A Few Notes on the Resource Based View of the Firm

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A Few Notes on the Resource Based View of the Firm

• Heli Wang
• Hong Kong University of Science and Technology
  (HKUST)
• E-mail mnheli_at_ust.hk

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Barney (1986) Strategic Factor Market
Expectations, Luck, and Business Strategy

• Strategic Factor Markets where firms buy and
  sell the resources necessary to implement their
  strategies.
• Examples
• For firms implementing a strategy of being a
  product innovator Market for RD skill and the
  labor market for engineers and scientists.
• From firms wishing to implement a strategy of
  product diversification may decide to do so by
  acquiring other companies Market for companies.
• For firms implementing a strategy of product
  differentiation Market for quality and
  reputation.
• Directly pointing to the cost side of
  implementing strategies, in addition to the
  benefit side.
• e.g., Porters positioning strategy dilemma in
  entering an attractive industry

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Barney (1986) Strategic Factor Market
Expectations, Luck, and Business Strategy

• In perfect strategic factor markets, the cost of
  acquiring strategic factors will equal the
  economic value of using these factors to
  implement product market strategies.
• Even if such strategies create imperfectly
  competitive product markets, they will not
  generate above normal performance for a firm, for
  their full value would have been anticipated when
  the resources necessary for implementation were
  acquired.
• When can above normal performance be possible?
• 1) Differences in expectations 2) Luck
• Other apparent strategic factor market
  imperfections, including 1) when a firm already
  controls all the resources needed to implement a
  strategy, 2) when a firm controls unique
  resources, 3) when only a small number of firms
  attempt to implement a strategy, and 4) when some
  firms have access to lower cost capital than
  others, and so on, are all special cases of
  differences in expectations held by firms about
  the future value of a strategic resource.

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Amit Schoemaker (1993) and Peteraf (1993)

• Equilibrium analysis of conditions for firms to
  sustain competitive advantage
• Amit and Schoemaker (1993)
• Firms differ in the resources and capabilities
  they control the differences lead to sustainable
  economic rents for some firms.
• Unique contributions
• Explicitly bring industry (SIF strategic
  industry factors) into resource (strategic
  assets) analysis
• View managers as discretionary decision makers
  under uncertainty, complexity, and
  intra-organizational conflicts
• Peteraf (1993)
• Integrating the existing resource-based
  perspectives into a parsimonious model.
• Four conditions underlie sustained competitive
  advantage Resource heterogeneity (Superior
  resources in an industry), ex post limits to
  competition, imperfect resource mobility, ex ante
  limits to competition.
• Barney (1991)
• Value, rarity, inimitability and
  non-substitution. (VRIN)

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Variance Decomposition Models

• Another stream of studies worth mentioning in the
  RBV literature
• Schmalensee (1985) Montgomery and Wernerfelt
  (1988) Rumelt (1991) McGahan and Porter (1997)
  etc.
• ? Significant portion of performance
  differentials among firms are explained by
  firm-level heterogeneities.

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Non-equilibrium Analysis Evolutionary/dynamic
view

• Explore sources of competitive advantages for
  firms in environments of rapid technological
  change.
• Teece et al. (1997)
• Dynamic capabilities The firms ability to
  integrate, build, and reconfigure internal and
  external competences to address rapidly changing
  environments.
• Competitive advantage arises from firms
  distinctive processes (ways of coordinating,
  combining, and reconfiguring), shaped by firms
  specific asset positions and the evolution path.
• Factors determining dynamic capabilities
• Processes routines or patterns of existing
  practices and learning
• Coordination/integration (static), learning
  (dynamic), and reconfiguration (tranformational)
• Positions current endowment of resources
  (technology, customer base, relational assets
  etc.)
• Path path dependencies and strategic
  alternatives available
• More recent work Eisenhardt and Martin (2000),
  Helfat and Peteraf (2003) Helfat et al. (2007)
  Teece (2007).

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Whats Next?

• Go deeper into the linkages among resources,
  capabilities, dynamic capabilities, and
  performance
• Processes (less equilibrium, more dynamic
  analysis)
• Rents distribution/who appropriate rents?
• Further understanding of the creation and
  development of superior resources, capabilities,
  dynamic capabilities in terms of both theory and
  specific empirical settings.
• Combining with entrepreneurship, learning,
  search, organizational change etc. literatures
• Integrating with other theories/streams of
  literature to better understand various strategic
  issues such as vertical integration,
  diversification, org. structure and design, etc.
• Behavioral theories, Agency theory, TCE
  (Transaction Cost Economics), etc.