The Resource - Based View (RBV): Issues and Perspectives.

Pankaj M Madhani
Asst. Professor, ICFAI Business School (IBS), Ahmedabad, India
Executive Summary
Resource based view (RBV) focuses on the concept of difficult-to- imitate attributes of the firm
as sources of superior performance and competitive advantage (Barney, 1986; Hamel and
Prahalad, 1996). Resources that cannot be easily transferred or purchased, that require an
extended learning curve or a major change in the organization climate and culture, are more
likely to be unique to the organization and, therefore, more difficult to imitate by competitors.
The RBV has been useful in identifying the basis by which the resources and capabilities of a
firm serve as sources of sustained competitive advantage (e.g., Wernerfelt, 1984; Barney, 1991;
Peteraf, 1993). As such, resources and capabilities are fundamental underpinnings of any source
of advantage (Rumelt, Schendel, & Teece, 1991). Valuable resources are termed strategic assets
(Barney, 1991; Amit & Schoemaker, 1993). The RBV asserts that ownership and control of
strategic assets determines which organizations will earn superior profits and enjoy a position of
competitive advantage over others.
The RBV deals with competitive business environment faced by firms but take an inside-out
approach i.e. it starts with analysis of firms internal environment. As such RBV is often
considered as an alternate to Porters five force model. The RBV emphasizes internal resources
and capabilities of firm in formulating strategy to achieve sustainable competitive advantages in
the market place. Internal resources and capabilities determine strategic choices made by firms
while competing in its external business environment. Firms abilities also allow some firms to
add value in customer value chain, develop new products or expand in new market place. When
firms capabilities are considered as paramount in the creation of competitive advantages, it will
focus on reconfiguration of value chain activities. This is necessary as it provides opportunity to
identify the capabilities within value chain activities which provide it with competitive
advantages. The RBV draws upon the resources and capabilities that reside within the
organizations in order to develop sustainable competitive advantages. Resources may be
considered as inputs that enable firms to carry out its activities.
According to RBV, not all the resources of firm will be strategic resources and hence sources of
competitive advantage. Competitive advantage occurs only when there is a situation of resource
heterogeneity (different resources across firms) and resource immobility (the inability of
competing firms to obtain resources from other firms).
_____________________________________________________________________________
Madhani, P. M. (2010), The Resource - Based View (RBV): Issues and Perspectives., PACE,
A Journal of Research of Prestige Institute of Management, Vol. 1, No. 1, pp. 43-55, January
2010.

If the resource is not perfectly mobile (i.e., the resource is not free to move between firms, or if a
firm without a resource faces a considerable cost burden in developing, acquiring or using it, that
a firm already using it does not), then the resource is likely to be a source of sustained
competitive advantage. If a resource is imitated or substituted then any advantages gained may
be short lived. In short, the more mobile a resource is, the less sustained the advantage gained
from that resource will be. In this current era of fast changing globalized world, if an
organization is able to change swiftly and be more alert to changes in the competitive market,
then they are more likely to gain and sustain competitive advantage.
Keywords: Resource Based View, Market Based View, Dynamic Capabilities, Strategy

The Resource - Based View (RBV): Issues and Perspectives.

