Resource Based

Strategy View

Narinder jeet kaur

S 55
PART 3: RESOURCE BASED ‘THEORY’ OF
THE FIRM

• The “resource-based” approach is concerned with the

nature of the firm’s resources and how these resources
are combined into capabilities.
• This is proposed by Peteraf (1993). Her approach is
outlined below and summed up the figure below-
 Peteraf’s model - Linn Products

Ex-post limits to
Heterogeneity
competition
The industry is made of firms
Specialist knowledge
with access to different
and reputation
resources and skills. Linn has
particular distinctive Competitive
competencies.
Advantage

Imperfect Ex-ante limits to

Mobility competition

Shared specialist knowledge Linn has demonstrated an

and reputation ability to leverage the
potential of existing
technologies

ALL THESE LEAD TO SUSTAINABLE COMPETITIVE ADVANTAGE

THROUGH DIFFERENTATION
 Competitive Advantage Peteraf

A firm is said to have a competitive advantage when it can:

• achieve rents: which requires resource heterogeneity
between firms (some better bundles than others).
• enjoy rents that are not offset by the costs of achieving a
superior set of resources: which requires ex ante limits to
competition for those resources.
• appropriate those rents for the firm: which requires
imperfect resource mobility.
• sustain those rents: which requires ex-post limits to
competition.
 Heterogeneity:

• Bundles of resources and capabilities are heterogeneous

across firms. Heterogeneity implies that firms with
superior resources/ capabilities will earn superior returns.
• An important class of resources are those which are
limited in the short run but may be renewed and
expanded within firms that use them. Prahalad and Hamel
(1990) argue that core competencies - particularly
knowledge-based resources - are enhanced as they are
used because of learning.
Ex-post limits to competition
Forces which limit competition from imitators.
These arise from sources already discussed:

Imperfect imitability, replicability, and

substitutability of resources/ capabilities isolating
the firm from challengers.
 Ex ante limits to competition
• The source of a firm’s rents is a superior resource position.
• But imagine the situation before any firm has achieved
this position.
• If many firms recognised its potential, a competitive
struggle would ensue to obtain the resources and build
the capabilities to occupy that position.
• This process would compete away all rents that could be
obtained from occupying the position. For example,
• (a)National Lottery licence.
• (b)Sony licence for transistor.
 Imperfect resource mobility
• This refers to the marketability or otherwise
of the underlying resources and capabilities.
• Thus good high street locations are important
for retailers but competition means the rental
costs reflect this fact. The value of the
location is captured by the property owner
not the retailer per se.