The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation

Hofer Charles W. Schendel Dan , Strategy Formulation: Analytic Concepts (St. Paul, MN: West, 1978), p. 12.

Buzzell Robert D. Gale Bradley T. , The PIMS Principles: Linking Strategy to Performance (New York, NY: Free Press, 1987).

See, for example, Mintzberg Henry , “Of Strategies, Deliberate and Emergent,” Strategic Management Journal, 6 (1985): 257–272; Pettigrew Andrew M. , “Strategy Formulation as a Political Process,” International Studies of Management and Organization, 7 (1977): 78–87; Quinn J.B. , Strategies for Change: Logical Incrementalism (Homewood, IL: Irwin, 1980).

Ricardo David , Principles of Political Economy and Taxation (London: G. Bell, 1891); Schumpeter Joseph A. , The Theory of Economic Development (Cambridge, MA: Harvard University Press, 1934); Penrose Edith , The Theory of the Growth of the Firm (New York, NY: John Wiley and Sons, 1959).

Teece David J. , “Economies of Scope and the Scope of the Enterprise,” Journal of Economic Behavior and Organization, 1 (1980): 223–247; Chatterjee S. Wernerfelt B. , “The Link between Resources and Types of Diversification: Theory and Evidence,” Strategic Management Journal, 12 (1991): 33–48.

Rumelt R.P. , “Towards a Strategic Theory of the Firm,” in Lamb R.B. , ed., Competitive Strategic Management (Englewood Cliffs, NJ: Prentice Hall, 1984); Lippman S.A. Rumelt R.P. , “Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition,” Bell Journal of Economics, 23 (1982): 418–438; Reed Richard DeFillippi R.J. , “Causal Ambiguity, Barriers to Imitation, and Sustainable Competitive Advantage,” Academy of Management Review, 15 (January 1990): 88–102.

Teece David J. , “Capturing Value from Technological Innovation: Integration, Strategic Partnering, and Licensing Decisions,” Interfaces, 18/3 (1988): 46–61.

Barney Jay B. , “Strategic Factor Markets: Expectations, Luck and Business Strategy,” Management Science, 32/10 (October 1986): 1231–1241.

Dierickx Ingemar Cool Karel , “Asset Stock Accumulation and the Sustainability of Competitive Advantage,” Management Science, 35/12 (December 1989): 1504–1513.

Schmalensee R. , “Industrial Economics: An Overview,” Economic Journal, 98 (1988): 643–681; Buzzell R.D. Gale B.T. , The PIMS Principles (New York, NY: Free Press, 1987).

Because of the ambiguity associated with accounting definitions of profit, the academic literature increasingly uses the term “rent” to refer to “economic profit.” “Rent” is the surplus of revenue over the “real” or “opportunity” cost of the resources used in generating that revenue. The “real” or “opportunity” cost of a resource is the revenue it can generate when put to an alternative use in the firm or the price which it can be sold for.

Baumol W.J. Panzer J.C. Willig R.D. , Contestable Markets and the Theory of Industrial Structure (New York, NY: Harcourt Brace Jovanovitch, 1982).

In economist's jargon, such jointly owned resources are “public goods”—their benefits can be extended to additional firms at negligible marginal cost.

Itami Hiroyuki [Mobilizing Invisible Assets (Cambridge, MA: Harvard University Press, 1986)] refers to these as “invisible assets.”

Based upon Hofer and Schendel, op. cit., pp. 145–148.

See, for example, Cockburn Iain Griliches Zvi , “Industry Effects and the Appropriability Measures in the Stock Market's Valuation of R&D and Patents,” American Economic Review, 78 (1988): 419–423.

General management, financial management, marketing and selling, market research, product R&D, engineering, production, distribution, legal affairs, and personnel. See Snow Charles C. Hrebiniak Lawrence G. , “Strategy, Distinctive Competence, and Organizational Performance,” Administrative Science Quarterly, 25 (1980): 317–336.

Prahalad C.K. Hamel Gary , “The Core Competence of the Corporation,” Harvard Business Review (May/June 1990), pp. 79–91.

Stevenson Howard H. , “Defining Corporate Strengths and Weaknesses,” Sloan Management Review (Spring 1976), pp. 51–68.

Pascale Richard T. , “Honda (A),” Harvard Business School, Case no. 9-384-049, 1983.

Lawrence Paul R. Dyer Davis , Renewing American Industry (New York, NY: Free Press, 1983), pp. 60–83.

“Du Pont's “Drug Hunter” Stalks His Next Big Trophy,” Business Week, November 27, 1989, pp. 174–182.

Caves Richard E. , “Economic Analysis and the Quest for Competitive Advantage,” American Economic Review, 74 (1984): 127–128.

Barney Jay B. , “Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?” Academy of Management Review, 11 (1986): 656–665.

Lippman Rumelt , op. cit.

This information problem is a consequence of the fact that resources work together in teams and their individual productivity is not observable. See A.A. Alchian and Demsetz H. , “Production, Information Costs, and Economic Organization,” American Economic Review, 62 (1972): 777–795.

Such asymmetric information gives rise to a “lemons” problem. See Akerlof G. , “The Market for Lemons: Qualitative Uncertainty and the Market Mechanism,” Quarterly Journal of Economics, 84 (1970): 488–500.

Barney , op. cit.

The definition of resource specificity in this article corresponds to the definition of “specific assets” by Caves Richard [“International Corporations: The Industrial Economics of Foreign Investment,” Economica, 38 (1971): 1–27]; it differs from that used by Williamson O.E. [The Economic Institutions of Capitalism (New York, NY: Free Press, 1985), pp. 52–56]. Williamson refers to assets which are specific to particular transactions rather than to particular firms.

“Catch a Falling Star,” The Economist, April 23, 1988, pp. 88–90.

Dierickx Cool , op. cit.

The key advantage of partnerships as an organizational form for such businesses is in averting conflict over control and rent allocation between employees and owners.

“Ad World Is Abuzz as Top Brass Leaves Lord Geller Agency,” Wall Street Journal, March 23, 1988, p. A1.

Ferguson Charles [“From the People Who Brought You Voodoo Economics,” Harvard Business Review (May/June 1988), pp. 55–63] has claimed that these start-ups involve the individual exploitation of technical knowledge which rightfully belongs to the former employers of these new entrepreneurs.

“The Decline of the Superstar,” Business Week, August 17, 1987, pp. 90–96.

“Faded Fad,” The Economist, September 30, 1989, p. 68.

Hamel Gary Doz Yves Prahalad C.K. , “Collaborate with Your Competitors—and Win,” Harvard Business Review (January/February 1989), pp. 133–139.

Stevenson (1985), op. cit.

Porter Michael E. , The Competitive Advantage of Nations (New York, NY: Free Press, 1990).

Itami , op. cit., p. 125.

Takahashi Arataroh , What I learned from Konosuke Matsushita (Tokyo: Jitsugyo no Nihonsha, 1980) [in Japanese]. Quoted by Itami, op. cit., p. 25.