study question 3: How does the High Church of the RBV
explain differences in performance among firms?
Sources used: Barney (1991); Peteraf (1993); Reading guide (meeting 2.1); Study guide (key
concepts 2.1); Lecture 3 slides ("Theories of Strategy 2.1 – RBV I: The High Church");
prerecorded slides Overview of RBV, The main RBV papers, Ricardian logic; your Notes on
lectures (Lecture 3); Case Manchester United.
1. The big picture: Porter vs. the RBV
The RBV developed as a reaction to Porter. Wernerfelt (1984) started it with the idea that,
for firms, products and resources are two sides of the same coin (Overview of RBV
slides). Porter looks at the product side; the RBV looks at the resource side. Both still treat
the firm itself as a black box.
View of the firm in the early RBV (Lecture 3 slide 20)
Page 1 of 16
,ToS Session 2.1 – RBV I: The High Church
Resources flow in from factor markets, products flow out to product markets; what
happens inside the firm is not explained by either view.
Porter / IO perspective RBV perspective
Direction Outside-in Inside-out
Unit of analysis Industry (and strategic group) Firm (its resources)
Source of Product market imperfections Factor market imperfections
advantage (market power) (superior resources)
Type of rent Monopoly / monopolistic rent Ricardian (efficiency) rent
Key tools Five Forces, generic strategies, VRIN/VRIO, Peteraf's cornerstones
strategic groups
Product market = the market where firms compete for customers for their products.
Factor market = the market where firms compete for the resources (land, labour, capital,
know-how) they need to make those products (Reading guide 2.1).
Empirical support (McGahan & Porter 1997, Lecture 3): business-unit effect 32%,
industry effect 19%, corporate parent effect 4%, year effect 2%, unexplained 43%. The
business-unit (firm) effect is larger than the industry effect, which is often used as an
argument for looking inside the firm (RBV) rather than only at industries (Porter). Note:
Porter would say the firm effect is also explained by his generic strategies.
The simple RBV logic (based on Conner 1991, Lecture 3 slide 28): costly-to-copy
resources → higher value minus cost than competitors → profit. Compare this to Porter:
industry structure (Five Forces) + generic strategy (differentiation or cost leadership) →
profit. Both end up defining competitive advantage as a better value–cost position; they
differ in where it comes from.
2. The RBV family: High Church vs. Low Church
The High Church stays close to neoclassical economics and its equilibrium logic; the Low
Church departs from it and opens the black box (terminology from Gavetti & Levinthal
2004, Reading guide).
Page 2 of 16
, ToS Session 2.1 – RBV I: The High Church
High Church (this session) Low Church (sessions 5.1–5.2)
Papers Factor market competition: Barney Capabilities: Dierickx & Cool
(1986). Core RBV: Barney (1991), (1989). Knowledge-based view:
Peteraf (1993), Peteraf & Barney Grant (1996). Dynamic capabilities:
(2003) Teece et al. (1997). Popular:
Prahalad & Hamel (1990), Stalk et
al. (1992)
Logic Static, equilibrium (neoclassical) Dynamic, process, disequilibrium
Focus Owning/acquiring unique resources Building and using resources
("resource picking") ("capability building")
Firm Black box, unitary, rational Opened up: routines, knowledge,
learning
Outcome Rent (value appropriation) Profit, growth, adaptation
explained
Business example: buying a mine with the richest ore deposit (High Church: superior
resource, rent) versus Toyota's production system built over decades (Low Church:
accumulated capability that cannot be bought).
3. Barney (1991): Firm Resources and Sustained Competitive
Advantage
Barney argues that sustained competitive advantage (SCA) comes from resources that
are valuable, rare, imperfectly imitable and non-substitutable (VRIN). It is the most cited
RBV paper, but was later criticised as tautological (Priem & Butler 2001): "valuable"
resources create advantage, and advantage proves they were valuable.
Starting point. Traditional strategy combines a SWOT: environmental models (Porter)
cover opportunities and threats; the RBV covers internal strengths and weaknesses.
Two core assumptions (the opposite of Porter/IO, which assumes identical firms and
mobile resources):
1. Resource heterogeneity – firms in an industry control different bundles of strategic
resources.
2. Resource immobility – these resources cannot move freely between firms, so
differences last.
Key definitions
Page 3 of 16
