Marek Kunasz
Microeconomics Department
University of Szczecin
64, Mickiewicza Street, 71-101 Szczecin, Poland
kunasz@wneiz.pl, http://lama.edu.pl/kunasz/
RESOURCE APPROACH IN BUILDING A LONG-TERM
COMPETITIVE ADVANTAGE OF ENTERPRISE
Abstract
Firm’s internal and external factors may provide a firm with sources of competitive
advantage, therefore academic discussion resulted in the two approaches, each of them focus
only on one of the abovementioned determinants: positioning or resource approach. This
article focuses on the latter one as it integrates internal and external aspects of the strategic
analysis what eliminates deficiencies of the previous approaches (Andrews, Porter), however,
it focuses on the firm’s internal factors in creating sustainable competitive advantage. The
main goal of this article is to describe the historical background, development and principles
of the Resource-Based View of the Firm (RBV). The author also focuses in details on
selected problems posed by some representatives of this trend, they concern: structure of
resource organization (particularly the role of capabilities, skills, and competences and other
intangible resources) and the role of various types of resources in establishing firm’s strategy.
Key words: Firm Behavior (D21), Productivity (D24), Economic Development (O1).
Introduction
Competitiveness of an entity, understood as an agregate of competitive potential,
competitive advantage, competition instruments and competitive position (Stankiewicz, 2000,
p. 97), is one of the most significant concepts of the free market economy. The sources of
sustainable competitive advantage providing entities with above-average returns should be
found in endo- and egzogenic factors. Two theories were found, each of them focus on the
abovementioned group of determinants (Maniak, 2005, p. 73). The first approach
(positioning) assumes that enterprises should create their competitive advantage outside the
organization by finding an attractive field of activity and adopting it to available resources.
The main objective of the second approach i.e. Resource-Based View of the Firm (RBV) is
to explain the reasons for earning above-average returns, obtaining a competitive position and
providing sustainable competitive advantage by focusing on the internal factors that should
take priority over the external ones.
This article focuses on the second approach and aims to describe the roots of the
Resource-Based View of the Firm and its main principles. The role of tangible and intangible
resources in developing a firm’s strategy is described as well. Theoretic material from the
domestic and foreign literature is used to discuss this issue.
The roots of RBV in the development of the economic thought
Strategic management and economics provided the foundation for the Resource-Based
View of the Firm.
Resource Approach in Building a Long-Term Competitive Advantage of Enterprise
73
According to the classical approach to the strategic management, the choice of the
strategy resulting in obtaining a competitive advantage was nothing but adopting firm’s
strengths and weaknessess, opportunities and threats in the environment. However, such a
model didn’t take into account any corporate strategy, didn’t provide a firm with any formal
solutions for a firm’s assessment and its environment. Therefore in the 1980’s strategic
management focused on the areas that Andrews hadn’t taken into account, i.e. relations
between enterprises and their environment (Porter’s model, matrix BCG). Not until the
1990’s managers focused largely on the internal factors. The Resource-Based View of the
Firm consolidated external and internal aspects of the strategic analysis.
The resource approach emphasises the firm’s endogenic growth. The first attempts to
explain firm’s endogenic growth were made already by Smith in 1954 when he analysed the
impact of labour distribution on improving productivity and the economic growth as well.
However, Schumpeter and Penrose made a major contribution to formulating RBV.
Schumpeter (the father of creative destruction spurred by innovation, technical
progress and industry development (Mikosik, 1993)) argued that innovation implemented by
enterepreuneurs is a drive to returns that occur in progress conditions and the economic
growth. Schumpeter understood innovation in a broad context and defined it as a new
combination of various material elements and human productive power that aim to
manufacture a new product or launch products with new properties, implement a new
production method, find a new outlet, find a new source of components or introduce a new
production organisation (Schumpeter, 1960).
Innovations facilitate processes in a firm, improve efficiency of available resources,
they are profitable for the inventors as they change proportion of the production costs in the
“innovative” enterprise to social production costs determining price level (Romanow, 1999,
p. 176). An ability of enterprises to implement innovations is the basis for obtaining
competitive advantage and determining differentiation in terms of the market force
(Sulimowska-Formowicz, 2002, p. 43). Therefore, contrary to the classical theories that focus
on capital accumulation, Schumpeter assumed that endogenic technological change and
human capital accumulation are key factors in the economic growth.
