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Value, proﬁt and risk: accounting and the resource-based view of the ﬁrm Steven Toms
The York Management School, University of York, Heslington, UK Abstract
Purpose – This paper aims to argue that the principal components of the Resource-Based View (RBV) as a theory of sustained competitive advantage are not a sufﬁcient basis for a complete and consistent theory of ﬁrm behaviour. Two missing elements are value theory and accountability mechanisms. Design/methodology/approach – The paper proposes a link between value theory and accountability using a Resource Value-Resource Risk perspective as an alternative to the Capital Asset Pricing Model. The link operates ﬁrst from the labour process, where value is created but is imperfectly observable by intra-ﬁrm mechanisms of organizational control and outside governance arrangements without incurring monitoring costs. Second, it operates through contractual arrangements which impose ﬁxed cost structures on activities with variable revenues. Findings – The paper thereby explains how value originates in risky and difﬁcult to monitor productive processes and is transmitted as rents to organizational and capital market constituents. It then reviews recent contributions to the RBV, arguing that the proposed new approach overcomes gaps inherent in the alternatives, and thus offers a more complete and integrated view of ﬁrm behaviour. Originality/value – The RBV can become a coherent theory of ﬁrm behaviour, if it adopts and can integrate the labour theory of value, associated measures of risk arising from the labour process and mechanisms of accountability. Keywords Resources, Risk management, Labour, Competitive advantage Paper type Research paper
Value, proﬁt and risk
1. Introduction To what extent is strategy framed in accounting terms and what role do accounting numbers and techniques play in setting strategy? In both cases the answer is probably not enough, in view of the potential contribution on offer from accounting generally, and from critical accounting in particular. In recent years, the resource-based view (RBV) of the ﬁrm, has achieved widespread dissemination in academic literature and management practice (Acedo et al., 2006). It explains competitive advantage, or delivery of sustained above-normal returns (Peteraf, 1993) or economic proﬁt (Barney, 2001), in terms of ﬁrms’ bundles of resources (Amit and Schoemaker, 1993; Rumelt, 1984), which are valuable, rare, inimitable and non-substitutable (VRIN) (Barney, 2001, emphasis added). A theory linking asset value and abnormal returns is therefore The author would like to thank participants at the European Critical Accounting Studies Conference, University of York, 2006 and the Institute of Chartered Accountants in Scotland, whose ﬁnancial support helped develop the ideas in this paper. He would also like to thank Chris Carter and two anonymous reviewers for their very helpful comments. Accounting, Auditing & Accountability Journal Vol. 23 No. 5, 2010 pp. 647-670 q Emerald Group Publishing Limited 0951-3574 DOI 10.1108/09513571011054927
required. Because the RBV literature has placed these issues at the centre of its agenda, its neglect of the accounting literature all the more surprising. If the strategy literature has neglected accounting, it is also fair to say that accounting has neglected strategy. Where concerned with valuation, accountants often employ theoretical stances at variance with the Neo-classical mainstream strategy literature (Bryer, 1994, 1999; Macve, 1999; Mouck, 1994; Tinker, 1980, 2004; Toms, 2006a, 2009; Toms and Bowman, 2010). A common approach of critical accounting is to begin with the restrictive assumptions of marginalist Neo-classical economics and argue that they possess logical inconsistencies, for example the tautological approach to asset...
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