Toward greater understanding of market orientation and the resource‐based view

Connor's commentary offers a series of thoughtful comments on the ideas presented in Hult, Ketchen, and Slater (2005). We focus on two of his contentions in our response. First, we argue that the theory underlying our study—the resource‐based view—is not tautological. This is because resources and performance are not directly related. Instead, realizing the potential value of resources depends on those resources being exploited through a firm's strategic actions. Second, we disagree with Connor's contention that market‐oriented and customer‐led firms lie along a continuum. We propose a richer conceptualization centered on a two‐by‐two matrix that contains market‐oriented firms, customer‐led firms, and two additional types. Copyright © 2007 John Wiley & Sons, Ltd.     

A Bayesian operationalization of the resource‐based view

This paper argues that the gap between the theoretical utility and the practical utility of the resource‐based view (RBV) may be narrowed by operationalizing the theory more consistently with Penrose's original framework. The operationalization proposed here is a twofold approach. First, the RBV may be enhanced by the explicit recognition of Penrose's two classes of resources, namely, administrative resources and productive resources. This distinction suggests a focus on the administrative decisions of managers that lead to economic performance. Second, we argue that the RBV is a theory about extraordinary performers or outliers—not averages. Therefore, the statistical methods used in applying the theory must account for individual firm differences, and not be based on means, which statistically neutralize firm differences. We propose a novel Bayesian hierarchical methodology to examine the relationship between administrative decisions and economic performance over time. We develop and explain a measure of competitive advantage that goes beyond comparisons of economic performance. This Bayesian methodology allows us to make meaningful probability statements about specific, individual firms and the effects of the administrative decisions examined in this study. Copyright © 2004 John Wiley & Sons, Ltd.     

A resource‐based view of manufacturing strategy and the relationship to manufacturing performance

This paper examines manufacturing strategy from the perspective of the resource‐based view of the firm. It explores the role of resources and capabilities in manufacturing plants that cannot be easily duplicated, and for which ready substitutes are not available. Such resources and capabilities are formed by employees' internal learning based on cross‐training and suggestion systems, external learning from customers and suppliers, and proprietary processes and equipment developed by the firm. Based on data from 164 manufacturing plants, the paper empirically demonstrates that competitive advantage in manufacturing (as measured by superior plant performance) results from proprietary processes and equipment which, in turn, is driven by external and internal learning. The implication is that resources such as standard equipment and employees with generic skills obtainable in factor markets are not as effective in achieving high levels of plant performance, since they are freely available to competitors. The paper also demonstrates the important role of internal and external learning in developing resources that are imperfectly imitable and difficult to duplicate. Copyright © 2002 John Wiley & Sons, Ltd.     

More thinking on research methods for the resource‐based perspective

We re‐examine the benefits of using a broader set of research methods to address key questions associated with the resource‐based view (RBV) of the firm. In responding to Levitas and Chi, we consider how research inside organizations can complement and augment research relying on secondary data. Copyright © 2002 John Wiley & Sons, Ltd.     

Empirical research on the resource‐based view of the firm: an assessment and suggestions for future research

The resource‐based view (RBV) is one of the most widely accepted theories of strategic management. However, to date no systematic assessment of the RBV's level of empirical support has been conducted. In response, a sample of RBV‐grounded empirical articles was analyzed from which it was found that the RBV has received only modest support overall and that this support varies considerably with the independent variable and theoretical approach employed. It is therefore suggested that scholars avoid the tendency to test models reflecting early incarnations of the RBV and instead test those that incorporate its more contemporary theoretical extensions. Copyright © 2007 John Wiley & Sons, Ltd.     

The resource‐based theory: dissemination and main trends

Papers published on the resource‐based theory (RBT) have made clear its widespread application, heterogeneity, and usefulness as a strategic approach. This paper empirically analyzes the assumptions underlying the theory from an inductive perspective. The paper differs from previous works by identifying the main trends within the theory and by noting their diffusion among the leading management‐oriented journals. Three main trends are shown to coexist within RBT: the resource‐based view, the knowledge‐based view, and the relational view. Copyright © 2006 John Wiley & Sons, Ltd.     

