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Chapter 9: The resource based view of the firm: Véronique Ambrosini

Key points

• The main principle behind the resource based view of the firm is the link between the internal characteristics of the firm and its performance; ergo the relationship of a firm’s resources and its competitive advantage.
• To facilitate in developing a competitive advantage the resources must be valuable, rare, inimitable and non-substitutable (VRIN).
• A firm is viewed as a bundle of tangible or intangible resources, its ability to use them then determines its performance.
• Causal ambiguity acts as a limit to other firms’ ability to imitate resources, because they do not know how a firm achieves its advantage so they do not know what to copy. In some instances the firm itself will not know the source of its own competitive advantage.
• Path dependency also limits a firm’s ability to copy others resources, because the resource may have been created over many decades and following many circumstantially bound decisions, resulting in a unique history for the firm, which competitors may be unable to imitate.
• To compete and develop a competitive advantage a firm must manage its resources, protecting and improving those it holds, and creating new resources.
• The resource based view is a competency based perspective that asks managers to look at their firm for competitive advantage.
• Intangible resources are more likely to be VRIN resources than tangible resources as they are more difficult to copy or identify. This is the case with the culture of a firm which will be unique and therefore may lead to developing an advantage.
• Diversification is mainly used in this instance, especially if based on a firm’s resources because by moving into new markets it can then use resources that are not currently being fully exploited.
• Dynamic capabilities focus on the renewal of an organisation’s current set of resources in line with a changing environment. If the resources are not renewed they may become redundant. Dynamic capabilities refer to the ability of the firm to alter its resources by creating, integrating, recombining and releasing resources; i.e. creating future resources.