Pankaj M Madhani
Asst. Professor, ICFAI Business School (IBS), Ahmedabad, India
Introduction
Resource based view (RBV) deals with competitive business environment faced by firms but
take an inside-out approach i.e. it starts with analysis of firms internal environment. As such
RBV is often considered as an alternate to Porters five force model. The RBV emphasizes
internal resources and capabilities of firm in formulating strategy to achieve sustainable
competitive advantages in the market place. Internal resources and capabilities determine
strategic choices made by firms while competing in its external business environment. Firms
abilities also allow some firms to add value in customer value chain, develop new products or
expand in new market place. When firms capabilities are considered as paramount in the
creation of competitive advantages, it will focus on reconfiguration of value chain activities. This
is necessary as it provides opportunity to identify the capabilities within value chain activities
which provide it with competitive advantages. The RBV draws upon the resources and
capabilities that reside within the organizations in order to develop sustainable competitive
advantages. Resources may be considered as inputs that enable firms to carry out its activities.
Foundation of Resource Based View
The RBV analyze and interpret resources of the organizations to understand how organizations
achieve sustainable competitive advantage. The RBV focuses on the concept of difficult-toimitate attributes of the firm as sources of superior performance and competitive advantage
(Barney, 1986; Hamel and Prahalad, 1996). Resources that cannot be easily transferred or
purchased, that require an extended learning curve or a major change in the organization climate
and culture, are more likely to be unique to the organization and, therefore, more difficult to
imitate by competitors. According to Conner, performance variance between firms depends on
its possession of unique inputs and capabilities (1991).
The RBV takes an inside-out view or firm specific perspective on why organizations succeed
or fail in the market place (Dicksen, 1996). Resources that are valuable, rare, inimitable and non
substitutable (Barney, 1991) make it possible for businesses to develop and maintain competitive
advantages, to utilize these resources and competitive advantages for superior performance
(Collis & Montgomery, 1995; Grant, 1991; Wernerfelt, 1984). According to RBV, an
organization can be considered as a collection of physical resources, human resources and
organizational resources (Barney, 1991; Amit and Shoemaker, 1993). Resources of organizations
that are valuable, rare, imperfectly imitable and imperfectly substitutable are main source of
sustainable competitive advantage for sustained superior performance (Barney, 1991).
______________________________________________________________________________
Madhani, P. M. (2010), The Resource - Based View (RBV): Issues and Perspectives., PACE,
A Journal of Research of Prestige Institute of Management, Vol. 1, No. 1, pp. 43-55, January
2010.

A resource must fulfill VRIN criteria in order to provide competitive advantage and sustainable
performance. A VRIN criterion is explained below.
1. Valuable (V): Resources are valuable if it provides strategic value to the firm. Resources
provide value if it helps firms in exploiting market opportunities or helps in reducing
market threats. There is no advantage of possessing a resource if it does not add or
enhance value of the firm;
2. Rare (R): Resources must be difficult to find among the existing and potential
competitors of the firm. Hence resources must be rare or unique to offer competitive
advantages. Resources that are possessed by a several firms in the market place cannot
provide competitive advantage, as they can not design and execute a unique business
strategy in comparison with other competitors;
3. Imperfect imitability (I): Imperfect imitability or inimitability means making copy or
imitate the resources will not be feasible. Bottlenecks for imperfect imitability can be
many viz. difficulties in acquiring resource, ambiguous relationship between capability
and competitive advantage or complexity of resources. Resources can be basis of
sustained competitive advantage only if firms that do not hold these resources cannot
acquire them;
4. Non-substitutability (N): Non-substitutability of resources implies that resources cant be
substituted by another alternative resource. Here, competitor cant achieve same
performance by replacing resources with other alternative resources.
According to Barney valuable resource must enable a firm to do things and behave in ways that
lead to high sales, low costs, high margins, or in others ways add financial value to the firm
(1986, 658). Barney also emphasized that resources are valuable when they enable a firm to
conceive of or implement strategies that improve its efficiency and effectiveness (1991, 105).
RBV helps managers of firms to understand why competences can be perceived as a firms most
important asset and, at the same time, to appreciate how those assets can be used to improve
business performance. RBV of the firm accepts that attributes related to past experiences,
organizational culture and competences are critical for the success of the firm (Campbell and
Luchs, 1997; Hamel and Prahalad, 1996). Annexure- I provides brief outline of prior work on
RBV.
Resource Based View: Types of Resources and Capabilities
According to RBV, resources can be broadly defined to include assets, organizational processes,
firm attributes, information, or knowledge controlled by the firm which can be used to conceive
of and implement their strategies (Learned, Christensen, Andrews, & Guth, 1969; Daft, 1983;
Barney, 1991; Mata et al., 1995). Examples of resources are brand names, technological abilities,
efficient procedures, among others (Wernerfelt, 1984; Olavarrieta & Ellinger, 1997; Spanos &
Lioukas, 2001). Other researchers have classified different resources as tangible and intangible
(Itami & Roehl, 1987; Hall, 1992; Hall, 1993). When identifying resources, several researchers
have grouped specific types of resources that may enable firms to conceive and implement value

