BA 591 Longitudinal Strategy

Prof. Mitchell

Jim Emery

Summary of Barneys Firm Resources and Sustained Competitive Advantage

Core Idea / Focus
Resource-based view (RBV) is used to explain and explore sources of firm competitive
advantage. Specifically, Barney develops a framework identifying the factors that can
allow resource heterogeneity and immobility to create sustained competitive advantage1
(see Figure 1 below)
Figure 1
Firm Resource
Heterogeneity
Firm Resource
Immobility

Value
Rareness
Imperfect Imitability
- History Dependent
- Causal Ambiguity
- Social Complexity
Substitutability

Sustained
Competitive
Advantage

Strengths
Provides an overview of where this work fits in relative to other strategy models (e.g.,
SWOT analysis) and addresses a few key concepts and assumptions to compare and
contrast RBV with traditional strategy theory
Two implicit assumptions of traditional theory include: 1) homogeneity among firms
(in terms of resources controlled and strategies pursued), and 2) high mobility of
resources (presumably enabling high imitability of strategies)
The resource-based view relaxes these assumptions
Does a good job defining the terminology and key concepts identified in his framework
(i.e., all the terms in Figure 1 are defined and, where appropriate, linkages to existing
literature are identified)
Identifies opportunities for future research to test the causal relationships identified in his
framework; Barney specifically develops 3 examples of how the framework might be
applied to firm resources: 1) strategic planning (formal and informal), 2) information
processing systems (particularly those systems deeply embedded in the firms formal and
informal decision-making processes), and 3) positive reputation.
Barney concludes by establishing some linkages between RBV (and his framework) and
other concerns and theories of economics and strategy (e.g., social welfare concerns,
organization theory and behavior); he also contrasts his framework with the population
ecology perspective (i.e., managers do matter in his framework).
Open Questions
Barneys paper is interesting and raises a number of practical questions, particularly with
respect to the issue of imperfect imitability. In the paper, Barney asserts that in order for
a firms resource to hold the potential of sustained competitive advantage, it must have all
four factors identified in the middle box of Figure 1 (pp. 105). Barney describes three
1

Defined as a firm implementing a value creating strategy that is not simultaneously being implemented by current
or potential competitors and when these other firms are unable to duplicate the benefits of the strategy.
12/3/2014

BA 591 Longitudinal Strategy

Prof. Mitchell

Jim Emery

factors that can contribute to imperfect imitability including: unique historical conditions,
causal ambiguity, and social complexity. As a practical matter, many executives engaged
in formal strategic planning today spend time trying to understand best practices of other
firms (both within and outside of their industry) that are believed to contribute to
sustained competitive advantage. Often the practical goal of this activity is to understand
how the practice can be applied (i.e., imitated to some extent) within the organization
conducting the planning. Yet if you believe Barneys framework, you must conclude that
those best practices that truly contribute to sustained competitive advantage cannot be
accurately imitated (or even fully described). This has several potential implications
including:
For Managers
best practice imitation may be useful to avoid falling behind competitors, but it
will probably not provide a source of sustained advantage; and
understanding the tangible success measures that customers apply to the products
of firms with sustained advantage may be more fruitful in developing firmspecific strategies that lead to sustained competitive advantage.
For Researchers
imperfect imitability implies that sample sizes of firm resources contributing to
sustainable competitive advantage are likely to be very limited (i.e., 1?); and
it may be interesting to consider the role of bounded rationality as it may
moderate the need to assume inimitability of a resource (e.g., if we assume that
managers limit their search for best practices, could firms develop sustained
competitive advantage simply by continually scanning and implementing best
practices which cannot be imitated quickly enough by their competitors perhaps
itself an inimitable rate of improvement strategy).

12/3/2014