Resource Based View

Topics: Strategic management, Management, Porter five forces analysis Pages: 9 (2615 words) Published: January 21, 2013

The mid-eighties witnessed the emergence of a growing body of work collectively labelled the resource and capability-based view of the firm (RBV). In reality, Resource Competence View (RCV) first adopted an “economic” orientation. Pioneer studies (Wernerfelt, 1984) , Barney, 1986, 1991, Dierickx and Cool, 1989, Peteraf, 1993) focused on the type of resources and competencies that could offer to its owner a sustainable competitive advantage. Therefore, resources and competencies approach first appeared as a theory of competitive advantage or a theory of “performance of the firm” (Argyres & Zenger, 2007). It is only recently, in the last 20 years that organizations have started using the resource based view approach on strategy. Nowadays, they view it as the most important key development in international business research and strategic management, an approach that gives a coherent vision based on a firm's capabilities to help determine the strategic resources necessary for the firm's survival and growth within a particular market place. As Hitt et al (2001) stated, “the resource based model assumes that each organization is a collection of unique resources and capabilities that provides the basis for its strategy and that is the primary source of return.”. It suggests that in order for a firm to sustain competitive advantage, it must not only have resources and capabilities but also have a firm control over it and they must meet certain basic criteria such as being: valuable, rare, inimitable and non substitutable such that it is impossible to be copied or replicated (VRIN). Although a resource based view strategy sounds like the better way to go, others have wondered if this approach is at all necessary or bring any more insight than the traditional understandings into a successful strategy to survive and thrive into a competitive market, strategy that will allow the firm to have a good competitive advantage. In this review, we aim to elucidate the concepts behind the resource based view strategy and its use by managers. Furthermore, we aim to elaborate on its advantages but also disadvantages moving on to a critical analysis of this emerging approach to strategy and competitive advantage from the point of view of well known authors such as M. Porter (1980,1985) who believes that external factors mainly contribute to a firm's competitive advantage and Jay Barney (1991) who criticizes the narrow approach of a resource based view on competitive advantage, mainly the homogeneity it gives to firms resources.


The RBV has emerged after the industrial work of Michael Porter and Rick Perry , who stated that companies must achieve a competitive advantage based on external factors. In fact, the RBV suggests that differences in profitability between firms in the same sector are much more important than inter sector profitability differences which was its founding idea. The resource-based view (RBV) has become one of the most influential and cited theories in the history of management theorizing. It aspires to explain the internal sources of a firm’s sustained competitive advantage (SCA). Its central proposition is that if a firm is to achieve a state of SCA, it must acquire and control valuable, rare, inimitable, and non substitutable (VRIN) resources and capabilities, plus have the organization (O) in a place that can absorb and apply them (Barney, 1991a, 1994, 2002). This proposition is shared by several related analyses: core competences (Hamel & Prahalad, 1994), dynamic capabilities (Helfat & Peteraf, 2003; Teece, Pisano, & Shuen, 1997), and the knowledge-based view (Grant, 1996b). Given its elegant simplicity and its immediate face validity, the RBV’s core message is appealing, easily grasped, and easily taught.

1 FUNCTIONAL ASPECTS OF THE RESOURCE BASED VIEW :Models based on resources and skills, Resource Based View and Competence Based View

The resources and...

References: Barney, J.B. 1991. Firm resources and sustained competitive advantage, journal of management 17:99-120.
Barney, J.B. McWilliams,A. , Turk,T. 1989. On the relevance of the concept of entry barriers in the theory of competitive strategy. Paper presented at the annual meeting of the strategic managemt society, San Francisco.
Lieberman,M.B, & Montgomery, D.B. 1998. First mover advantages, Strategic management journal, 9:41-58.
Porter,M. 1980. Competitive strategy. New York. Free Press.
Porter, M. 1985. Competitive advantage. New York. Free Press.
Porter,M. 2000. What is Strategy? Harvard Business Review.
Rumelt,R. 1984. Towards a strategic theory of the firm. In R. Lamb (Ed.), Competitive strategic management: 556-570. Englewoods Cliffs, NJ : Prentice-Hall.
Wernerfelt, B. 1984. A resource based view of the firm. Strategic management Journal. 5:171-180.
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