creating business strategies (e.g., Hitt & Ireland, 1985; Grant, 1991; Amit & Schoemaker, 1993;
Black & Boal, 1994; Bogaert, Maertens, & Van Cauwenbergh, 1994; Wade & Hulland, 2004).
Barney (1991) categorises three types of resources:
1. Physical capital resources (physical, technological, plant and equipment),
2. Human capital resources (training, experience, insights) and
3. Organizational capital resources (formal structure).
Brumagim (1994) presents a hierarchy of resources with four different levels of corporate
resources;
1. Production/maintenance resources (considered the most basic or lowest level),
2. Administrative resources,
3. Organizational learning resources, and
4. Strategic vision resources (considered the most advanced or the highest level).
All firms possess a wide spectrum of resources and capabilities. For better understanding of
resources it is necessary to distinguish such varied resources. One useful approach for such
classification is to group resources in two categories viz. tangible resources and intangible
resources (Table 1).
Table 1: Types of Resources and Capabilities

Resources
Financial
Physical

Technological
Organizational

Resources

Tangible resources and capabilities

Examples
- Ability to generate internal funds
- Ability to raise external capital
- Location of plants, machines, offices, and their
geographic locations
- Access to raw materials and distribution channels
- Possession of patents, trademarks,
copyrights, and trade secrets
- Formal planning, command, and control systems
- Integrated management information systems
Intangible resources and capabilities
Examples

Human

- Managerial talents
- Organizational culture

Innovation

- Research and development (R & D) capabilities to

innovate new product, process and services
- Capacities for organizational innovation and change
- Perceptions of product quality, durability, and
reliability among customers
- Successful product branding and positioning with

Reputational

satisfied and loyal customer base

- Reputation as a good employer
- Reputation as a socially responsible corporate citizen
(Sources: Compiled by author; Adapted from (1) J. Barney, 1991, Firm resources and sustained
competitive advantage, Journal of Management, 17: 101; (2) R. Hall, 1992, The strategic
analysis of intangible resources, Strategic Management Journal, 13: 135-144.)
Identification of Resources and Capabilities: A Strategy for Sustainable Competitive
Advantages
The RBV has been useful in identifying the basis by which the resources and capabilities of a
firm serve as sources of sustained competitive advantage (e.g., Wernerfelt, 1984; Barney, 1991;
Peteraf, 1993). As such, resources and capabilities are fundamental underpinnings of any source
of advantage (Rumelt, Schendel, & Teece, 1991). Valuable resources are termed strategic assets
(Barney, 1991; Amit & Schoemaker, 1993). The RBV asserts that ownership and control of
strategic assets determines which organizations will earn superior profits and enjoy a position of
competitive advantage over others. Three major questions are asked of resources to identify the
impact they have:
1. Is the resource or capability valuable?
2. Is it heterogeneously distributed across competing firms?
3. Is it imperfectly mobile?
As shown in Figure 1, it is only when the three questions are confirmed that a sustained
competitive advantage is likely to be gained.

Is a resource
or capability
valuable?

No

Yes
Is it heterogeneously
distributed across
competing firms?

Yes

No

Competitive
Disadvantage

Is it
imperfectly
mobile?

