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Resource Based View of the Firm: The Nature of Resources Required for
Competitive Advantage

Article · January 2012

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 International
Journal of
Management
& Organizational
Studies
VOLUME 2, ISSUE 1 ISSN: 2305-2600

Resource Based View of the Firm: The Nature

of Resources Required for Competitive
Advantage
Shahnawaz Saqib and Sajjad Rashid
______________________________________________________________________________

Author(s) Biography ABSTRACT: In the field of management during the

last three decades the concept of competitive advantage
Shahnawaz Saqib is M S Scholar at Department of has remained the focal point of the firms. Firms always
Business Administration, Government College remained inquisitive to attain and sustain the
University Faisalabad, Pakistan. competitive advantage. The resource based view (RBV)
Email: shahnawaz_saqib@yahoo.com has made a great contribution towards attaining and
sustaining the competitive advantage. Researchers agree
Sajjad Rashid is MS Scholar at Department of Business that the firms having rare, valuable, inimitable, and
Administration, Government College University non-substitutable resources always triumph the
Faisalabad, Pakistan. competitive advantage. RBV has its due implications in
the fields of marketing, HRM, corporate governance,
international business, and entrepreneurship.

Keywords: Effective Strategic Planning, Challenges,

Associated Benefits, Strategic Business Units (SBU’s).
_____________________________________________

© Society of Management and Human Resource Development Page 92

 SAQIB & RASHID

S
trategic Management is a field of study which Valuable: The asset has strategic importance if it:
helps to devise set of actions/pattern of actions or
decisions which a firm initiates to achieve and Rare – The resources which are unique and not own by
sustain the competitive advantages. This competitive others help to draft competitive strategy.
advantage is the key for outperforming the other firms.
This is a challenge for the firms to keep the competitive Inimitable: Resources which give sustained competitive
advantage for the long term. Firms use two perspectives advantage to the firms and do not attain by the other
to attain and sustain the competitive advantages. These firms.
two perspectives/dimensions are resource based view
(RBV) and market based view. These views are the two Non-substitutable – There must be no strategically
sides of a coin. equivalent valuable resources that are themselves neither
rare nor inimitable.
The resource-based view (RBV) argues that firms
possess resources, which are major cause of generating Research Background
the sustained competitive advantage resulting the greater
performance of the firm. One set of these resources The resource based view (RBV) of the firm has its roots
brings the firms to attain competitive advantage in the organizational economics literature, where
(valuable & rare resources), and on the other hand 2 nd theories of profit and competition associated with the
set of resources enables the firms to sustain with the writings of Ricardo (1817), Schumpeter (1934) and
competitive advantage for long period by protecting Penrose (1959) focus on the internal resources of the
against resource imitation, its transfer and substitution. firm as the major determinant of competitive success.
Simply we can say that Strategic Management provides Central to the understanding of the resource based view
answers that how a unique and valuable competitive of the firm are definitions of resources, competitive
advantage can be attained as well as this competitive advantage, and sustained competitive advantage (Patrick
advantage should be hard for competitors to copy or M Write, Gray C McMahan & AbaGail McWilliams
substitute. The term “Resources” is used to describe the 1993).
firm’s tangible and intangible assets as the resource
based view extends not only assets of the firm but its The real development was on the resource based view
capabilities also. was made during 1980s. The scholars working in the
field of strategic management found dissatisfaction with
As per Constance, E.Helfat and Margaret A.Peteraf the Porter Five Forces Model. As porter model
(2003), “A resource refers to an asset or input to suggested that the competitive advantage lies in the
production (Tangible & Intangible) that an organization external forces Lippmann & Rumlet (1982), Wernerfeldt
owns, controls, or has access to on a semi-permanent (1984). Barney (1986) also contributed towards the
basis. An organization Capabilities refers to the ability development of resource based view by giving the
of an organization to perform a coordinated set of tasks, concept of strategic factor markets. Later on during 1991
utilizing organizational resources, for the purpose of & 2001 Barney also extended his work on the RBV.
achieving a particular end result.
As per Bob De Wit the resources of any firm can be Literature Review
categorize as under:
Birger Wernerfeldt (1984) mentioned that only general
Resources statement regarding growth strategy can be given as that
Intangible in some senses it involves striking a balance between the
Tangible
Relational Competences exploitation of existing resources and the development
Relationships Knowledge of new ones.
Land Jay Barney (1991) found that Firms cannot expect to
(contracts) (Patents)
Reputations Capabilities “Purchase” sustained competitive advantages on open
Building markets. Rather such advantage must be found in the
(Brands) ( Program)
Materials Attitude. rare, imperfectly imitable, and non substitutable
Money - - resources already controlled by a firm. These resources
are the mix of tangible and intangible resources
including a firms Management skills, its organizational
Jay Barney (1991) has given a criterion for resources by
processes and routines and the information and
pointing out the strategic importance of resources to
knowledge it controls.
attain the competitive advantage, which is as under

