reaction paper on resource based view of strategy

Resource based view perspective of strategic management sees strategy as an object that has price and could be bought and sold by the firms. This approach is especially explicit in Barney’s (1986) “Strategic Factor Markets” article where he draws a neoclassic perfect market picture and trades strategic resources instead of goods/services.  Thus, RBV also assumes a firm level rationality since firms estimate these strategic resources’ return potentials and decide a price for them, then make buy/not buy decisions. Plus, they are also able to manage uncertainty. However, in this uncertain environment it is possible that they could overestimate, underestimate or accurately estimate the value of a strategic resource and when the expected return of a strategy is lower than actual return this is explained by good fortune or vice versa (Barney, 1986). In addition, what makes a resource a strategic resource that creates competitive advantage is clearly prescribed; Valuable, Rare, Imperfectly Imitable and Organized (Ambrossini, 2007). Also, the core question of mainstream strategic management that is “sustainable competitive advantage” for a firm is prescribed as having VRIO resources, which brings the tautology criticism that is broadly criticized in Priem and Butler’s (2001a) article.

Besides suffering from being tautological, in my opinion, the main problem in RBV is that; although it is very prescriptive, it is not clear in measurement criterions of resources. The answer to rarity or imperfect imitability may be quite simple but it also suffers from assuming only a snapshot of time since we would not know if a resource that is rare or imperfectly imitable today will also have same characteristics in the future. Also, since RI is not sufficient for a resource to provide sustainable competitive advantage, we should also be able to measure its value and define it as somehow valuable; however, both how to measure and to what extent a resource should have a value in order to be defined as valuable is too abstract. In fact Barney (1986) argues that even management should not know that the firm has a VRIO resource because if they know it could also be known by the competitors and could be imitated. Then, how a firm could protect its unknown VRIO resource without knowing what it is? Or if a firm should be Organised to exploit a VRI resource in order to make it a source of sustainable competitive advantage, how this organizing could be done without knowing what resource to exploit?

These questions, together with “good chance, winner’s curse, good fortune” discourse that Barney (1986) uses lead me to think that although RBV tries to build its assumptions on neoclassical economics, it is rather evolutionary indeed. More clearly, whatever strategy a firm thinks that it obtains, its sustainable competitive advantage depends on a VRIO resource that the firm has without knowledge and that is unexpectedly and by chance acquired at a lower price and thus have over normal returns. Plus, if we define sustainable competitive advantage to be continuously selected by environment, we could also escape from tautology. Finally, we should also accept that a VRIO resource will not be always a strategic resource for a firm to survive but there should be actors that form, (re)organize and evolve that resource while the context is also changing and neither actors nor context exist in RBV.

(This post has something to do with that one)

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