No

Yes

Sustained
Competitive
Advantage

Competitive
Parity

Temporary
Competitive
Advantage
(Source: Chart developed by author - Adapted from Mata et al., 1995)

Figure 1: Identification of Resources and Capabilities

The question of a resources value is generally confirmed in two ways. First, if a resource is used
to reduce a firms cost it can be seen as valuable (low cost resources). Second, if a resource is
used to increase a firms revenue it can be seen as valuable (differentiated resources). As such,
valuable resources may be used to implement new strategies to improve efficiency and
effectiveness (Barney, 1991), improve customer satisfaction (Bogner & Thomas, 1994; Verdin &
Williamson, 1994), or reduce cost (in relation to competitors) (Barney, 1986; Peteraf, 1993). In
essence, a resource is valuable if it helps an organization to improve its performance relative to
their competitors. If the resource meets these conditions the second question is examined. If not,
and the resource is exploited, at worst, a competitive disadvantage may be gained this is
because the resource is not valuable to the organization.

The second question regarding the distribution of a resource examines whether the given
valuable resource is freely available. If the resource is freely available to all firms, then a
competitive parity may be gained, allowing the firm to have the same resources as its
competitors. However, if it is not freely available (heterogeneously distributed), then the
resource may be a source of competitive advantage (given the third question). While some firms
may enjoy resource based advantages (due to their resource base) others will be in a position of
resource based disadvantage (Michalisin et al., 1997). Put another way, the resource
heterogeneity implies that firms have varying capabilities. Therefore, firms with marginal
resources can expect to breakeven, while firms with superior resources should expect to earn
rents (Peteraf, 1993). The differences in firm resource endowments can be attributed to several
factors: the time the firm enters the marketplace, different sets of knowledge, products and
systems of learning, as well as decision made over time (Helfat, 2000).
The third and final question measures the degree of competitive advantage which may be gained
from the given resource. This is achieved by questioning the mobility or inimitability of a
resource. If the resource is perfectly mobile then the resource is likely to be only a source of
temporary competitive advantage, at best (Mata et al., 1995). This temporary nature is attributed
to the advantage because the resource could, due to its mobile nature, change hands. Michalisin
et al. (1997) states that since a firms advantage is based on a firm having strategic assets that are
superior to ones competitors, therefore, the ability to sustain the advantage is a function of the
heterogeneity of such resources.
Barney (1991) defines sustained competitive advantage as a non-duplicatable advantage. This
follows from Lippman and Rumelts (1982) and Rumelts (1984) definitions that outline a
sustained competitive advantage as an advantage that continues to hold after efforts of others to
duplicate the advantage have ceased (Barney, 1991). Barneys (1991) definition of sustained
competitive advantage does not mean it will last forever. Rather, it suggests that it will not be
competed away or easily duplicated by the efforts of others (Barney, 1991).
Barney states that sustained advantages may be challenged when unanticipated changes in the
economic structure of an industry occur. Such unanticipated changes therefore, can make what
was a source of sustained advantage no longer a source of advantage. Rumelt & Wensley (1981),
and Barney (1997) call these unanticipated changes Schumpeterian Shocks. Therefore, a firm
enjoying a sustained competitive advantage when faced with a Schumpeterian Shock may
experience a major shift in the nature of competition and any sources of sustained competitive
advantage may be nullified. A sustained competitive advantage may only be made when
resources are strategic and valuable, are heterogeneously distributed and imperfectly mobile and
firms should sustain the advantage notwithstanding periods of Schumpeterian Shock.
Resource Based View (RBV) Vs Market Based View (MBV)
The resource based view (RBV) is a way of viewing the firm and consecutively of imminent
strategy. The resource based view (RBV) was popularized by Hamel and Prahalad in their book
Competing for the Future (1996). RBV considers the firm as a bundle of resources. These
resources, and the way that they are combined, make firms different from one another and in turn

