BIZ6034 Seminar on Technology Strategy
Review paper of
“The Cornerstones of Competitive Advantage : A Resource Based View / Peteraf(1993)”
기술경영학협동과정 박사(4) 이혜선 2011313311
Summary
The purpose of this study is to integrate various strands on sustaining firms’ competitive
advantage as in resource management perspectives to develop a simplified model. This is
because the ideas regarding firms’ competitive advantages in previous literatures have been
approached various perspectives. Based on Penrose(1959), Barney(1986, 1991),
Wernerfelt(1984)’s RBV, Peteraf focuses the delivery of sustained above-normal returns that
can be applied to industry for their strategic implications. He argues that there are 4
cornerstones that must be met for the firms to sustain competitive advantages.
1) Resource heterogeneity: In the perspectives of RBV, firms’ competitive advantage
underlies by their heterogeneity of resources and capabilities. This presents in 2 main
respects that are Ricardian rents and monopoly rents. Ricardian rents can be earned by
having unique productive processes, which allows firm to produce a good at lower cost
than competitor. As firms lower costs in the market, this will produce supernormal
profits by having finite nature of the resources. Monopoly rents can be earned by
achieving market oriented product differentiation. Their uniqueness will offer customers
valued product, which it can position as a premium price to create rents.
2) Ex-Post Limits to Competition: In order to sustain firms’ competitive advantage, they
need to protect their resources from imitation and substitution over time. These factors
will reduce the potential rent-earning that imitation will raise competitors’ advantage and
substitution will provide options for customers to switch on to another products.
3) Imperfect mobility: Once firms have obtained their valuable resources, they need to
retain them within their boundaries. If their resources were firm-specific then it would be
easier to retain. This is because their firm-specific resources such as organizational
culture, absorb capabilities and etc. would not be easy to be imitated even if they use cospecialized or resources from outside.
4) EX-Ante Limits to Competition: In order to expend firms’ revenue, scarce resources need
to be acquired before its value is widely understood. Thus the role of managers is very
important to perform necessary skills under risk of uncertainty environment.
Contribution
Regarding firm’s sustaining competitive advantage, previous literatures have been
approached in many different ways for suggesting theoretical models. RBV of the firm
concerns the internal accumulation of their assets, which it relates with firm’s endowments.
Thus according to Barney(1991), Penrose(1959), Conner(1991) and Wernerfelt(1984), firm’s
resources should be valuable, rare, imperfectly imitable and immune to the creation,
development or acquisition of substitute factors in order to sustain competitive advantage and
to gain abilities of generating economic rents.
I think the contribution of Perteraf’s work is that she integrated and simplified the various
RBV’s premises into theoretical framework. By this framework, the mechanisms of
sustainable competitive advantage strategy can be seen that economic rents and competitive
advantage arise because firms heterogeneity. And this differs with respect to their level of
specificity so their suitability can be predicated regarding competitive advantage. Her
integrated framework also provides additional explanation of why competitively successful
firms can be distinguished from less successful firms. I understood as it is because
competitively successful firms possess more firm-specific and competitive valuable assets,
resources and capabilities then less successful firms. And this is because distressed firms
cannot earn rents due to nature of the resource, which it also affects less successful firms to
posse inimitable resource endowment and capabilities.
Critique
In her framework, I thought it cannot always infer competitive advantage because even if
the firm managerially control higher rates of profit than competitor, this sometimes doesn’t
mean it has competitive advantage. Also even the firm achieved an efficient cost minimizer
for production or process, this doesn’t always mean it is profited because benefits of
minimization are unobservable. But on the other hand, this framework is useful for
considering technology strategy because technology development may require long term and
organizational capability such as learning and knowledge sharing needs to be accumulated as
well as protected which is critical factor for sustaining competitive advantage. Also I think
this framework can be useful for outsourcing strategy. Firms can check their internal status to
decide what is needed as in make or buy perspectives. So associating outsourcing strategy, it
would be meaningful to extend this framework into a level down to define related factors.
Personally, her theoretical framework can be useful for planning business strategy in real
world. But without literature background on its associated economic theories and RBV
history, the deeper meaning of the framework cannot be caught. Especially academic fields
and industries nowadays are diverse and converge; I personally thought that I should write a
future paper with reader friendly literature review.