© Society of Management and Human Resource Development Page 93

RESOURCE BASED VIEW OF THE FIRM: THE NATURE OF RESOURCES REQUIRED FOR COMPETITIVE ADVANTAGE

Margaret A.Peteraf (1993) established a criteria for Unique HRM System will lead towards Strategic
Competitive advantage and gave its four dimensions, out Competitive advantage.
of four two dimensions relates to the resources. i.e.
Superior Resources & Imperfect Resource mobility. Entrepreneurship: Entrepreneurship is an art to gain
Danny Miller & Jamal Shamsie (1996) found that competitive advantage by utilizing the knowledge and
Property based resources may lose their value quickly capabilities. This utilization of knowledge and expertise
when an industry changes. Static resources that are based resources depends upon the assessment of
usually used to control, require legal protection which is opportunities and generating the rent. This
beyond the control of the firm. Once this protection entrepreneurship helps to attain the first mover
loses or the environment changes the firm forgoes its advantage. The nature of resources and capabilities
competitive advantage. But this case is not same as with provided a base to acquire the First Mover Advantage
the adaptable knowledge-based resources (Barney 1986 through entrepreneurship. Thus rare, valuable,
Geroski & Vlassopou-Louse 1990) inimitable, and Non-Substitutable resources can affect
Augustine A. Lado & Michael J Zhang (1998) found nature of entrepreneurship to enter into the markets.
that Expert Systems (ESs) are the firm’s capabilities to
integrate multiple knowledge multiple knowledge bases Marketing: Creation of Customer value leads to
and this system can be used to attain the competitive generate revenues on the basis of assessment of Markets
advantages by developing the Firm Capability. and Capabilities. Field of Market Research can provide
Jay Barney, Mike Wright and David J. Ketchen, (2001) the answers of the questions like which market should
again stated that resource based view holds the same be captured by keeping in view the attributes of
importance after elapse of 10 years. They quoted Sir resources on the basis of customer needs. Further as the
Isaac Newton quote “If I have seen far, it is because I study of customer needs have a direct link with the
have stood on the shoulders of giants”. Clear fact that change in the type of resources required for attaining
resource based view is the base to achieve and sustain and sustaining the competitive advantage.
the competitive advantage.
Benjamin B. Dunford, Scott A. Snell & Patrick M. International Business: The resource based view
Wright (2001) found that the concept of Resource Based (RBV) can help the organization to do the business
View (RBV) has influenced the field of Strategic across the borders. Under the globalization the large
Management for attaining the Sustainable Competitive organizations can focus on the markets where they can
Advantage. reach by analyzing the strength of their resources in
order to attain the competitive advantage. RBV further
Contribution of Resource Based View into the can help to operate across the borders by utilizing the
other Fields of Study different strategies like Strategic Alliances.

Field of Corporate Governance: The resource Conclusion

based view has a linked with the implementation of
Corporate Governance. If any firms failed to apply the From the above discussion it has been revealed that the
Corporate Governance in its essence then it will be Resource Based View explores the internal strengths of
difficult for it to maintain and sustain the competitive the firms. This internal strength is on the basis of
advantage which is the core concept of RBV even in the Resources which have the characteristics of Rare,
presence of necessary resources. All the conditions of Valuable, Inimitable, and Non substitutable. These
attributes related to the RBV are present like, rare, attributes of resources help to attain and sustain the
valuable, inimitable and non substitutable, but without competitive advantage. Only the resources having these
the proper implementation of Corporate Governance the characteristics cannot provide Competitive Advantage
competitive advantage will not be attained neither it will but capabilities to handle these resources are necessary
be sustained. to create competitive advantage.
RBV has made great contribution to the field of
Human Resource Management: The Human Marketing, HRM, Corporate Governance, International
Resource Practice and HRM Systems is the base of Business, and Entrepreneurship.
Strategic Competitive Advantage (SCA). HR systems There is still need to explore the Resource Based View
are developed by a time and unique to that particular in depth. Researcher should try to find out the
firm which is difficult to imitate. HRM Practices dimensions of RBV leading towards the area of study of
concerned with individuals are imitable up to some Ethics, Management Information Systems, Human
extent, but the HR System is not easy to imitate. So the Resource Management, and Modern Scenario of E-
Business.

International Journal of Management and Organizational Studies Page 94

 SAQIB & RASHID

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