allow a firm gain competitive advantage. This concept of RBV is quite different from the
traditional Market Based View (MBV). According to MBV perspective, firms are considered as
fairly homogenous and driving force for market competition is marketing efforts of competing
firms in terms of marketing mix strategy. Further, according to MBV, identifying alternative
market as characterized by Michael Porters five forces model is major strategic issue. MBV
does not take into account whether firm is in position to exploit available market opportunity i.e.
whether firms have enough resource and capabilities to compete in the market place.
RBV in Changing Environment: Dynamic Capabilities
As market is dynamic, firms resources also need to change over a period of time to make them
relevant to changing market condition. This perspective is based on the dynamic capabilities and
is outcome of RBV (Teece, Pisano, & Shuen, 1997). Dynamic capabilities have been defined as
firms processes that use resources specifically the processes to integrate, reconfigure, gain, and
release resources. While RBV primarily concentrates on types of resources and capabilities for
its strategic importance, the dynamic capability concentrates on how these resources and
capabilities need to change or update over a period of time to keep their relevance in the
changing market place.
The RBV considered resources and competencies as static that can be pointed as stationary at
certain time frame work and will remain so over a period of time also. The focal point is that
when firms are having resources that are valuable, rare, inimitable and non substitutable, it
enables firms to develop value enhancing strategies that are not easily copied by competing firms
(Barney, 1991; Conner & Prahalad, 1996; Peteraf, 1993; Wernerfelt, 1984). However in this era
of dynamic economy, there is need for firms to build up new capabilities or competencies for
sustaining such competitive advantage. (Teece, Pisano & Schuen, 1997). Dynamic capabilities
thus are the organizational processes or strategic routines by which firms develops new
configuration for updating resources as per market requirement (Eisenhardt & Martin, 2000).
Such dynamic capabilities require that organizations establish processes that enable them to
change their routines, services, products, and even markets over time.
The dynamic capabilities approach, examines competitive advantage in the globalized
environment of rapid market change. In such dynamic marketplaces, where the competitive
environment is rapidly changing, managers of firms need to develop capabilities embedded in the
firm which are based on sequences of path dependant learning in order to achieve periods of
competitive advantage (Teece et al., 1997; Eisenhardt & Martin, 2000; Miller, 2003). Dynamic
capabilities are strategic and organizational processes like product development and strategic
decision making that create value for firms by manipulating resources inherent with firms
(Eisenhardt & Martin, 2000, p 1106). Winter (2003) views dynamic capabilities as process of
extending, modifying, or creating new capabilities. The key differential between ordinary
capabilities and those that are dynamic is that dynamic capabilities are linked with change and
more particularly, changing the resource base of a firm (Collis, 1994; Winter, 2003).
The RBV, MBV and dynamic capabilities perspective all focus on different unit of analysis and
degree of change as shown in Figure 2. Initially to cope up with market forces, MBV was
conceptualized, subsequently focus shifted to RBV. Finally, to respond to challenges of ever

changing globalized world, concept of Dynamic Capabilities became popular. This transition is
shown by direction of arrow in Figure 2.
Static
Resource
Based
View

Market
Forces

Dynamic
Capabilities

Degree of
Change

Market
Based
View

Dynamic
Market

Firm
Unit of Analysis
(Source: Model Developed by Author)

Figure 2: Characteristics of RBV, MBV and Dynamic Capabilities

The dynamic capabilities approach is especially relevant today when global competitive forces
are changing landscapes of industries. In this globalized environment ways of achieving
competitive advantage are changing fast. As such, firms in this marketplace need to have timely
strategies, flexible infrastructures, and an ability to utilize resources and capabilities in coupled
and innovate ways (Teece et al., 1997). Therefore, in contrast to traditional RBV assumptions
competitive advantages gained in the dynamic marketplace may be based on capabilities, which
have greater homogeneity and substitutability across firms (Eisenhardt & Martin, 2000).
Competitive advantages achieved through dynamic capabilities are therefore based on the ability
to change the resource base of the firm. This means dynamic capabilities alter resource bases by
creating, integrating, recombining, and releasing resources (Eisenhardt & Martin, 2000).
Dynamic capabilities have been tightly coupled with a dynamic or rapidly changing environment
(Teece et al., 1997; Sher & Lee, 2004). However, Zahra et al. (2006) also discuss the
applicability of such capabilities in non dynamic marketplaces and suggest that while
organizations which operate in more dynamic marketplaces would gain greater value from
dynamic capabilities; it does not exclude organizations in slower to change marketplaces from
gaining value from dynamic capabilities.
Research Methodology
The basic methodological approach used in this paper involves design of a framework for
examining the values generated by marketers by leveraging RBV. As discussed earlier, Barney

