2a) RBV Flashcards
Porter (1985)Competitive Advantage Book ;(1991)
• 1985 – Porters Value Chain (Competitive Advantage Book)
o Porter’s version of a View on resources / Very similar to RBV but often not attributed that way in the literature.
1991- firms accumulate resources because of history (different strategies and value chain configs.).
Resources and activities (value chain configurations) are duals of each other.
Barney (1991;2001;2011)
1991:
PURPOSE: Present a new theory of competitive advantage in contrast to Porter (1980) 5 Forces Model & SCP.
(drawing off Penrose & Wernerfelt)
Assumptions:
1) Firms have different resources (heterogenous)- Previous work from Porter places little emphasis on idiosyncratic firm attributes (He claims, but perhaps Porter 1985 does just that).
2) Resources are sticky, not perfectly mobile
- Firm history matters (endowments) ability to acquire/exploit depends on place/time).
For Resources to lead to SCA they must be:
1) Valuable, 2) Rare, 3) Imperfectly imitable 4) No Substitutes (later adds Organized to create value).
3 types of Resources:
1) Physical, 2) Human (intelligence/insight,etc), 3) Organizational (structures/processes)
2001- Clarified…He could have drawn on micro-economics or population ecology (classic draw on Hannan&Freeman or Nelson & Winters), but rather he drew on Porter(SCP).
All approaches were valid, but the article would have looked very different (his 1986 article drew on Neoclassical micro-economics). Other scholars have also looked at this.
2011- Admits to the challenge of measuring resources, because many of them are intangible
Penrose (1959)
Foundational Theory that Barney and Wernerfelt draws off of.
firms are “a pool of resources”
- this early work is the first to theorize about the causal link between resources, capabilities, and competitive advantage.
- She also hints at Dynamic Capabilities by arguing “ firms can create economic value not due to mere possession of resources, but due to effective and innovative management of resources”
Priem & Butler (2001)
PURPOSE: Is the RBV useful?
Criticisms of theory:
1) tautology (self-verifying / circular reasoning/not testable) Valuable Res—> Value
2) Resource value is determined outside of the firm (exogenous) however, RBV arbitrarily holds customer factors constant (demand-side is not considered)
3) overly inclusive definitions of resources make it had to establish boundaries
4) How and Why can not be determined using static cross sectional research
OTHER CONCLUSION:
- This article wins the Decade Award.
- Later they build upon this in Priem, Butler, & Li 2013.
Wernerfelt (1984)
TITLE: A resource based view of the firm.
- Defines resources as anything that is a strength or weakness of the firm (drawing from Andrews 1971)
- It is important to look at firm’s in terms of their resources rather than their products (hints that this is the source of competitive advantage).
- Introduces the Resource-Product matrix as a tool to analyze a firm’s resource position and the strategic options that this mix provides to the firm.
Describe the evolution of RBV
Penrose (1959) - firms are a “pool of resources”
Caves (1977) - mobility barriers
Lippman & Rumelt (1982) -
Wernerfelt (1984)
Dierickx and Cool (1989)- tradeable vs nontradable resources. When no subs exists Resources are esp. useful
Barney (1991;2001;2011) - RBV
Peteraff (1993) -
Lieberman (2005) - Emperical test (automakers)
Crook et al (2008) - MetaAnalysis
Alternatives/Critique:
Porter(1985;1991) - ValueChains
Priem&Butler(2001) -
Priem, Butler, & Li (2013)
Other tie-ins
Industry (Schmalensee ‘85; Rumelt ‘91; McGahan&Porter ‘97; Short 2009)
Dierickx and Cool (1989)
This article draws the distinction between tradeable and nontradeable resources (e.g., reputation).
NonTradeable are also called critical or strategic assets.
Resources are especially useful when no effective substitutes are available. -Barney cites and becomes a core concept of RBV
- “idiosyncratic nature of firm assets”
- identifies “stocks and flows” of assets. Competitive position is determined by stocks, future strategy involves choosing optimal flow (changes) to resources.
Lippman & Rumelt (1982)
Explained the concepts of inimitability and causal ambiguity -Barney cites and becomes a core concept of RBV.
Peteraff (1993)
PURPOSE: Syncronize disjointed work on RBV (Wernerfelt ‘84, Barney ‘91, Rumelt ‘91)
CONCLUSION: 4 conditions must be met for SCA
(1) heterogenous resources exist
(2) Resources are sticky, not perfectly mobile
(3) ex ante limits to competition
(4) ex post limits to competition
The discussion limiting the RBV to “Ricardian Rents” and not including “Schumpeterian Rents” (also can be described as entrepreneurial Rents, the demand-side rents or value creation rents) might be the catalyst that spiral RBV research in a overly restricted direction that Priem is highly critical of.
Crook et al (2008)
Used meta-analysis to establish that strategic resources
explain a significant portion of variance in performance .
approx 22%
Lieberman (2005)
PURPOSE/METHOD: Operationalize RBV in Auto-maker industry (longitudinal data). Uses the Stochastic Frontier Production Function
CONCLUSION: methodological contribution (perhaps).
-Theoretical rational for their operationalizations were not convincing, removing the theoretical spin and looking at the data what we learn is “efficient production facilities are more profitable”.
- Did they have the ends in mind and try to fit Toyato’s resources PostHoc to explain the story of RBV?
Caves (1977)
Resources are sticky, not perfectly mobile (mobility barriers)
Connection between RBV & D.C/KBV
Interesting: The way Barney defines RBV I am convinced that he has included Dynamic Capabilities in his definition- includes “knowledge that enables a firm to conceive and implement strategies that improve efficiency and effectiveness”. Talks about Human and Organization Resources. However, some RBV theorists that cite Barney conceptualize resources more narrowly opening the door for emphasis of “Knowledge” in KBV and D.C. (I don’t really think this was outside of the scope of Barney’s original paper).
Ricardian Rents
(also called Differential rent) The excess profit extracted from a higher quality product or lower cost input (e.g. plant location).
Consider 2 companies that extract coal of identical quality. Company X operates at an efficient production. Its costs $20 to extract coal.
Company Y operates at a site where it is relatively difficult to extract coal. Its costs $30 to extract.
Company X will ‘create’ more resource rent because of the more accessible resource ($10 differential rent).
Schumpeterian rent
(also called Entrepreneurial rent) can accrue due to entrepreneurial skills or managerial investments. A company may invest in advertising, training of employees, and so forth. These investments can result in a higher price (brand) or lower costs (better technology). Consider the “production” of rock lobster where the costs to produce one rock lobster (i.e. paying for labour, the nets, and the like, and including normal profit) amount to $3. Assume the rock lobster is sold for $5 on the market. Resource rent here amounts to $2. However, assume the fisher has managed to decrease the costs for catching rock lobster from $3 to $2. This could be due to his/her entrepreneurial skills and more efficient use of labour and capital.
