Resource Based View

Question 1

What is the resource-based view about?

Answer 1

Sustained competitive advantage derives from valuable, rare, imperfectly imitable, and not substitutable resources and capabilities that a firm has. These resources and capabilities can be viewed as bundles of tangible and intangible assets, including a firm’s management skills, its organizational processes and routines, and the information and knowledge it
controls.
The RBV is the opposite of the market-based view and conceptualizes firms as bundles of resources. Thereby, inter-firm resource heterogeneity explains sustained
competitive advantage of some firms.

Question 2

Market-based view vs resource-based view

Answer 2

Market
o External View
o Structure ➔ Conduct ➔ Performance
o Inter-industry differences in performance
o Selection of industry and position therein critical for competitive advantage
o Focus on industry analysis and market segmentation
o Corporate strategy primarily determined by industry membership
o Focus: Explain inter-firm performance differences by industry attributes

• External view, a view that sees as the primary source of superior performance the
  structure of the industry
• A theory that is based on structure, conduct, performance chain
• Good to explain why certain industries have higher or lower mean levels of
  performance
• Associated with the 5 forces by Porter: rivalry within the industry, bargaining
  (feilschen) power of suppliers, bargaining power of buyers, the threat of new
  entrants and the threat of substitutes
• In a nutshell: the market-based view is a theoretical perspective that tries to explain
  differences and performance between industries and not between firms in one
  industry and it’s a perspective that highlights the role of understanding industry
  structures and industry attributes as salient (hervorspringend) determinants of
  performance differences.

Resource
o Internal View
o Resources ➔ Conduct ➔ Performance
o Intra-industry differences in performance
o Internal resource base critical for competitive advantage
o Focus on resource analysis and core competences
o Corporate strategy primarily determined by firm resource endowments
o Focus: Explain inter-firm performance differences by firm attributes

• Antithesis to that at the time dominant theoretical perspective
• Internal view that assumes that the true source of competitive advantage is not the
  structure, but the resources of the firm

Question 3

Firm Resources

Answer 3

Resources:
are stocks of available factors owned or controlled by the focal organization &
are strengths the firms can use to conceive of and implement their strategies. These are all
assets, capabilities, organizational processes, firm attributes, information, knowledge, etc.
controlled by a firm that enable the firm to conceive of and implement strategies that
improve its efficiency and effectiveness. Resources are strategically relevant if valuable,
rare, imperfectly imitable, and non-substitutable

Question 4

Attributes of Resources

Answer 4

❖ Heterogeneity: Resources might be unequally distributed even within the same
industry (i.e. organizations are likely to differ in their resource endowments)
❖ Imperfect Mobility: Resources might be difficult to develop or purchase by
organizations (i.e. organizations might face problems when seeking to replicate
others’ resource configurations)
❖ Strategic Relevance: Persistent differences in resource endowments can be a source
of sustained competitive advantage
In an industry with homogeneous and mobile resources no firm can
▪ have a sustained competitive advantage as any other firm with these same resources
can implement the same strategy
▪ have a first-mover advantage as identical firms become aware of the same
opportunities at the same time and exploit it the same way
▪ be protected by entry barriers as this requires this firm to implement different
strategies than firms seeking to enter which in turn requires the application of
heterogeneously distributed, immobile firm resources

Question 5

Competitive Advantage

Answer 5

It was observed that some of the most successful firms operate in unattractive industries,
which contradicts the market-based view where the industry determines performance →
these firms possess superior resources
Sustained CA: Value creating strategy that is not simultaneously implemented by any
(potential) competitors and these competing firms are unable to duplicate this strategy.
Resource advantages deliver a sustained competitive advantage and lead to superior firm
performance. It has to be obtained that sustained competitive advantage can get invaluable
through unanticipated changes in the economic structure (Schumpeterian Shocks).

Question 6

There are 4 strategically relevant attributes of resources that need to be fulfilled to deliver
sustained competitive advantage (VRIN)

Answer 6

✓ Valuable: resource enables the organization to improve its efficiency and
effectiveness, exploits opportunities, neutralizes threats
✓ Rare: resource is not simultaneously possessed by many current or future
competitors (e.g. managerial talent)
✓ Imperfectly Imitable: resource cannot be easily imitated or purchased by competitors
➢ Unique historical conditions: sometimes firms acquire or exploit resources at
a specific point in time and once this time has passed others are not able
anymore to acquire these, e.g. location, scientific breakthroughs,
organizational culture
➢ Causal ambiguity: all competing firms must have an imperfect understanding
of the link between the resources controlled by the firm and its competitive
advantage, because otherwise this information will be diffused in the long run
➢ Social complexity: social complexity of resources constrains the ability of
other firms to imitate this source of competitive advantage, e.g.
organizational culture, reputation, interpersonal relations among managers
✓ Non-Substitutable: resource cannot be substituted by strategically equivalent
resource (which are themselves at least either imitable or not rare)

Question 7

Dynamic Capabilities

Answer 7

Dynamic Capabilities: is the ability to sense and then seize new opportunities, and to
reconfigure and protect knowledge assets, competencies and complementary assets to
achieve sustained competitive advantage. It puts a focus on the optimal orchestration of
available resources in dynamic contexts, on agility and rapid orchestration and awareness
about the possibility of resource obsolescence and not just focuses on strategic superiority
of resources per se in terms of quantity/quality like in the static perspective.

1. Component: Sensing
Identify new opportunities and threats through environmental
scanning and information interpreting
2. Component: Seizing
Responding to new insights through new
product development, business model
innovation and strategic investments
3. Component: Reconfiguring
Changing internal and external resource configurations of the organization

Question 8

Resource reconfiguration types

Answer 8

❖ Incremental Dynamic Capabilities: Continuously improve the resource base (e.g. finetune
degree program)
❖ Renewing Dynamic Capabilities: Periodically
refresh, adapt and augment the resource base
(e.g. develop new degree programs with new
technologies)
❖ Regenerative Dynamic Capabilities:
Infrequently alter the way in which the
organization changes its resource base (e.g.
rethink the way in which degree programs are
developed and delivered)

Question 9

Sources of competitive advantage

Answer 9

Informal strategy-making processes are
often rare as they are often protected by
the companies possessing them from
getting public and they are otherwise also
mostly only imperfectly imitable because
they are socially complex and if they are
also not substitutable by formal planning
systems they can be a source of competitive
advantage

▪ Embedded information-processing systems
with a complex machine-manager system
can be a source of competitive advantage
as it is rare and socially complex and thus
imperfectly imitable and its substitutes (for
example highly experienced manager
teams) are themselves rare and socially
complex

▪ A positive reputation of firms among
customers and suppliers can be a source of
competitive advantage as it is rare and only
imperfectly imitable as it usually depends
on historical settings and is socially
complex. Whether it is really a source of
competitive advantage thus depends on
whether guarantees function as a substitute
for a firm’s reputation

Question 10

No source of competitive advantage

Answer 10

Formal strategic planning systems, which
enable companies to discover
opportunities and threats, cannot be a
source of competitive advantage as they
are either not rare or documented in
public sources that they can easily be
learned (imitated), but they can help to
discover potential resources which yield
competitive advantage

▪ Information processing systems simply
based on machines can’t be a source of
competitive advantage as they are highly
imitable (can be purchased)