Explaining interfirm cooperation and performance: toward a reconciliation of predictions from the resource‐based view and organizational economics

Interfirm cooperation and its performance implications are examined in the context of two widely cited theoretical approaches to organizations. Broadly speaking, the resource‐based view suggests that firms seek to capitalize on and increase their capabilities and endowments, whereas organizational economics asserts that firms focus on minimizing the costs of organizing. Although these perspectives agree on managers’ likely actions in many areas, their predictions diverge when interfirm cooperation is considered. We take a step toward reconciling these differences by positing that firms place resource‐based concerns in front of considerations from organizational economics when deciding whether or not to engage in interfirm cooperation. We examined this prediction using data from 94 publicly held restaurant chains. The results support our integrated view, but also suggest that giving primacy to resource concerns detracts from the performance of some firms. We derive several implications of these findings in an effort to guide subsequent inquiry. Copyright © 1999 John Wiley & Sons, Ltd.     

Value,rareness, competitive advantage,and performance: a conceptual‐level empirical investigation of the resource‐based view of the firm

The resource‐based view of the firm (RBV) hypothesizes that the exploitation of valuable, rare resources and capabilities contributes to a firm's competitive advantage, which in turn contributes to its performance. Despite this notion, few empirical studies test these hypotheses at the conceptual level. In response to this gap, this study empirically examines the relationships between value, rareness, competitive advantage, and performance. The results suggest that value and rareness are related to competitive advantage, that competitive advantage is related to performance, and that competitive advantage mediates the rareness‐performance relationship. These findings have important academic and practitioner implications which are then discussed. Copyright © 2008 John Wiley & Sons, Ltd.     

Pricing process as a capability: a resource‐based perspective

Strategists following the resource‐based view argue that firms can generate rents through value creation. To create value, firms develop and use resources and capabilities that other firms cannot imitate, trade for, or substitute other assets for. Even a firm that has created value, however, may not capture the potential rents associated with that value. To capture rents, a firm must set the right prices for what it sells. Most views of pricing assume that a firm can readily set appropriate prices. In contrast, we argue that pricing is a capability. To develop the ability to set the right prices, a firm must invest in resources and routines. We base our argument on a study of the pricing process of a large Midwestern manufacturing firm. We show that pricing resources, routines, and skills may help or inhibit a firm in setting the right price—and hence in appropriating value created. Our view of pricing as a capability contributes to the resource‐based view because it suggests that strategists should consider the portfolio of value creation and value appropriation capabilities a firm uses to create competitive advantage. Our view also contributes to economics because it suggests that strategic decisions about pricing capabilities have important implications for a fundamental economic action, determining prices. Managers in firms without effective pricing processes may be unable to set prices that reflect the wishes of its customers, so the customers may misuse their resources. As a result, resources may be used ineffectively. Our view of pricing as a capability therefore takes the resource‐based‐view straight to the heart of what is perhaps the central economic question: the best use of resources. Copyright © 2003 John Wiley & Sons, Ltd.     

Capabilities,business processes,and competitive advantage: choosing the dependent variable in empirical tests of the resource‐based view

A growing body of empirical literature supports key assertions of the resource‐based view. However, most of this work examines the impact of firm‐specific resources on the overall performance of a firm. In this paper it is argued that, in some circumstances, adopting the effectiveness of business processes as a dependent variable may be more appropriate than adopting overall firm performance as a dependent variable. This idea is tested by examining the determinants of the effectiveness of the customer service business process in a sample of North American insurance companies. Results are consistent with resource‐based expectations, and they show that distinctive advantages observable at the process level are not necessarily reflected in firm level performance. The implications of these findings for research and practice are discussed along with a discussion of the relationship between resources and capabilities, on the one hand, and business processes, activities, and routines, on the other. Copyright © 2003 John Wiley & Sons, Ltd.     