(1991) argued that to gain sustainable competitive advantage, firms must possess resources and
capabilities that have four essential characteristics, namely, valuable, non-substitutable, rare, and
inimitable. The key thrust of marketing is to gain competitive advantage in the market place, but
there has been little formal and systematic study of how the marketing mix strategy can be a
source of sustainable competitive advantage for the firm.
The objective of research methodology presented here is to study the sources of competitive
advantage from the perspective of the firms marketing strategy. The aim is to develop an
integrated framework that links the elements of the marketing mix with the strategic
management concept of sources of competitive advantage and the resource characteristics of
valuable, non-substitutable, rare, and inimitable. Thus, the key research question addressed here
is how should a firm design its marketing mix (of product, price, place and promotion) in order
that the firms overall marketing offering becomes a source of sustainable competitive advantage
for the firm?
A valuable resource means that they allow a firm to create or implement strategies that improve
their efficiency or effectiveness of market offering. A non-substitutable resource means that
there must be no strategically equivalent valuable resources that could be substituted for the
existing resources. Rare resources imply that the firms target customers regard the marketing
offering as unique and no other rival is perceived to offer the same or similar bundle of benefits
to the customers. Inimitable means that the firms marketing offering cannot be copied by its
rivals. Inimitability helps in sustaining rarity over time.
The research framework proposed in this paper is shown in Figure 3. According to Figure 3, the
two dimensions of the framework are called marketing resources and market outcome
respectively. The framework links the characteristics of the firms marketing strategy based on
marketing resources with its market outcomes. It shows how the resource diversity in marketing
strategy influences the different levels of outcomes in the organization. Each dimension of the
framework is further divided into two levels. The two levels of marketing offering are valuable /
appropriable and rare / inimitable. These reflect the characteristics that the firms resources and
capabilities should possess in order to be a source of sustainable competitive advantage for the
firm. The two levels of market outcome are firm level advantage and sustainable competitive
advantages.
As the firms marketing resources and capabilities progressively improve from being valuable
and non-substitutable to rare and inimitable, its market outcome is correspondingly enhanced
from mere firm level advantage at the lowest level, to sustainable competitive advantage at the
highest level. Thus, the level of market outcome that is attained by the firm depends critically on
the quality of its marketing resources and capabilities. Conversely, depending on the set
objectives, firms can configure their marketing resources and capabilities to achieve the desired
level of market outcome.
Finally, the upward pointing arrow with positive slope in the Figure 3 indicates that as the firm
enhances its resources and capabilities, there is a corresponding improvement in the firms
market outcome. That is, the level of market outcome is a function of the characteristics of

marketing resources and capabilities owned by the firm. Marketing resources, the X-axis in
Figure 3 refers to the bundle of tangible and intangible resources that is created and delivered by
the firms marketing strategy for its target customers. Marketing outcome, the Y-axis refers to
firm level advantage and sustainable competitive advantages generated by marketing resources.
To gain a sustainable competitive advantage from its market offering, firms must offer a
customer value proposition that is valuable, non-substitutable, rare and inimitable.

Market outcome

Sustainable
competitive
advantages

Firm level
advantages
Valuable
and nonsubstitutable

Rare and
inimitable
Marketing resources
(Source: Model Developed by Author)

Figure 3: Identification of Marketing Resources and Market Outcome

Three dimensional marketing resources and market outcome cube model is shown in Figure -5.
Three dimensions of the framework are called valuable and non- substitutable marketing
resources, rare and inimitable marketing resources and market outcome.

