Resource-based theory

According to resource-based theory, organizations that own “strategic resources” have important competitive advantages over organizations that do not. Some resources, such as cash and trucks, are not considered to be strategic resources because an organization’s competitors can readily acquire them. Instead, a resource is strategic to the extent that it is valuable, rare, difficult to imitate, and non-substitutable. These strategic resources can provide the foundation to develop firm capabilities that can lead to superior performance over time. Capabilities are needed to bundle, to manage, and otherwise to exploit resources in a manner that provides value added to customers and creates advantages over competitors.

During the 1990s, the resource-based theory with its first branch of resource-based view (also known as the resource-advantage theory) of the firm became the dominant paradigm in strategic planning. RBV can be seen as a reaction against the positioning school and its somewhat prescriptive approach which focused managerial attention on external considerations, notably industry structure. The so-called positioning school had dominated the discipline throughout the 1980s. In contrast, the resource-based view argued that sustainable competitive advantage derives from developing superior capabilities and resources. Jay Barney’s 1991 article, “Firm Resources and Sustained Competitive Advantage,” is seen as pivotal in the emergence of the resource-based view.

A number of scholars point out that a fragmentary resource-based theory was evident from the 1930s, noting that Barney was heavily influenced by Wernerfelt’s earlier work which introduced the idea of resource position barriers being roughly analogous to entry barriers in the positioning school. Other scholars suggest that the resource-based view represents a new paradigm, albeit with roots in “Ricardian and Penrosian economic theories according to which firms can earn sustainable supranormal returns if, and only if, they have superior resources and those resources are protected by some form of isolating mechanism precluding their diffusion throughout the industry.” While its exact influence is debated, Edith Penrose’s 1959 book The Theory of the Growth of the Firm is held by two scholars of strategy to state many concepts that would later influence the modern, resource-based theory of the firm.

The resource-based theory is an interdisciplinary approach that represents a substantial shift in thinking. The resource-based theory is interdisciplinary in that it was developed within the disciplines of economics, ethics, law, management, marketing, supply chain management and general business.

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