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Jay B Barney.

Competitive advantage

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Jay Barney @MIP: Gaining and sustaining competitive advantage

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Resource-based theories of competitive advantage: A ten-year retrospective on the resource-based view. Received 3 April ; received in revised form 19 June ; accepted 20 September Abstract The resource-based view can be positioned relative to at least three theoretical traditions: SCP- based theories of industry determinants of firm performance, neo-classical microeconomics, and evolutionary economics.

In the article, only the first of these ways of positioning the resource- based view is explored.

This article briefly discusses some of the implications of positioning the resource-based view relative to these other two literatures; it also discusses some of the empirical implications of each of these different resource-based theories. All rights reserved. Introduction Positioning an argument relative to the received literature is, perhaps, the most difficult part of writing a theoretical essay.

All this is made more complicated by the fact that any one theoretical argument can be positioned in alternative ways and that each of these alternatives can generate important, but different, insights. E-mail address: barney.

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Positioning issues were important when my Journal of Management paper was being written. Of these three, I chose the first. However, the article could have just as well been written by adopting one of these other two positioning alternatives. And each of the resulting papers would have generated different insights compared to the article that was actually published. In an important sense, these three different ways of positioning the resource-based view generate what could almost be described as three different resource-based theories of competitive advantage Schulze, Of course, these theories are not entirely different.

For example, they all share a common set of assumptions, including the assumption that resources and capabilities may be heter- ogeneously distributed across firms and the assumption that these differences may be long lasting Barney, These theories also share a common emphasis on understanding why some firms can consistently outperform others. These commonalities identify these theories as examples of the broader resource-based view. However, differences among these theories are also important. While they share critical assumptions, they emphasize very different implications of those assumptions.

And while they all focus on explaining sustained performance differences across firms, they adopt different definitions of performance. Given these differences, it is not surprising that these three resource-based theories have generated three different empirical literatures within the broader resource-based view. The purpose of this paper is to explore the implications of positioning the resource-based view relative to SCP-based theories of competitive advantage, relative to neo-classical microeconomics, and relative to evolutionary economics. The paper begins by briefly describing what the paper might have looked like if it had adopted these latter two positioning alternatives, and then examines how these three resource-based theories have evolved in the literature since The resource-based view and neo-classical microeconomics Neo-classical microeconomics, or neo-classical price theory as it is sometimes called, focuses on how market forces determine the quantity, quality, and price of goods and services sold in a market.

This theory adopts many of the same assumptions as the broader resource-based view—that economic actors be they firms or people are boundedly rational utility maximizers, that markets can vary in their competitiveness, that information can vary in how it is diffused across a market, and so forth.

Indeed, there is only one important difference between the assumptions of neo-classical microeconomics and the resource-based view. This means that when demand for a particular resource or capability increases, the price of acquiring this resource will also increase, and the total amount of this resource made available to the market will also increase.


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For example, if there is a shortage of engineering talent in a particular market, the price of this talent in this labor market will increase, and the number of people who make their engineering talent available in this market— either by training to become engineers or by moving from another market to this market—will increase. The resource-based view acknowledges that many factors of production may, in fact, be elastic in supply. However, this view also argues that because some resources and capabil- ities can only be developed over long periods of time i.

Inflexion Point: Resource-Based Theory: Creating and Sustaining Competitive Advantage ()

Supply inelasticity implies that firms that possess these kinds of resources and capabilities may be able to generate above normal profits, and these profits not lead to increased supply of these resources and capabilities in the short term, and perhaps not even in the long run.

Supply inelasticity thus can become a source of sustained competitive advantage Peteraf, Of course, some neo-classical microeconomists have examined the profit implications of factors of production that are inelastic in supply. The best known of this work was done by Ricardo nearly years ago Ricardo, Ricardo demonstrates how these kinds of factors of production can generate profits for firms by analyzing the profitability of farms when the supply of fertile land is fixed. However, Ricardo implicitly assumes that relatively few factors of production have the attributes that make them fixed in supply.

In this sense, the resource-based view is simply an extension of Ricardian economics but with the assertion that many more factors of production— besides land—are inelastic in supply Peteraf, Adopting neo-classical microeconomics as the theory against which to position the arguments developed in the article would have helped address many of the controver- sies that have emerged around the resource-based view since If the resource-based view is seen as a logical extension of neo-classical microeconomics, this debate becomes moot, since it is clear that the only acceptable theories in neo-classical microeconomics are equilibrium theories.

Indeed, the advantages of positioning the resource-based view relative to neo-classical microeconomics are so significant, I actually wrote a paper that did so Barney, a. Published in in Management Science, this paper develops the core resource-based arguments, but does so not relative to SCP-based explanations of firm performance but relative to neo-classical microeconomics. Thus, for firms to obtain economic rents, they must acquire the resources and capabilities needed to conceive of and implement strategies in imperfectly competitive strategic factor markets—the kinds of markets studied by Ricardo.

Resource-Based Theory

The paper concludes by describing the attributes of such markets. However, by the late s, it became clear to me that positioning the resource-based view relative to neo-classical microeconomics did not effectively address issues that were critical to many strategic management scholars. In so doing, I knew that I would not be able to generate the same insights that I felt I had generated in the Management Science article. On the other hand, I felt that some new insights might be forthcoming by adopting this alternative positioning.

That I chose not to meant that some of the insights that I felt I had developed in more evolutionary versions of this argument would be lost, so that other insights that might be more relevant to main stream strategy scholars could be highlighted. Evolutionary economics has a long history in the field of economics. However, the most influential work in this area is undoubtedly Nelson and Winter In the Nelson and Winter framework, firms vary in the routines they have developed to conduct their business.

The least efficient and effective routines are either abandoned or changed or a firm is likely to not be able to survive in the long run. The most efficient and effective routines generate competitive advantages for firms. Unlike neo-classical microeconomics, this evolutionary theory does not apply equilibrium analysis. Instead, through the use of simulations and other methods, Nelson and Winter are able to demonstrate the conditions under which some routines will provide more sustainable competitive advantages than other routines.

In this sense, the performance that a routine generates ensures its survival, and thus a routine within a firm is also the mechanism through which retention occurs. There are obviously numerous analogies between the resource-based view and this evolutionary theory.

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Routines are an example of firm resources and capabilities. Firm heterogeneity—as a function of history or initial firm endow- ments—is an important part of both theories, as is competition and the role of superior performance and sustainable competitive advantage. While the sustainability of competitive advantage in evolutionary theory is not defined with respect to equilibrium conditions, it is clear that this notion of sustainability is much closer to the concept of sustained competitive advantage, as it is used in the resource-based view, than the equilibrium notions of zero economic profit used in non-Ricardian neo-classical microeconomics.

Given the close links between the resource-based view and evolutionary economics, why did I not choose to pursue this positioning for the article? As was the case with positioning the resource-based view relative to neo-classical microeconomics, I believed that this positioning would not address many of the central issues in the field of strategic management in the late s. Indeed, during this time period, the most influential version of evolutionary thinking was population ecology theory.

None of these assertions were consis- tent with the research interests or objectives of strategic management scholars. Of course, since the mids, population ecology theorizing has become much more sophisticated and distinctions between evolutionary economics and population ecology theories have broken down.

speccorlagis.tk There are currently several efforts under way to more completely develop an evolutionary version of the resource-based view e. Implications of the three resource-based theories While the resource-based view is positioned relative to only SCP-based models of competitive advantage in the article, all three of these resource-based theories have been developed in the literature.