Managing knowledge in foreign entry strategies: a resource‐based analysis

International strategies vary in their potential to exploit and augment a firm's resources, especially its knowledge base. Resource‐based analysis suggests clustering the diverse entry modes in terms of their exploitation and augmentation characteristics. We thus introduce a new categorization of entry modes based on their potential to augment the resources of an entrant. We then explore the antecedents of these modes, and advance testable propositions delimiting for which firms and in which circumstances each mode maximizes long‐term value creation. Finally, we outline how our resource‐based framework complements transaction‐cost‐based frameworks. Copyright © 2009 John Wiley & Sons, Ltd.     

Comparing the resource‐based and relational views: knowledge transfer and spillover in vertical alliances

We compare resource‐based and relational perspectives to examine competitive advantages within the context of vertical learning alliances. Previous research has shown that through such alliances suppliers acquire knowledge to forge new capabilities and attain performance improvements. We ask whether such improvements are exclusive to the learning partnership, or are available in other average partnerships of this supplier. We posit that the extent to which such performance improvements are partnership exclusive depends on whether the newly forged capabilities lie entirely within the supplier firm's boundaries, or at the learning dyad level. As such, we untie two forms of performance improvements arising from learning dyads. While the resource‐based view helps explain the performance gains learning suppliers deploy across average partners, the relational view reveals the additional performance edge that remains exclusive to the learning partnership. Based on empirical evidence from a survey of 253 suppliers to the equipment industry, we find that partnership exclusive performance (i.e., ‘relational performance’), the true source of learning dyads' competitive advantage, is a function of suppliers acquiring know‐how within the dyad, developing dyad‐specific assets and capabilities, and structuring buyer‐supplier relational governance mechanisms. We discuss implications for research and practice. Copyright © 2008 John Wiley & Sons, Ltd.     

Rethinking research methods for the resource‐based perspective: isolating sources of sustainable competitive advantage

An exploration of traditional perspectives and contemporary propositions regarding sustainable competitive advantage points to the conclusion that the locus of advantage is located specifically within organizational effects. The key issue emerges that research investigating sources of sustainable competitive advantage must be done not only on organizations but also in organizations. The fallout from this conclusion is, however, that the research methodologies traditionally used in strategy research will not unambiguously uncover these sources of sustainable advantage. Using organizational culture as an example of a possible source of sustainable advantage within a resource‐based paradigm, a four‐step research framework is suggested for isolating these organizational effects. Copyright © 1999 John Wiley & Sons, Ltd.     

Toward a contingent resource‐based theory: the impact of information asymmetry on the value of capabilities in veterinary medicine

The paper investigates the contingencies which define valuable resources in professional medical services. We identify activities with credence, experience, and search qualities in medical service industries in general, and in veterinary practices more specifically. We propose that different capabilities are needed to deliver different services and test whether the contingent combination of capabilities for particular services is linked to the performance of veterinary practices. For example, we expect that practice capabilities which help to retain clients are necessary for the successful delivery of services with experience qualities. We find evidence of performance benefits of client retention in a sample of 193 veterinary practices. We also find that in markets where competition from a new form of entrant is especially intense, an independent veterinarian’s credence activities combine with its experience and search activities to jointly improve practice profitability. Since the new entrants’ resources are mainly effective in the delivery of services with search qualities, the practice capabilities of the independent veterinarians that allow them to offer services with credence and experience qualities can be seen as a type of isolating mechanism. Copyright © 1999 John Wiley & Sons, Ltd.     

