Resource-Based View of the Firm

Conceptual Overview

The resource-based view (RBV) assumes that firms are administrative organizations involving collections of physical (human) and intangible assets or, synonymously, bundles of idiosyncratic resources and capabilities. The RBV has evolved from economic theory and explains the role of resources that are available to a firm in pursuit of a sustainable competitive advantage. Jay Barney formalized the RBV by drawing on the work of Birger Wernerfelt, who in 1984 introduced the notion of resource position barriers; these in turn are generally related to entry barriers in the “five forces” model of Michael Porter's positioning school, which focuses primarily on the company's external competitive environment without an explicit account of internal firm resources. The resource-based perspective, however, highlights the need for a fit between the external market context in which a firm operates and its internal capabilities.

Instead of focusing on the accumulation of resources necessary to implement the strategy dictated by conditions and constraints in the external environment, the resource-based view suggests that a firm's unique resources and capabilities provide the basis for a strategy. The strategy chosen provides the basis for leveraging the firm's core competencies relative to opportunities in the external environment. Accordingly, shortand long-term economic rents and sustainable competitive advantage stem from the firms' unique resource positions, which produce superior products of superior performance.

The core rationale of the RBV, according to Barney, encompasses the identification of the firm's potential key resources, the evaluation of the extent to which these resources fulfill the criteria of being valuable, rare, imperfectly imitable, and nonsubstitutable (the so-called VRIN attributes), and the maintenance of those resources that satisfy these evaluations. This conceptualization emphasizes the role of costly-tocopy attributes of the firm as sources of economic rents and thus as the central drivers of performance and competitive advantage. Costly-to-copy resources are those resources that are consistent with the aforementioned set of evaluation criteria.