According to the resource-based view, a firm’s competitive advantage often stems from its
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RBV – What is a resource-based view of strategy?The resource-based view (RBV) is a strategy model that considers an organization's resources as key to sustainable competitive advantage.Home/Strategy/RBV – What is a resource-based view of strategy? Show
Idea in shortResource-based view argues that resources, both tangible and intangible, must be heterogenous, immobile and have VRIO properties to become VRIO resources. VRIO resources result in sustained competitive advantage. What is a resource-based view?RBV is an approach to achieving sustained competitive advantage. The thinking around this approach emerged in the 1980s and 1990s, following publications by Birger Wernerfelt[1], Prahalad and Hamel[2], Barney, J[3] and others. The supporters of this view argue that organizations should look inside the company to find the sources of competitive advantage, instead of looking at the external competitive environment. According to RBV proponents, it is easier and more feasible to exploit external opportunities by deploying existing resources in a new way. This approach is in contrast to acquiring new skills or developing new capabilities for each different opportunity. According to the RBV model, resources play a major role in organizations achieving higher performance. The two types of resources are:
Tangible assetsTangible assets are physical things. Land, buildings, machinery, equipment and capital – all these assets are tangible. Organizations can easily purchase the physical resources in the market. So, they confer little advantage to the companies in the long run. This is because rivals can also acquire identical assets, which delivers competitive parity. Intangible assetsIntangible assets are assets that have no physical presence. However, a company can own these assets. Examples of intangible assets are brand reputation, trademarks, intellectual property, etc. Unlike tangible assets, companies take a long time to build intangible assets. Hence, a company’s competitors cannot easily buy these assets from the market. Usually, intangible assets usually within a company. As a result, intangible assets play a significant role in a company’s competitiveness. Often, intangible assets are the main source of a company’s sustained competitive advantage. The two critical assumptions of RBV are that resources must also be heterogeneous and immobile. HeterogeneousThe first assumption is that skills, capabilities and other resources that organizations possess differ from one company to another. If organizations have similar resource profiles, they cannot employ different strategies to out-compete each other. What one company would do, the other could simply follow. As a result, companies achieve no competitive advantage. This is the scenario of perfect competition. Yet, real world markets are far from perfectly competitive. Some companies that are exposed to the same external and competitive forces can easily replicate different strategies and outperform each other. Therefore, RBV assumes that companies achieve competitive advantage by using their different bundles of resources.
ImmobileThe second assumption of RBV is that resources are not mobile and do not move from company to company, at least in short-run. Due to this immobility, companies cannot replicate rivals’ resources and implement the same strategies. Intangible resources, such as brand equity, processes, knowledge or intellectual property are usually immobile. Importance of Resource-based ViewThe resource-based view strategy aims to gain a sustainable competitive advantage. An organization can sustain its competitive advantage only through an extensive resource analysis, resource allocation, and cross-functional resource usage. Likewise, only when a company unleashes its workforce’s true potential can it innovate better and stand out in the industry. An RBV strategy helps organizations achieve:
Visibility for efficient resource allocationThe comprehensive view of all the resource pools facilitates managers to gain insight into resource skills and competencies. This, in turn, allows managers to allocate resources as per the scope and market demand of its products and services. Real-time information helps them make data-driven decisions, leverage talent to the maximum potential, and maximize profitability. Maintains the competitive advantageThe rise in market volatility propels extensive ad hoc customer demands. Responsiveness to changing marketplace conditions often becomes the deciding factor for a company’s growth and success. In these situations, managers can utilize both their tangible and intangible assets to execute critical strategic responses. An RBV of strategy enables demand fulfillment to sustain a company’s competitive advantage. Cross-functional resource usageIn a matrix organization, the resource-based strategy model facilitates enterprise-wide visibility of the workforce and its expertise. It helps in allocating appropriate resources from different departments and form a