There is no common definition of strategy or the way how to implement it. However, it is common understanding that the purpose of each business1 is to maximise profit and that this is reached through a competitive advantage a firm might have over its rivals. Therefore, strategy should describe a mean to manage and direct a business in its environment towards a favourable market position which offers a competitive advantage (e.g. Rumelt, 1996; Porter, 1996).
In this sense, “a firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy.” (Barney, 1991: 102) However, there are different approaches regarding what strategies need to be based upon to achieve that competitive advantage, i.e. what are the sources for a favourable market position and a competitive advantage.
Table of Contents
1. Introduction
2. The Resource-based View
3. Criticisms of the Resource-based View
4. Conclusions
Objectives and Topics
This paper aims to provide a critical review of the Resource-based View (RBV) as a strategic management theory, contrasting it with the traditional positioning-based view (PBV) to determine how it has advanced our understanding of firm competitiveness and strategy formulation.
- Evolution of strategic management theories
- Core assumptions of the Resource-based View (RBV)
- Comparative analysis: RBV vs. Positioning-based view (PBV)
- Theoretical criticisms regarding tautology and testability
- The link between internal resources and sustained competitive advantage
Excerpt from the Book
2. The Resource-based View
Although, a resource-based perspective has long been central to strategy researchers (Conner, 1991), the resource-based view (RBV) received a fresh impetus only during the 1980s. It emerged as opponent to the until then prevalent environmental model, or positioning-based view (PBV). Strategists with this classical view regard the external environment as the primary determinant of strategy. That is, strategy is formulated with a view to a as advantageous perceived position in the market. Grant (1991) argues that firms start the formulation of their strategy generally with a mission statement which is usually related to the market or the customers a firm wants to serve. “But in a world where customer preferences are volatile, the identity of customers is changing, and the technologies for serving customer requirements are continually evolving, an externally focused orientation does not provide a secure foundation for formulating long-term strategy. “ (Grant, 1991: 116)
Whereas in positioning models firms are seen as systems “of discrete but interrelated socio-economic activities” (Oosthuizen, 2003: 3) and a strategy should create a fit between a firm’s activities and its environment within an industry, the RBV thinks of the firm as a unique bundle of resources. Firm resources are defined as “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” (Barney, 1991: 101).
Summary of Chapters
1. Introduction: This chapter establishes the foundational understanding of strategy and competitive advantage, introducing the divergence between internal resource-focused and external market-focused approaches.
2. The Resource-based View: This chapter defines the RBV, explains its core assumptions regarding resource heterogeneity and immobility, and positions it as a counter-theory to the traditional positioning-based view.
3. Criticisms of the Resource-based View: This chapter addresses major academic critiques of the RBV, focusing specifically on its potentially static nature, the difficulty in defining value, and the accusation of tautological reasoning.
4. Conclusions: This chapter synthesizes the discussion, arguing that despite its theoretical shortcomings, the RBV has significantly enriched strategic management by fostering an inside-out analytical perspective.
Keywords
Resource-based view, competitive advantage, strategy, positioning-based view, firm resources, heterogeneity, strategic management, internal organization, competencies, capabilities, tautology, organizational learning, market position.
Frequently Asked Questions
What is the primary focus of this paper?
The paper provides a critical academic review of the Resource-based View (RBV) and examines how it has evolved the discourse on strategic management.
Which two opposing strategic frameworks are compared?
The paper contrasts the Resource-based View (RBV), which focuses on internal assets, with the Positioning-based View (PBV), which prioritizes external market structures.
What is the central research question?
The work investigates how the Resource-based View has developed our understanding of strategy and whether it offers a superior explanation for sustained competitive advantage compared to traditional models.
What methodology does the author employ?
The author uses a literature-based theoretical analysis, comparing seminal academic arguments and definitions to evaluate the validity and utility of the RBV.
What is the main argument regarding the RBV's limitations?
The author highlights that the RBV is criticized for being potentially tautological, difficult to test empirically, and lacking a clear mechanism to identify how 'value' is initially created.
Which concepts are essential to the Resource-based View?
Key concepts include resource heterogeneity, resource immobility, isolating mechanisms, path dependency, and the development of unique core competencies.
Why does the RBV suggest that internal history is important?
According to the RBV, a firm's unique history and path-dependent development create competencies that are difficult for competitors to imitate, thus serving as a source of competitive advantage.
How does the author interpret the criticism of tautology within the RBV?
The author explains that because valuable resources are defined by their ability to increase efficiency and competitive advantage is also defined by increased efficiency, the theory risks circular reasoning that is hard to falsify.
- Quote paper
- Katja Kirsch (Author), 2004, Critically review how the resource-based view has developed our understanding of strategy, Munich, GRIN Verlag, https://www.grin.com/document/36856
