Summary of resource-based view

Resource-based view of the firms argue that firms have heterogeneous performances because they have different resources and firms will expand their boundaries if they can find complementary resources.


Short history of resource-based view

RBV started from Penrose's (1959) theory about how firms' resources influence their growth. The term RBV was later coined by Wernerfelt (1984), where he emphasized the idea that resources are of special value of the firms. Barney (1991) developed the core tenets of RBV by presenting a detailed definition of resources and presented a set of factors that make resources potential sources of competitive advantages, such as valuable, rare, inimitable and nonsubstitutable. From 1992 to 1999, large amount of research emerged and developed RBV in a more thorough way by decomposing the constructs and combining with other theories. Amit and Schoemaker (1993) split the construct resources into resources and capability. Oliver (1997) combines RBV and institutional theory to better explain competitive advantage. KBV and Dynamic capability are also derived from RBV. After 2000, resource-based view has been applied to different fields, such as entrepreneurship research, human resources research, etc..


Current research streams

There are two main research streams of RBV. The first one focusing on explain how special resources of the firms can serve as the competitive advantage of the firms. RBV argues that differential firm performance is fundamentally due to firm heterogeneity rather than industry structure (Barney, 1991;Wernerfelt,1984). Firms that are able to accumulate resources and capabilities that are rare, valuable, non-substitutable, and difficult to imitate will achieve a competitive advantage. (Barney, 1991).

The second one focuses on explaining firms' diversification. A firm’s entry into new product markets results from excess capacity in valuable resources that may be transferable across firms but subject to market imperfections (Penrose, 1959).


Main tensions for the theory

Three main tensions are identified in the literature. First,  from a dynamic view, Wernerfelt (2011) argue that current resources of the firms will create asymmetries in competition for new resources, because firms will expand their resource portfolio by building on their current resources. Therefore, small initial differences can lead to huge differences over time. The relationship between resources acquisition and strategic resources stock still asks for future research.

Second, the micro foundation for RBT still requires more exploration, because currently we know relatively little about how the managers manage the resources. For example, integrating with the theories of management of human capital, Coff and Kryscynski (2011) argue that up-and-coming stars would require lower wages to work with other stars. At the same time, the competitors may use higher wages to attract these stars away. In addition, Garbuio et al. (2011) discuss how decision heuristics and biases influence the decision making in diversification and acquisition.

Third, recently, scholars have start to consider RBT and sustainability. Hart and Dowell (2011) examine how firms can achieve both environmental sustainability and competitive advantages. They also point out that there is still few research that investigates the organizations in the base-of-the-pyramid markets, where individuals lives on one dollar per day or even less. McWilliams and Siegel (2011) discuss how managers can achieve strategic CSR by combining RBT framework with economic models, such as hedonic pricing,  contingent valuation, etc.. Taking CSR as a critical resource of the firms, future research could look at what firms can do to prevent negative CSR behaviors and develop sustainable capability of the firms. 


Main critics

The major critic of RBV comes from Priem and Butler (2001). They argued that RBV is not useful for strategic management research because 1) it is tautological in the sense that the outlined relationship between resources and competitive advantage is true by logic, since the concepts used for defining both terms are the same, 2) it is not a theory of the firm because it does not answer the question “why firm exists” directly and it contributes little to the research of firm boundary, 3) it does not open the “black-box” of process that firms function and operate, and 4) it is static.

References:
Penrose, E. T. (1995). The Theory of the Growth of the Firm. Oxford university press.

Wernerfelt, B. (1984). A resource‐based view of the firm. Strategic management journal, 5(2), 171-180.

Barney, J. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1): 99–120.

Amit, R., & Schoemaker, P. J. (1993). Strategic assets and organizational rent. Strategic management journal, 14(1), 33-46.

Oliver, R. L., Rust, R. T., & Varki, S. (1997). Customer delight: foundations, findings, and managerial insight. Journal of Retailing, 73(3), 311-336.


Wernerfelt, B. (2010). The use of resources in resource acquisition. Journal of Management.

Coff, R., & Kryscynski, D. (2011). Drilling for micro-foundations of human capital–based competitive advantages. Journal of Management, 0149206310397772.

Garbuio, M., King, A. W., & Lovallo, D. (2011). Looking Inside Psychological Influences on Structuring a Firm’s Portfolio of Resources. Journal of Management, 37(5), 1444-1463.

Hart, S. L., & Dowell, G. (2010). A natural-resource-based view of the firm: Fifteen years after. Journal of Management, 0149206310390219.

McWilliams, A., & Siegel, D. S. (2010). Creating and capturing value: strategic corporate social responsibility, resource-based theory, and sustainable competitive advantage. Journal of Management, 0149206310385696.