9-9-9
Rare
and
inimitable
resources
4
9-1-9

1-9-9
Sustainable
Competitive
Advantages

9
Valuable and
NonSubstitutable
resources
4

1-1-9

Market
Outcome
1-9-1
9-9-1
Firm level
Advantages

1
9-1-1

1-1-1

Figure - 5: Marketing Resources and Market Outcome - CUBE Model

(Source: Model developed by author)

Table 2 below explains value of edges of cube with interpretation in terms of resources.
Table 2: Value of edges of cube with interpretation in terms of resources
Value Interpretation
1-1-1

Lack of advantages

1-9-1

Unproductive Rare and inimitable resources

1-1-9

Unproductive Valuable and Non- Substitutable resources

1-9-9

Unproductive overall resources

9-1-1

Unsustainable firm level advantages

9-9-1

Differentiated competitive advantages

9-1-9

Unsustainable firm level advantages

9-9-9

Overall sustainable competitive advantages

(Source: Model developed by author)

Marketing activities are designed to enhance customer value proposition and ensure long term
customer loyalty. Marketing strategy focuses on activities that enable the organization to gain
competitive advantages. The concepts of valuable, non-substitutable, rare and inimitable that are
developed in the RBV literature for the firms resources and capabilities can therefore be
usefully adapted to analyze and evaluate the firms marketing initiatives. The basic aim of this
framework is to apply these concepts to analyze the firms marketing strategy and to understand
how the marketing mix can be designed to have the characteristics of valuable, non-substitutable,
rare and inimitable resources and become a source of sustainable competitive advantages for the

firm. The firm must seek innovative ways of configuring the various elements of the marketing
mix strategy supported by resources of the firm so that its new marketing offerings are perceived
to be different in order to sustain its unique position. That is why; the firm must have a systemic
program of continuous innovation and a continual passion to reconfigure the marketing mix in
new and ingenious ways.
Limitations of the RBV
Limitations of the RBV can be grouped into following three main areas1:
1. The vagueness of terminology associated with the RBV,
2. The tautological nature of some of the views underlying assumptions,
3. Methodological issues.
Vagueness of terminology
The lack of commonality of terms with RBV research has received a lot of criticism in the
literature (e.g., Foss, 1998; Williamson, 1999; Fahy, 2000; Priem & Butler, 2001; Montealegre,
2002; Rugman & Verbeke, 2002; Foss & Knudsen, 2003; Hoopes et al., 2003; Wade & Hulland,
2004). Collis (1994) and others (e.g., Coates & McDermott, 2002; Ray et al., 2004) describe the
number of definitions as vast. The use of different terminology to explain results of RBV studies
makes it very difficult to compare the results of various studies. For example, while some
researchers outline distinct meanings for the core terms; resources, competencies, and
capabilities (e.g., Helfat & Peteraf, 2003), other researchers use the terms interchangeably (e.g.,
Ray et al., 2004). Nanda (1996) suggests that the lack of commonality of terms limits the
usefulness of results of RBV research to strategic thinking. Conner comments that since
everything in a firm may be seen as a resource resources lose (their) explanatory power (1991,
p 145). Similarly, Hax and Wilde (2001) suggest a significant limitation of RBV research is the
vagueness of the theory.
Tautological nature
Another significant assessment of the RBV is that the view is essentially a tautology (Porter,
1991; Foss, Knudsen, & Montgomery, 1995; Mosakowski & McKelvey, 1997; Priem & Butler,
2001; Bromiley & Fleming, 2002) in nature. Porter claims that at its worst, the resource based
view is circular (1991, p 108). The researchers also challenge the premise of the RBV
suggesting that the view seems to assume what it seeks to explain (Hoopes et al., 2003, p 891).
Furthermore, the researchers posit that the lack of clarity about core aspects of the RBV impede
the development of theory and fruitful debate.
Methodological issues
Each of the studies of resources and firm performance vary substantially in terms of the
methodology employed and the way the RBV research is designed. Rouse and Daellenbach
(1999) question the strong bias towards quantitative research methods suggesting that such a
methodology is not appropriate for RBV research in general. The researchers suggest that the
nature of advantages in organizations should be firm based and complex and, as such, qualitative
1