However, Penrose, who developed Marshall’s theory, inventively included firm’s
resources in her theory of firm’s growth. She avoided using the term “productive factors” on
purpose as they didn’t explain too much. According to Penrose, a firm is perceived as a
bundle of resources, which is the basis for executing its goals. They shouldn’t be regarded as
inputs to the production process. Depending on the combination of quality, amount of
resources and ways of their utilizing, an enterprise may provide its customers with particular,
however, different set of services (market offer). This opportunity to use resources in such a
diffrent way determines uniquess of each firm on the market, their power depends on it, too.”
(Penrose, 1959, pp. 24-25)
Main principles of RBV
The Resource-Based View of the Firm considers enterprise as a unique set of tangible
and intangible assets and capabilities. These resources distinguish an enterprise from the
others and constitute a source of competitive advantage. On one hand, firm’s profitability is
detrmined by resource characteristics (i.e. their type, amount and nature), on the other hand,
by imperfect conditions on the market where resources are purchased.
The main assumption of this theory is that resources and skills which are scare,
durable, imperfectly mobile and difficult to imitate enable an enterprise to obtain sustainable
competitive advantage and in turn earn above-average performance.
The second main assumption is a differentation of enterprises in terms of possessed
74
Marek Kunasz
resources and capabilities, it explains why companies obtain various effects (returns). They
are a function of entities’ ability to use imperfect and incomplete productive factors
considered as barriers to the resource mobility. Imperfect resource mobility i.e. lack of
opportunity to purchase or duplicate by enterprises the same resources that decide on
company success, determine uneven distribution of resources between rivals, this in turn,
influences maintaining and improving heterogeneity over a time1. Hence, even if purchasing
identical material productive factors is possible, incomplete knowledge on rival’s way to use
them results in difficulty to imitate the resource2 (Amit, Schoemaker, 1993); (Barney, 1991);
(Dierickx, Cool, 1989); (Reed, DeFillippi, 1990)
The RBV model proves that competitive advantage of modern enterprises is
particularly based on intangible resources such as knowledge, capabilities and experience that
allow to provide customers with unique value of products and services. The enterprises able
to meet customers’ needs more efficiently that rivals, obtain competitive advantage on the
selected (by them) markets, they also may utilize resources and capabilities to meet needs and
expectations of another customers, i.e. enter new markets and establish „future markets”.
Organization’s resources
According to the RBV theory, resources are defined as stocks of available factors that
are owned or controlled by the firm (Amit, Schoemaker, 1993) (Sitek, 1997, p. 758) (Głuszek,
2000, p. 92). They can be converted into the end products or services with the use of assets
and mechanisms that belong to a firm, they are are as follows:
• technology,
• system of management,
• systems of incentives.
Classification of resources depends on the firm’s profile, ownership structure,
implemented strategy, situation on the market and competition tools that are used
(Markiewicz, 2003, p. 22). One of the most frequently described in the literature criterion
implemented by (Grant, 1991a); (Collins, Montgomery, 1995); (Obłój, 1993, p. 85);
(Pierścionek, 1996, p. 118) is classification for tangible and intangible resources. Tangible
resources consist of facilities, raw materials, components, products, and equipment, as well as
human and financial resources (Głuszek, 2001, p. 86). Some authors (Barney, 1991, pp. 99120) even mention organizational and information resources. Most of material components
included in the firm’s balance sheet comprises its tangible assets. Although the range of the
alternative methods to assess firm’s property is very wide, their value can be precisely
assessed.
However, intangible resources are very difficult to assess objectively. Their
differentiation and changeable value depending on the owner of the majority of intangible
resources, exclude using market prices (Grant, 1991b).
