The Resource Based View of the Firm

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The Resource Based View of the Firm
By W. Scott Sherman, Ph.D.
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Resources
What a firm HAS...
What a firm has to work with
Assets, including people and the value of its
reputation
Resources are inputs of the firms production
process...
Resources include capital equipment, employee
skills, brand names, finances, and talented
managers
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Four Assumptions of the I/O Model

• External environment imposes pressures and
  constraints that determine strategies leading to
  above-average returns

Most firms competing in an industry control
similar strategically relevant resources and
pursue similar strategies
Resources used to implement strategies are highly
mobile across firms
Organizational decision makers are assumed to be
rational and committed to acting in the firms
best interests (profit-maximizing)
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VRIO Outcomes and Effect on Competitive Advantage
Costly to Imitate
Exploited by Organization
Competitive Consequences
Performance Implications
Valuable
Rare
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Core Competencies--Cautions and Reminders
All core competencies have the potential to
become Core Rigidities
Core Rigidities are former core competencies that
sow the seeds of organizational inertia and
prevent the firm from responding appropriately to
changes in the external environment
Strategic myopia and inflexibility can strangle
the firms ability to grow and adapt to
environmental change or competitive threats
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VRIO Workpage
Perf Impl
Comp Cons
Resource
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