Master: Business Administration
Specialization: Human Resource Management
Resource Based View: A short review of its main strengths and weaknesses
Short introduction, definition and characteristics
The Resource Based View (RBV) is a useful business management tool that, in recent years, has been attracting the attention of a growing number of researchers. The popularity of this influential contemporary theory comes primarily from the fact that it combines both strategic and organizational insights. Its aspiration is to try to explain the internal resources of a firm that can lead to the acquisition of sustained competitive advantage. Its fundamental concept is that, if an organization wants to achieve sustained competitive advantage, it should possess resources that are valuable, rare, inimitable and non-substitutable (VRIN). Some key terms should also be defined in order to avoid possible confusion. Internal Resources: assets, capabilities, processes, information, knowledge, etc. which are obtained and controlled by firms. They are considered as the strengths of a company and can be categorized in physical capital resources, human capital resources and organizational capital resources. They promote the effectiveness and efficiency of a firm. Competitive advantage and sustained competitive advantage: A company is considered to have competitive advantage when its value creating strategy is not implemented by current or potential competitors at the same time. The difference of the sustained competitive advantage is that the competitors cannot duplicate this strategy. Next, a review of some strong and weak key points of the RBV is provided, as presented in the organizational literature. Strengths
An important contribution of the RBV to strategic management is that it has given insight into the nature of competitive advantage and it has broadened our comprehension of sustained competitive advantage. The logic behind it is a simple one to comprehend. The main goal of the firms is profitability and above average returns. This can be achieved by gaining competitive advantage. Competitive advantage can be gained by possessing and controlling resources. Therefore, the RBV focuses on how firms can identify, develop, deploy and sustain their advantages in order to maximize profitability. Moreover, the RBV tries to give a valid explanation about why certain resources within the company can have more advantageous results than others. This is explained further in the following paragraphs.
The RBV framework is a conceptually grounded framework with a purpose to assess the strengths and weaknesses of a firm’s resources. It focuses not only on the value, but also on the durability of the results. Using this framework, managers can select the strengths which are important in a given market so as to provide value to customers. There are examples of managers who brought strengths in a market but they failed, as these strengths were not of interest to the customers.
Another advantage is that it puts pressure on managers to consider on which of the firm’s strengths are unique and cannot be copied by competitors. Services firms for example can be in a vulnerable position, because their only valuable resources are not hidden or unclear and therefore, can be easily duplicated by other services firms. A proposition to this could be to categorize resources based on their barriers of duplication. In general, intangible assets are more difficult to be copied and can provide a more meaningful basis for achieving competitive advantage.
According to Arthurs and Busenitz (2006), the RBV promotes the understanding of dynamic capabilities of the firm (that is the ability to reconfigure the firm’s resource base) and new venture performance in entrepreneurship research. The use of the framework seems to be appropriate, as both RBV and entrepreneurship are based on the idea of buying low and selling high. In other words, the resource-based...
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