There are some features that distinguish intangible resources from tangible ones (Głuszek,
2001, p. 87):
• they can be in multiple uses simultaneously (e.g. company’s reputation can be used by
different employees , on the different markets and for different purposes), unlike tangible
resources that are connected with precise action in a precise place,
• they can be improved while using (e.g. by strengthening and popularizing of brand) in
contrast to machines and devices which depreciate and lose their value,
1
It abandons the classical theory on homogeneity and perfect resource mobility.
When resources are non-inimitable or imperfectly inimitable, they can provide a firm with long term returns,
however if they can be duplicated by rivals, they will have only a temporary value, cf. (Collins, Montgomery,
1995).
2
Resource Approach in Building a Long-Term Competitive Advantage of Enterprise
•
75
lack of possibility to purchase or hire intangible resources, that’s why every company has
to work on their own recources (it’s a lengthy process, e.g. it takes even few years to
establish reputation or brand reputation).
Intangible resources include as follows (Hall, 1993, p. 619); (Markiewicz, 2003, p.
23); (Rybak, 2003, p. 14):
• intellectual property rights of patents, duplicateright, trade secrets,
• trademarks and brand-names,
• company’s name and tradition,
• reputation products and company,
• contracts,
• licences,
• databases of customers, suppliers,
• personal and organizational networks,
• the know-how of employees as well as proffessional advisers, suppliers, distributors,
• proper interpersonal relationships,
• organizational structure,
• the culture of the organization.
This taxonomy seems to be clear, however, it doesn’t reflect the entire structure of
modern entities value. New classifications can differ horizontally from the traditional ones
that have been used so far. Still some issues are discussed e.g. shall some aspects linked with
employees be regarded as tangible or intangible resources. Intangible resources of the
organization comprise many assets that can be assessed by traditional methods. Therefore
fragmenting within the selected structures is necessary to make. However, we should bear in
mind that tangible resources are depreciating as sources of competitive advantage
(Wawrzyniak, 2001, p. 52), therefore we should mainly focus on intangible resources. Taking
an ownership critierion into account, intangible resources may be classified as (Hall, 1992, p.
136):
• assets,
• skills.
Skills are abilities to use resources resulting from knowledge brought and developed
by firm’s human capital. They determine utilization of available resources, thus they can be
sources of potential competitive advantage. They are specific in character for given firms or
sectors as they are shaped by historical interactions between resources. Skills can be regarded
abstractively as direct goods made by a firm to use resources more efficiently. Assets are
static in character and refer to capabilities while skills are bundles undergoing time changes
(Penrose, 1959).
Intangible resources may be classified with respect to the following characteristics
(Hall, 1993):
• intangible resources that are “people dependent” and “people independent”,
• intangible resources which can be protected in law (regulatory) and not protected in law–
the latter resources can be additionally divided into:
• positioning – relate to consequence of the past actions (e.g. reputation),
• functional – relate to the ability to do specific things (it results from the knowledge,
skill and experience of employees),
• cultural – apply to the organization as a whole (e.g. culture of the organization)
76
Marek Kunasz
Table 1. A framework of intangible resources and capabilities
People
dependent
functional
Know-how of
employees,
suppliers and
distributors
INTANGIBLE RESOURCES
cultural
positioning
organizational
culture, ability to
learn
People
independent
reputation,
networks
databases,
information
regulatory
Skills
Assets
contracts,
licences, trade
secrets,
intellectual
property rights
Source: (Hall, 1992, p. 140)
As the taxonomy is very complicated and diverse, the classification made by (Rybak,
2003, pp. 14-17) seems to be very interesting as he classified resources as:
• resources sensu stricto (understood as „input” to production), they are transformed in
each value chain link and situated at the lowest hierarchy. They are also regarded as
having the lowest strategic value which depends on the ability to use them in
implementing strategic objectives,
• resources sensu largo that cover resources sensu stricto as well as skills, competencies and
core competencies.
Core competences and distinctive capabilities
Resources and skills provide kind of a foundation for firm’s:
core competences or
distinctive capabilities.
