Resource-Based Theory of the Firm

The central proposition of resource-based theory of the firm is that a resource leads to sustained competitive advantage over competitors. The resource-based theory of the firm explicates what a resource is and the basic characteristics that a resource has. Managers, consultants, and researchers of corporate reputation seek to demonstrate that corporate reputation improves corporate performance. The resource-based theory of the firm is[Page 706] frequently drawn on as an explanation for why a good reputation helps improve performance. This entry first provides an overview of the resource-based theory of the firm and discusses the resource properties of corporate reputation. It then describes how to test whether corporate reputation is indeed a resource for an organization.