Resource-based view of the firm- Barney (1991) PDF

Preview

Summary

This lecture explores Resource-based view of the firm....

Description

Resource-based view of the firm: Barney (1991) Jay Barney ❑ Born 8 Oct, 1954 (age 63) ❑ PhD from Yale ❑ Currently Professor in Utah University ❑ His paper “Firm resources and sustained competitive advantage” published in Journal of Management in 1991 makes him be best known for his contributions to the resource-based view of competitive advantage in the field of strategic management: “The father of modern RBV theory” ❑ His 1991 JOM paper is one of the most cited articles in management: 62,639 citations by Nov. 2018. I. 1.

Resource based view (RBV): General background Traditional SWOT analysis, RBV and industry attractiveness model and competitive advantage Firms obtain sustained competitive advantages by implementing strategies that exploit their internal strengths, through responding to environmental opportunities, while neutralizing external threats and avoiding internal weaknesses (Barney, 1991: 99) 2. The source of Firm’s competitive advantage Resource based view emphasizes that organizations should look inside the company to find the sources of competitive advantage instead of looking at competitive environment for it 3. Barney’s (1991) critics on environmental model of competitive advantage “To help focus the analysis of the impact of a firm’s environment on its competitive position, much of this type of strategic research has placed little emphasis on the impact of idiosyncratic firm attributes on a firm’s competitive position” (Barney, 1991: 100) e.g., Porter’s (1980) “five forces” model 4. Barney’s (1991) critics on environmental model of competitive advantage

Assumption 1. “Firms within an industry (or firms within a strategic group) are identical in terms of the strategically relevant resources they control and the strategies they pursue” (Barney, 1991: 100) RBV: “Firms within an industry (or group) may be heterogeneous with respect to the strategic resources they control” (Barney, 1991:101)

Assumption 2. “Should resource heterogeneity develop in an industry or group, this heterogeneity will be very short lived because the resources that firms use to implement their strategies are highly mobile” (Barney, 1991: 101) “Heterogeneous resources” RBV: “Firms’ strategic resources may not be perfectly mobile across firms, and thus heterogeneity can be long lasting” (Barney, 1991:101) “Immobility of resources” “Now surprisingly, it is argued that firms, in general, cannot expect to obtain sustained competitive advantages when strategic resources are evenly distributed across all competing firms and highly mobile. This conclusion suggests that the search for resources of sustained competitive advantage must focus on firm resource heterogeneity and immobility” (Barney, 1991: 103) 3. Overall implications of Barney’s (1991) Shift of defining firm’s identity from market focused perspective to firm itself Market focused perspective (External environment perspective) •Defining the firm in terms of market they serve •What is our business? •Who are our customers? •Which of customers’ needs are we seeking?

Resource-based view (Internal environment perspective) •Defining the firm in terms of “what it is cable of doing!!” •Focus on the firm’s bundle of resources and capabilities II. Defining three key concepts 1. Firm resources (Barney, 1991: 101-102) All assets, capabilities, organizational processes, information, knowledge, etc controlled by a firm

firm

attributes,

Firm resources enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness ❑

Types of resources

Physical capital resources: firm’s plant, equipment, geographic location, access to raw materials Human capital resources: training, experience, judgment, intelligence, relationships, and insight of individual managers and workers in a firm Organizational capital resources: a firm’s formal reporting structure, its formal and informal planning, controlling, and coordinating systems, informal relations among groups within a firm and between a firm and those in its environment 2. Competitive advantage and sustained competitive advantage (Barney, 1991: 102-103) ❑

Competitive advantage

“A firm is said to have a competitive advantage when it is ] implementing a value creating strategy not simultaneously being implemented by any current or potential competitors” (Barney, 1991: 102)

❑

Sustained competitive advantage

“A firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy” (Barney, 1991: 102) IV. Sources of sustained competitive advantage Four attributes for holding the potential of sustained competitive advantages 1. Valuable resources 2. Rare resources’ 3. Imperfectly imitable resources 4. (Non) substitutable resources 1. Valuable resources “Resources are valuable when they enable a firm to conceive of or implement strategies that improve its efficiency and effectiveness” (Barney, 1991: 106) 2. Rare resources “In general, as long as the number of firms that possess a particular valuable resource (or bundle of valuable resources) is less than the number of firms needed to generate perfect competition dynamics in an industry, that resource has the potential of generating a competitive advantage” (Barney, 1991: 107)” 3. Imperfectly immitigable resources ❑ The sources of imperfect imitability (1) Unique historical conditions (Path dependence) “The performance of a firm does not depend simply on the industry structure within which a firm find itself at a particular point in time, but also on the path a firm followed through history to arrive where it is” (Barney, 1991: 108) “If a firm obtains valuable and rare resources because of its unique path through history, it will be able to exploit thoseresources in implementing value-creating strategies that cannot

be duplicated by other firms, for firms without that particular path through history cannot obtain the resources necessary to implement the strategy” (Barney, 1991: 108) (2) Casual ambiguity “Casual ambiguity exists when the link between the resources controlled by a firm and a firm’s sustained competitive advantage is not understood or understood only very imperfectly” (Barney, 1991: 109) “In the face of such casual ambiguity, imitating firms cannot know the actions they should take in order to duplicate the strategies of firms with a sustained competitive advantage” (Barney, 1991: 109) 3. Imperfectly imitable resources ❑ The sources of imperfect imitability (3) Social complexity “A firm’s resources may be imperfectly imitable is that they may be very complex social phenomena, beyond the ability of firms to systematically manage and influence” (Barney, 1991: 110) e.g., interpersonal relations among managers in a firm, a firm’s culture, a firm’s reputation among suppliers and customers 4. (Non) substitutable resources “There must be no strategically equivalent resources that are themselves either not rare or imitable” (Barney, 1991: 110)...