Core competences refer to technology and production field as they are a set of
different skills possessed by strategic business units and lead to collective learning in the
organization. Hence, they are typical for diversified enterprises. The real sources of firm’s
success are to be found in management’s ability to consolidate corporate-wide technologies
and production skills into competences that empower individual businesses to generate new
ideas of products and introduce new value of products already manufactured (Prahlad,
Hamel, 1990, pp. 79-81).
On one hand, core competences provide the foundations for creating products meeting
needs of present customers and satisfying the future needs of present and future customers, on
the other hand, they integrate departments in a firm in order to provide customers with value.
Core competences are of key importance (i.e. they lay the foundations for establishing
a sustainable competitive advantage) when they (Hamel, 1990, pp. 83-84):
• provide potential access to a wide variety of markets and sectors ,
• make a significant contribution to the end user value,
• are unique, thus very difficult for competitors to imitate.
However, distinctive capabilities comprise a kind of the firm’s behaviour pattern
linked with a strategic bundle of processes taking place in a firm which require multifunctional coordination in order to provide customers with value. Thanks to distinctive
capabilities, core competences are introduced. Successful competition depends on ability to
convert basic strategic processes into capabilities that enable meeting customers’ needs. Thus,
•
•
Resource Approach in Building a Long-Term Competitive Advantage of Enterprise
77
capability is core (strategic) only when it focuses on customers at its beginning and the end.
Comparing described above classifications, it should be stated that core competences
are linked with production and technological fluency at the particular value chain links
whereas strategic capabilities are more general in their character and cover the entire firm’s
value chain (Stalk, Evans, Shulman, 1992); (Szymura-Tyc, 2002, pp. 8).
Some attempts to integrate the two described approaches were made by scholars.
(Leonard-Burton, 1992, pp. 111-125) defines core competences/distinctive capabilities as
knowledge that differentiates the firm strategically and creates sustainable competitive
advantage comprised in:
• physical and technical systems,
• knowledge management systems,
• employees’ knowledge and qualifications,
• organizational standards and values sets.
Tangible and intangible resources as well as core competences/distinctive capabilities
build on them, generate competitive advantage on the market, i.e. all aspects that positively
distinguish a given fims or its products from rivals.
Resources in the firm’s strategy
In the abovementioned context, the heart of the firm’s strategy is to create future
competitive advantage faster than rivals are able to generate present competitive advantage.
Thus, it requires investing in core competences/distinctive capabilities as these capabilities in
combination with ability to improve already possessed capabilities and learn the new ones,
comprise competitive advantage that is most probable to maintain (Hamel, Prahlad, 1989).
Much attention in RBV is paid to asset characteristic that play a significant role in
creating sustainable competitive advantage, they are defined as strategic (Sitek, 1997, p. 761).
(Barney, 1991, pp. 99-120) proposes that advantage-creating resources must meet four
conditions, namely (so-called VRIO model): value, rareness, inimitability and nonsubstitutability. However, (Peteraf, 1993, p. 186) distinguishes: imperfect inimitability,
imperfect substitutability, imperfect resource mobility, resource heterogeneity, ex ante and ex
post limits to competition. (Collins, Montgomery, 1995) suggest that they must meet five tests
namely inimitability, durability, appropriability, substitutability, and competitive superiority.
However (Amit, Schoemaker, 1993) go even further, producing a list of eight criteria
including complementarity, scarcity, low tradability, inimitability, limited substitutability,
appropriability, durability and overlap with strategic industry factors.
So as we can see for ourselves, there are so many various approches to this issue.
(Dytwald, 1996, pp. 24-25) is the author of classification that integrates the abovementioned
approaches. The significance of firm’s resources as strategic factors generating competitive
advantage can be considered in the aspect of the following set of distinctive features (cf.
Głuszek, 2001, p. 88):
• durability, i.e. the period of time when resources is used and earns returns; some of them
depreciate with the time being e.g. some tangible and intangible resources (e.g. patents),
the majority of them is based on accumulated knowledge and they increase their value
with the time being (e.g. employees’ capabilities),
• difficulty to imitate reflects inability to duplicate the resource by rivals, in practice each
resource can be duplicated to a greater or lesser extent, however, there are many factors
that make it more difficult:
• physical uniqueness a resource can’t be duplicated so to speak by definition (e.g.