cross-functional team to execute the project. It reduces hiring cycle costs and also helps to leverage the diversified workforce. Besides, employees are also given multi-faceted projects to work on enhancing their professional portfolio. Critiques of RBVSupporters of RBV posit that competitive advantage is best achieved by utilising present internal resources. However, this has drawn many critics within leadership and management. Other theories and frameworks, such as the industrial organisation view (I/O), place more emphasis on strategic planning, regulatory policy and the activity of market competition. The authors of RBV frameworks tell managers that they should find and develop high potential resources, using the VRIO framework. However, they do not suggest how this should be done. In reality, there is little that managers can do to improve the available resources. This framework also neglects the leadership and managerial capability to improve the processes and create systems leading to higher-value resources. In the long run, these resources have a more pronounced impact on the organisational performance. The levels of organisational learning and adaptiveness are critical success factors in the long run. The RBV is an important model only in the short run. Furthermore, in unpredictable markets, disruptive innovations can have an almost instantaneous and drastic effect on the value of resources. This can render previous activities to try and generate a sustainable advantage totally null. Thus, RBV is applicable only in stable competitive environments. SummaryCompetition is a fundamental aspect of business and innovation. Resources are the force that steers you through this competition. Therefore, utilizing the resources to their maximum potential is the key to maintain and sustain the competitive advantage. A resource-based strategy ensures optimal performance of resources and organization both! RBV can be useful for developing competitive advantage, particularly in the short-term. But, you should use this model in partnership with other frameworks and theories when performing long-term strategic planning. APAMLAHarvardVancouverChicagoIEEE Think Insights (October 25, 2022) RBV – What is a resource-based view of strategy?. Retrieved from https://thinkinsights.net/strategy/rbv-strategy/. "RBV – What is a resource-based view of strategy?." Think Insights - October 25, 2022, https://thinkinsights.net/strategy/rbv-strategy/ Think Insights July 18, 2017 RBV – What is a resource-based view of strategy?., viewed October 25, 2022, Think Insights - RBV – What is a resource-based view of strategy?. [Internet]. [Accessed October 25, 2022]. Available from: https://thinkinsights.net/strategy/rbv-strategy/ "RBV – What is a resource-based view of strategy?." Think Insights - Accessed October 25, 2022. https://thinkinsights.net/strategy/rbv-strategy/ "RBV – What is a resource-based view of strategy?." Think Insights [Online]. Available: https://thinkinsights.net/strategy/rbv-strategy/. [Accessed: October 25, 2022] Was this article helpful? × We appreciate your feedback! We will use your feedback to improve the quality and diversity of our content. The more feedback you provide,
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 I am Mithun Sridharan, Founder & Author of Think Insights and INTRVU. I am a Global Industry Advisor at a leading cloud technology company, where I advise CxOs & Executives at global corporations on their strategic initiatives. Previously, I served on leadership and executive roles at global Management Consulting & technology firms, such as KPMG, Sapient Consulting, Oracle, and EADS. My insights on this website are based on my 1st-hand client engagement experiences across Capital Markets, Automotive and Hi-tech verticals. Please feel free connect with me on LinkedIn. Related PostsWhat is resourceResource-based theory of competitive advantage argues that innovations achieve sustainable competitive advantage by accumulating and using resources to serve consumer interests in ways that are hard to substitute for or imitate. It states that successful innovations are determined not just by the innovation.
What is the resourceThe Resource Based View (RBV) of the firm starts from the concept that a firm's performance is determined by the resources it has at its disposal. The way these resources are used and configured enable the firm to perform and can provide a distinct competitive advantage.
What does the resourceIn the RBV Model, the focus is on the firm and the development of appropriate resources. It is the acquisition and preservation of assets and capabilities that is the primary function of the firm. Competitive advantage is based on achievement and deployment of unique resources and capabilities.
What is resourceThe resource-based view (RBV) is a managerial framework used to determine the strategic resources a firm can exploit to achieve sustainable competitive advantage. Barney's 1991 article "Firm Resources and Sustained Competitive Advantage" is widely cited as a pivotal work in the emergence of the resource-based view.
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