Communication and attention dynamics: An attention‐based view of strategic change

Research Summary : The attention‐based view (ABV) has highlighted the role of organizational attention in strategic decision making and adaptation. The tendency to view communication channels as “pipes and prisms” for information processing has, however, limited its ability to address strategic change. We propose a broader role for communication as a process by which actors can attend to and engage with organizational and environmental issues and initiatives and argue that such a view can significantly advance understanding of strategic change. On this basis, we offer suggestions for future research on communication practices, vocabularies, rhetorical tactics, and talk and text in shaping organizational attention in strategic change. We also maintain that this enhanced view of the ABV can help advance research on dynamic capabilities, strategy processes, strategy‐as‐practice, and behavioral strategy. Managerial Summary : To further enhance our capabilities to manage strategic change and renewal processes in organizations, we need a better understanding of how to manage organizational attention. In this article, we highlight the importance of understanding the role of communication and discuss the use of different communication practices, vocabularies, rhetorical tactics, and talk and text as possible levers that can be used to dynamically shape organizational attention. We call for further research to advance the understanding of how these levers can be used to influence the ways in which different sets of strategic issues, initiatives, and action alternatives are handled. We believe that such an enhanced view of organizational attention can enable the development of new, improved strategy practices to manage strategic change and renewal processes.     

A resource‐based perspective on human capital losses,HRM investments,and organizational performance

Reversing the focus on human capital accumulations in the resource‐based literature, the authors examine the issue of human capital losses and organizational performance. They theorize that human capital losses markedly diminish the inimitability of human capital stores initially, but that the negative effects are attenuated as human capital losses increase. They argue further that these effects are more dramatic when human resource management (HRM) investments are substantial. As predicted, Study 1 shows that the human capital losses (voluntary turnover rates)‐workforce performance relationship takes the form of an attenuated negative relationship when HRM investments are high. Study 2 shows stronger curvilinear effects of voluntary turnover rates on financial performance via workforce productivity under these conditions. Implications for resource‐based theory and strategic HRM are addressed.     

How symmetrical assumptions advance strategic management research

We develop the case for symmetrical assumptions in strategic management theory. Assumptional symmetry obtains when assumptions made about certain actors and their interactions in one of the application domains of a theory are also made about this set of actors and their interactions in other application domains of the theory. We argue that assumptional symmetry leads to theoretical advancement by promoting the development of theory with greater falsifiability and stronger ontological grounding. Thus, strategic management theory may be advanced by systematically searching for asymmetrical assumptions in existing theory in order to identify the instances where new and useful insights can be derived from adopting symmetrical assumptions. Copyright © 2013 John Wiley & Sons, Ltd.     

Firm performance,rent appropriation,and the strategic resource divestment capability

Dynamic capabilities manifest the organizational capacity to purposefully create or modify the firm's resource base. In this paper, we consider resource divestment an important firm‐level resource management capability that manifests a two‐step organizational change routine. Firms must first be motivated to engage in resource divestment, and then decide which resources should be ‘sold off.’ In exploring this firm‐level capability, we employ factor market theory to consider the ‘seller side’ of the market, and provide a useful framework for conceptualizing how firms generate competitive advantage through resource divestment. We test our model of the resource divestment capability with a dataset of professional baseball franchises during the period 1969–83. Copyright © 2007 John Wiley & Sons, Ltd.     

Managerial decision making and firm performance under a resource‐based paradigm

A framework is presented that connects managerial decision making to resource building and firm performance. The framework takes a behavioral view of decision making and distinguishes two distinct decision‐making processes. First there is the creative conceptualization of new resource configurations that are intended to deliver competitive advantage. Then there is the painstaking development of resources required to implement strategy. We argue that heterogeneity in the resources of rival firms arises from the interplay of these two processes: resource conceptualization and resource development. Heterogeneity spawns performance differences that can be explained ex ante from characteristics of managerial decision‐making processes. We illustrate the approach in a simulated decision‐making environment representing a highly competitive and dynamically complex industry. Results from repeated simulation experiments conducted with executive and MBA students show vast differences in performance among firms, even when they started with identical resource positions. In a departure from traditional resource‐based literature, we explain how these differences stem from path dependent accumulation of resources and spontaneous variety in the way rivals conceptualize resources. Copyright © 2010 John Wiley & Sons, Ltd.