Polaroid patent),
• accumulation over time refers to a long-term creation process and resource
78
Marek Kunasz
accumulation (e.g. brand creation); such a process can’t be simply shortened without
lowering profitability of imitation actions,
• development path refers to difficulty to duplicate all historical circumstances that
contributed to creating a given resource,
• unprofitability refers to high costs of gaining information and duplicating a given
resource (innovative technology purchase), the costs exceed possible to gain returns,
• mystery results in a lack of understanding of causes and effects ocurring in the asset
bundle and indicating the elements deciding on competitive advantage (e.g.
interactions between employees),
• imperfect substitutability reflects inability to substitute the resource by another one that
has similar properties (e.g. opportunity to use alternative distribution chanels),
• purchase opportunity this opportunity can be taken when there’s no other ways to
duplicate resource or find any substitutes. However, then we should pay attention to the
factors that can be barriers to imperfect resource mobility:
• allocation costs are borne as a result of people and other resources mobility, they may
lower a competitive position which a resource purchaser obtains at the beginning in
comparison with the firms that have already possessed this resource,
• imperfect information influences a competitive position at the beginning, when a firm
doesn’t have any experience in utilizing a given resource, it may have relatively more
difficulties with objective value assessment and resource productivity in comparison
with these firms that have already had experience in this field,
• resource specifity refers to an opportunity to lower productivity and in turn resource
value as a result of overtaking by another owner (e.g. in case of overtaking a small
company by a big concern),
• inability of skill transfer is linked with an opportunity to purchase mainly knowledge
not capabilities considered as the sum of open and hiden knowledge (e.g. in case of
overtaking),
• ownership – the problem of ownership doesn’t exist in case of tangible resources,
however, in case of intangible resources it causes problems as value created by intangible
resources doesn’t belong only to the owner. The value is the subject of transaction made
by customers, distibutors, suppliers, and employees.
The procedure of establishing strategy should include the following elements (Grant,
1991a); (Reed, DeFillippi, 1990); (Dytwald, 1996, pp. 25-26).
1. Identification of possessed tangible, intangible resources and capabilities.
2. Assessment of distinctive capabilities understood as the best way of utilizing resources
and capabilities by a firm.
3. Assessment of resource profitability potential based on the abovementioned criteria,
distinctive strategic assets.
4. Choice of strategy which should determine resource gap (between possessed resources
and those essential for strategy implementing) and opportunity to eliminate the gap as
well as programmes that aim to improve quality of the resource base by introducing the
new ones and developing the old ones.
5. Improving a base of resources and capabilities with the use of the selected strategy.
Conclusion
The Resource-Based View of the Firm is one of the most important concepts that
explains the reasons for gaining above-average profits by firms, holding a certain competitive
position and creating sustainable competitive advantage. A firm is analysed as a resource
collection whose attractiveness is examined in the context of its environment. Therefore such
Resource Approach in Building a Long-Term Competitive Advantage of Enterprise
79
approach combines analysis of internal phenomena taking place in a firm with analysis of the
environment that previous approach (positioning) focused on. Combination of both
perspectives enable to eliminate deficiences of the previous approaches, at the same time
explains some fundamental issues for modern strategic management and economics
concerning discreapancies in earned results, establishing successful market strategy or
providing efficient differentiation.
REFERENCES:
1. Amit R., Schoemaker P., (1993), Strategic Assets and Organizational Rent, Strategic
Management Journal, vol 14.
2. Barney J.B., (1991), Firm Resources and Sustained Competitive Advantage, Journal of
Management, Vol 17, No 1.
3. Collins D., Montgomery C., (1995), Competing on Resources: Strategy in the 1990s,
Harvard Business Review, July-August.
4. Dierickx I., Cool K., (1989), Asset stock acumulation and sustanability of competitive
advantage, Management Science, vol. 35, No. 12.
5. Dytwald J.A., (1996), Zasoby przedsiębiorstwa, Przegląd Organizacji, nr 3.
6. Głuszek E., (2001), Zasoby niematerialne w świetle kryteriów rynkowych warunkujących
generowanie przewagi konkurencyjnej, in: Prace Naukowe Akademii Ekonomicznej we
Wrocławiu no 886, Wrocław.
