A framework for determining competitive heterogeneity
Tony T. Akiwumi MBA FCMI
2002 Cohort, DBA Programme,
Kingston University, Kingston, Surrey, UK
The Resource-Based View of the firm is an emerging strategic management theory of firm heterogeneity that explains the differences in firm prosperity that cannot be attributed to differences in industry conditions alone; it also exposes the resource conditions that underlie competitive advantage. The Resource-Based View of the firm argues that a firm’s sustainable competitive advantage depends on its ability to manage the institutional context of its resource decisions.
Because of the imperfections in the resource-market and the subjective managerial decisions about how these resources are acquired, developed and deployed, firms can be expected to differ in the degree to which economic rents are both realised and sustained.
Resource-Based View theory postulates that a firm achieves sustainable competitive advantage and thus enhanced economic rents only when it is able to obtain preferential access to and exploit the potential of, strategic competitive advantage-generating resources, i.e. those that are valuable, rare, inimitable and non-substitutable
This paper provides an integrated review of the Resource-Based View framework in an effort to provide a critical evaluation of the way that it has influenced the development of research and practice across key fields of management. The paper then goes on to suggest areas of research related to how a firm can achieve sustainable competitive advantage through the development expertise derived from the implementation of related and complementary Resource-Based acquisition strategies.
Keywords: Resource-Based View, Competitive Advantage
TABLE OF CONTENTS
DEVELOPMENT OF THE RESOURCE-BASED FRAMEWORK5
DEFINING KEY CONCEPTS6
SUSTAINED COMPETITIVE ADVANTAGE9
Industry versus firm-specific effects9
Attributes of competitive advantage generating resources10
Management decisions and strategic choices13
RESOURCE-BASED VIEW FRAMEWORK-A CRITICAL REVIEW14
Significance of the Resource-Based View to research and practice14
Human Resource Management15
Problems and Weaknesses with the Resource-Based View17
Resource-Based procedure for strategy development18
Unit of empirical analysis18
Testing and measuring the Resource-Based View18
A portent for a future research agenda20
Acquisition expertise as a firm-specific resource20
This paper begins with the early classical economists assumption that man is a highly rational economic being; further that the desired outcome of the firm’s managerial effort is above average economic rents or profits. A firm’s profitability can be disaggregated into two key elements: the industry average and the firm-specific divergence from that average attributable to the competitive advantage enjoyed by that firm as a result of its particular strategy.
The concept of competitive advantage as used in the business context is clearly derived from the economic and militaristic origins of the strategy literature (Whittington, 1993). The term strategy is derived from the ancient Greek words strategos – a general, stratos – an army and agein – to lead, and has only been used...