Karyn Chri S Tine Rastrick, http://adt.waikato.ac.nz/uploads/approved/adt-uow20080115.215153/public/04c..

and field based methodologies are much appropriate. Chan (2000) supports this position
suggesting that the field of research may not be fully understood until more qualitative
contributions are added to the conversation.
Conclusion
According to RBV, not all the resources of firm will be strategic resources and hence sources of
competitive advantage. Competitive advantage occurs only when there is a situation of resource
heterogeneity (different resources across firms) and resource immobility (the inability of
competing firms to obtain resources from other firms). If the resource is not perfectly mobile (i.e.,
the resource is not free to move between firms, or if a firm without a resource faces a
considerable cost burden in developing, acquiring or using it, that a firm already using it does
not), then the resource is likely to be a source of sustained competitive advantage. If a resource is
imitated or substituted then any advantages gained may be short lived. In short, the more mobile
a resource is, the less sustained the advantage gained from that resource will be. In this current
era of fast changing globalized world, if an organization is able to change swiftly and be more
alert to changes in the competitive market, then they are more likely to gain and sustain
competitive advantage.

ANNEXURE- I
Prior Research Study on the RBV
Authors (year)
Penrose (1959)

Andrews (1971)
Lippman and Rumelt (1982)

Wernerfelt (1984)
Rumelt (1984)
Barney (1986)
Rumelt (1987)
Rumelt (1987), Dierickx and Cool
(1989)

Day and Wensley (1988), Aaker

(1989), Grant (1991), Wernerfelt
(1989)
Prahalad and Hamel (1990)

Hansen and Wernerfelt (1989),

Rumelt (1991)

Barney (1991)

Conner (1991)

Major Contribution
Emphasizes the internal resources of a firm. A
firms growth is based on a firms resources and
limited by managerial resources
Emphases management of internal resources
Sustained competitive advantage results from rich
connections between uniqueness and causal
ambiguity
Firms as bundles of resources
Strategic theory of the firm based on the idea of
firms as resource bundles
Characteristics of the factors market determine
possibilities for a firm to earn rents
Firms as rent-seekers. The importance of isolating
mechanisms to earn rents
Summary article on imitability barriers (e.g.,
causal ambiguity and isolating mechanisms like
asset interconnectedness, asset stock efficiencies,
etc.) that impede (or make very costly) imitation
from other competitors
Strategic formulation models that have firm
resources as the central concept and as the sources
of sustainable competitive advantage
Core-competencies as the drivers of corporate
strategy and diversification.
Business should exploit and leverage core
competencies. Corporations should diversify in
related businesses which can make use and
enhance the core competences of the organization
Empirical studies that support the hypothesis that
firm-specific resources or organizational factors
are more important than industry variables for
explaining firm superior performance
Key strategic resources can be sources of strategic
competitive advantage if they are scarce, difficult
to imitate, non-substitutable, and valuable
Comparison of the resource based theory of the
firm with other strategic approaches derived from
economics. Clarification of assumptions of the
resource based theory and its implication for rent
earning strategies

Peteraf (1993)

Day (1994)

Collis and Montgomery (1995)

Grant (1996)
Teece, Pisano, and Shuen (1997)

An integrative resource based framework for

strategic competitive advantage. Proposes that
firms obtain superior performance, by earning
rents from scarce and efficient resources and/or
form market power in the product markets
Capabilities framework of strategic competitive
advantage. Distinguishes between outside-in,
spanning and inside-out capabilities
Managerially-oriented review of the RBV
Knowledge based view develops considering
knowledge as the key or strategic asset of firms
Dynamic capabilities as sources of competitive
advantage

(Source: Compiled by author; Adapted from Olavarrieta & Ellinger, 1997; Mahoney, 2004)

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