7. Głuszek E., (2000), Zasoby przedsiębiorstwa jako baza formułowania strategii, in: Prace
Naukowe Akademii Ekonomicznej we Wrocławiu no 879, Wrocław.
8. Grant R.M., (1991a), Contemporary Strategy Analysis: Concepts, Techniques,
Application, Basil Blackwell, Cambridge MA.
9. Grant R.M., (1991b), The Resource-Based Theory of Competitive Advantage:
Implications for Strategy Formulation, California Management Review, Spring.
10. Hall R., (1993), A Framework Linking Intangible Resources and Capabilities to
Sustainable Copetitive Advantage, Strategic Management Journal, vol. 14, 1993.
11. Hall R., (1992), The Strategic Analysis of Intangible Resources, Strategic Management
Journal, nr 13.
12. Hamel G., Prahlad C.K, (1989). Strategic Intent, Harvard Business Review, May-June.
13. Leonard-Burton D, (1992), Core Capabilities and Core Rigidities: A Paradox in Managing
New Product Development, Strategic Management Journal, vol 13.
14. Maniak G., (2005), Istota i tworzenie konkurencyjności przedsiębiorstw. Wybrane
aspekty, in: Zeszyty Naukowe Uniwersytetu Szczecińskiego no 382, WNUS, Szczecin.
15. Markiewicz P., (2003), Zasoby niematerialne jako źródło przewagi konkurencyjnej, in:
Zeszyty Naukowe Akademii Ekonomicznej w Krakowie no 597, Kraków.
16. Mikosik S., (1993), Teoria rozwoju gospodarczego Josepha A. Schumpetera, PWN,
Warszawa.
17. Obłój K., (1993), Strategia sukcesu firmy, PWE, Warszawa.
18. Penrose E., (1959), The Theory of the Growth of the Firm, Oxford University Press,
Oxford.
19. Peteraf M.A., (1993), The Cornerstones of Competitive Advantage: A Resource-based
view, Strategic Management Journal, vol. 14.
20. Pierścionek Z., (1996), Strategie rozwoju firmy, PWN, Warszawa.
21. Prahlad C.K, Hamel G., (1990), The Core Competence of the Corporation, Harvard
Business Review, May-June.
22. Reed R., DeFillippi R., (1990) Casual Ambiquity, Barriers to Imitation and Sustanable
Competitive Advantage, Academy of Management Review, vol. 15, no. 1.
80
Marek Kunasz
23. Romanow Z.B., (1999), Historia myśli ekonomicznej w zarysie, Akademia Ekonomiczna
w Poznaniu, Poznań.
24. Rybak M. (red.), (2003), Kapitał ludzki a konkurencyjność przedsiębiorstw, Poltext,
Warszawa.
25. Schumpeter J.A., (1960), Teoria rozwoju gospodarczego, PWE, Warszawa.
26. Sitek E., (1997), Strategia rozwoju w ujęciu zasobowej teorii firmy, Ekonomista, no 5,6.
27. Smith A., (1954), Badania nad naturą i przyczynami bogactwa narodów, PWE,
Warszawa.
28. Stalk G., Evans P., Shulman L.E., (1992), Competing on Capabilities: The New Rules of
Corporate Strategy, Harvard Business Review, March-April.
29. Stankiewicz M., (2000), Istota i sposoby oceny konkurencyjności przedsiębiorstwa,
Gospodarka Narodowa, no 7/8.
30. Sulimowska-Formowicz M., (2002), Nurt zasobowy w teorii firmy, Gospodarka
Narodowa, no 5-6.
31. Szymura-Tyc M., (2002), Zasoby oparte na wiedzy w procesie budowy przewagi
konkurencyjnej przedsiębiorstw, Przegląd Organizacji, no 3.
32. Wawrzyniak B., (2001), Zarządzanie kapitałem ludzkim w przedsiębiorstwach,
Zarządzanie Zasobami Ludzkimi, no 3-4.