The Resource-Based View (RBV) is an economic tool used to determine the strategic resources available to a firm. These resources can be exploited by the firm in order to achieve sustainable competitive advantage. Barney (1991) formalised this theory, although it was Wernerfelt (1984) who introduced the idea of resource position barriers being roughly analogous to entry barriers in the positioning school (see Porter, 1980). RBV proposed that firms are heterogenous because they possess heterogenous resources.
The key points of the theory are:
1) Identify the firm's potential key resources.
2) Evaluate whether these resources fulfill the following (VRIN) criteria:
- Valuable - they enable a firm to implement strategies that improve its efficiency and effectiveness.
- Rare - not available to other competitors.
- Imperfectly imitable - not easily implemented by others.
- Non-substitutable - not able to be replaced by some other non-rare resource.
3) Care for and protect resources that pass these evaluations.
What constitutes a "resource"?
Barney (1991, p101) - "firm resources include 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"
Kay (1999) - "Resources are inputs into a firm's production process, such as capital, equipment, the skills of individual employees, patents, finance, and talented managers. Resources are either tangible or intangible in nature."
What constitutes "competitive advantage"?
Barney (1991, p102) - A firm achieves competitive advantage when it is able to implement a "value creating strategy not simultaneously being implemented by any current or potential competitors"
Priem and Butler (2001) made four key criticisms:
- The RBV is tautological
- Different resource configurations can generate the same value for firms and thus would not be competitive advantage
- The role of product markets is underdeveloped in the argument
- The theory has limited prescriptive implications
However, Barney (2001) proposed counter-arguments to these. Further criticisms are:
- It is perhaps difficult (if not impossible) to find a resource which satisfies all of the Barney's VRIN criterion.
- There is the assumption that a firm can be profitable in a highly competitive market as long as it can exploit advantageous resources, but this may not necessarily be the case. It ignores external factors concerning the industry as a whole; Porter's Industry Structure Analysis ought also be considered.
- Peteraf, M. A. (1993), "The cornerstones of competitive advantage: a resource-based view". Strategic Management Journal, Vol. 14, No. 3, pp. 179-191
- Porter, M. E. (1980), "Competitive Strategy: Techniques for Analyzing Industries and Competitors", New York, NY: Free Press
- Rumelt, R. P. (1991), "How much does industry matter?". Strategic Management Journal, Vol. 12, No. 3, pp. 167-185
- Teece, D., Pisano, G. and Shuen, A. (1997), "Dynamic Capabilities and Strategic Management". Strategic Management Journal, Vol. 18, No. 7, pp. 509-533
- Wernerfelt, B. (1984), "A resource-based view of the firm". Strategic Management Journal, Vol.5, pp.171-180
Porter's Five Forces
- Barney, Jay B. (1991), "Firm Resources and Sustained Competitive Advantage". Journal of Management, Vol. 17, No. 1, pp. 99-120
- Barney, Jay B. (2001), "Is the resource-based "view" a useful perspective for strategic management research? Yes". Academy of Management Review, Vol. 26, No. 1, pp. 41-55
- Priem, R. L. (2001) Is the Resource-Based 'View' a Useful Perspective for Strategic Management Research? Academy of Management Review, 26, 22.