The Resource-Based View (RBV) is an economic tool used to determine the resources available to a firm, which ought to be exploited in order for that firm to develop a strategy for achieving sustainable competitive advantage. Barney (1991) formalised this theory, although it was Wernerfelt (1984) who introduced the idea of resource position barriers being roughly analogous to entry barriers in the positioning school (see Porter, 1980). Economics (deriving from the Greek words οίκω [okos], house, and νέμω [nemo], rules hence household management) is the social science that studies the allocation of scarce resources to satisfy unlimited wants. ... In marketing and strategic management, sustainable competitive advantage is an advantage that one firm has relative to competing firms. ...

Concept

The key points of the theory are:

1) Identify the firm’s potential key resources

2) Evaluate whether these resources fulfil the following (vrin) criterion:

• Valuable - they enable a firm to implement strategies that improve its efficiency and effectiveness
• Rare - not available to other competitors
• Imperfectly imitable - not easily implemented by others
• Non-substitutable - not able to be replaced by some other non-rare resource

3) Care for and protect resources that pass these evaluations

Definitions

What constitutes a "resource"?

Barney (1991, p101) - “firm resources include all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness” In business and accounting an asset is anything owned, whether in possession or by right to take possession, by a person or a group acting together, e. ... ...

Kay (1999) – “Resources are inputs into a firm's production process, such as capital, equipment, the skills of individual employees, patents, finance, and talented managers. Resources are either tangible or intangible in nature.”

What constitutes "competitive advantage"?

Barney (1991, p102) - A firm achieves competitive advantage when it is able to implement a “value creating strategy not simultaneously being implemented by any current or potential competitors” In marketing and strategic management, sustainable competitive advantage is an advantage that one firm has relative to competing firms. ...

Criticisms

Priem and Butler (2001) made four key criticisms:

• The RBV is tautological
• Different resource configurations can generate the same value for firms and thus would not be competitive advantage
• The role of product markets is underdeveloped in the argument
• The theory has limited prescriptive implications

However, Barney (2001) proposed counter-arguments to these. In logic, a tautology is a statement which is true by its own definition, and is therefore fundamentally uninformative. ...

Further criticisms are:

• It is perhaps difficult (if not impossible) to find a resource which satisfies all of the Barney's VRIN criterion.

• There is the assumption that a firm can be profitable in a highly competitive market as long as it can exploit advantageous resources, but this may not necessarily be the case. It ignores external factors concerning the industry as a whole; Porter’s Industry Structure Analysis ought also be considered.

Michael Porters 1979 framework uses concepts developed in Industrial Organization (IO) economics to derive 5 forces that determine the attractiveness of a market. ...

Further reading

• Peteraf, M. A. (1993), "The cornerstones of competitive advantage: a resource-based view". Strategic Management Journal, Vol. 14, No. 3, pp. 179-191

• Porter, M. E. (1980), "Competitive Strategy: Techniques for Analyzing Industries and Competitors", New York, NY: Free Press

• Rumelt, R. P. (1991), "How much does industry matter?". Strategic Management Journal, Vol. 12, No. 3, pp. 167-185

• Teece, D., Pisano, G. and Shuen, A. (1997), "Dynamic Capabilities and Strategic Management". Strategic Management Journal, Vol. 18, No. 7, pp. 509-533

• Wernerfelt, B. (1984), "A resource-based view of the firm". Strategic Management Journal, Vol.5, pp.171-180

See also

Porter's Five Forces Michael Porters 1979 framework uses concepts developed in Industrial Organization (IO) economics to derive 5 forces that determine the attractiveness of a market. ...

Core competences A companys core competency is the one thing that it can do better than its competitors. ...

References

• Barney, Jay B. (1991), "Firm Resources and Sustained Competitive Advantage". Journal of Management, Vol. 17, No. 1, pp. 99-120

• Barney, Jay B. (2001), "Is the resource-based "view" a useful perspective for strategic management research? Yes". Academy of Management Review, Vol. 26, No. 1, pp. 41-55