Is Resource Based-View Useful Briem

' Academy af Management Review2001, Vol.26, No, 1. 22-40,

IS THE RESOURCE-BASED "VIEW" A USEFULPERSPECTIVE FOR STRATEGIC MANAGEMENT

RESEARCH?

RICHARD L. PRIEMUniversity of Texas at Arlington

JOHN E. BUTLERHong Kong Polytechnic University

As a potential theory, the elemental resource-based view {RBV) is not currently atheoretical structure. Moreover, RBV proponents have assumed stability in productmarkets and eschewed determining resources' values. As a perspective for strategicmanagement, imprecise definitions hinder prescription and static approaches rele-gate causality to a "black box." We outline conceptual challenges for improving thissituation, including rigorously formalizing the RBV, answering the causal "how"questions, incorporating the temporal component, and integrating the RBV with de-mand heterogeneity models.

The popularity of the resource-based "view"(RBV) of strategic management is manifest in itsrapid diffusion throughout the strategy litera-ture. Yet, there has been little critical evaluationof the RBV as a theoretical system (see Ryall,1998, for an exception) or of its potential contri-butions to strategic management (see McWil-liams & Smart, 1995, for an exception). In thisarticle we attempt to restrain, at least briefly,the RBV's momentum while encouraging effortsto clarify its fundamental theoretical statementsand to specify its likely contributions to knowl-edge. We take an initial step toward a morerigorous critique and hopeful clarification of theRBV by addressing two elemental questions: (1)Is the foundational and unembellished RBV ac-tually a theory? {2) Is the RBV likely to be usefulfor building understanding in strategic manage-ment?

Sociologists have shown that inquiries intothe status of i deas^as in the first questionabove, concerning the theoretical status of theRBV—are important to scientific progress. Thisis because groups of adherents sprout uparound certain concepts. Such linked individu-als, called "invisible colleges" by Crane (1972),influence the direction of graduate education.

We thank Cyndy Cycyota, lohn Hulpke, Tom Lumpkin,Geoff Waring, and Katherine Xin for helpiul comments onearlier versions of this article and Katja Schroei Brown forable research assistance.

the distribution of research funding, and the re-search agenda itself. Yet, these individualshave vested interests in the propagation of"their" concept. Thus, periodic critical examina-tions of the ideas underlying fashionable re-search genres might be warranted to ensuremaximum returns from research effort. Thismight be particularly true for developing aca-demic fields, such as strategic management.

The second question we address—concerningthe usefulness of the RBV for strategic manage-ment̂ —is important, because new perspectivestend to be better suited toward answering someissues rather than others. Identification of thesehigh-potential issues might help to direct theorybuilding and research while simultaneouslyclarifying the potential contributions of the RBVto the strategy field.

We approach these questions as follows. First,we evaluate the degree of diffusion by the RBVthroughout the strategy literature using theeighteen strategy research topics identified bySchendel and Hofer (1979). We then examine thebasic RBV framework, as proffered in Barney's{1991) expository article, to see if it satisfies keyrequirements for theoretical systems (e.g., Mc-Kelvey, 1997; see also Bacharach, 1989; Dubin,1976; Hunt, 1991; Rudner, 1966; Thomas & Tymon.1982; Whetten, 1989). Thus, the analysis is under-taken from a logical positivist rather than post-positivist perspective. We pay particular atten-tion to such issues as determining the analytic

22

2001 Piiem and Butlei 23

or synthetic nature of statements in the RBV,the logic of the RBV, and the RBV's aptness forstrategic management given the key character-istics of the strategy discipline (e.g., Meyer,1991). Next, we examine RBV-driven research todetermine the extent to which it has contributedto theory building in strategic management and,for empirical papers, how the HBV has beentested. Finally, we develop suggestions fromthese analyses for productive directions in fu-ture resource-based strategy research.

DEFINITION AND DIFFUSION OF THE RBV

Wernerfelt's {1984) conceptual article entitled"A Resource-Based View of the Firm" recentlywas selected as one of the most influential pa-pers published in the Strategic ManagementJouznal prior to 1990 (Wernerfelt, 1995). The arti-cle begins with the statement, "For the firm,resources and products are two sides of thesame coin" (1984: 171). Wernerfelt then goes on toanalyze, from a resource perspective, the effi-cacy of sequential entry strategies for diversify-ing firms. One major contribution of this articlewas to direct strategy scholars back toward re-sources as important antecedents to productsand, ultimately, firm performance. In early con-ceptual work in strategic management, scholarsgenerally had given equivalent attention to firmstrengths and weaknesses versus the opportu-nities and threats in the competitive environ-ment (e.g., Andrews, 1971; Ansoff, 1965; Learned,Christensen, Andrews, & Guth, 1965). The publi-cation of Porter's (1980) influential book, Compef-ifive Strategy, shifted the emphasis toward ex-ternal, industry-based competitive issues.Wernerfelt's (1984) article served as a reminderthat both strategy scholars and "managers oftenfail to recognize that a bundle of assets, ratherthan the particular product market combinationchosen for its deployment, lies at the heart oftheir firm's competitive position" {Dierickx &Cool, 1989: 1504).

Rumelt (1984), Barney (1986, 1991), Dierickx andCool (1989), and others have contributed to thesubsequent development of the RBV of strategicmanagement. The conceptual work in thisstream generally has focused on the character-istics of firm resources that can contribute to asustainable competitive advantage. Some theo-rists have followed Penrose {1959) quite closely,emphasizing how resources contribute to diver-

sification and how diversification must matchthe "core competencies" of the firm for optimalperformance {e.g., Peteraf, 1993; Prahalad &Hamel, 1990; Wernerfelt, 1984; see Ryall, 1998, fora discussion of this approach). Penrose's discus-sion of the role of resources in diversificationprovides a view of firm expansion into newproducts and markets. The RBV might be usefulin addressing this issue.

Other theorists have emphasized the morefundamental contribution of resources to sus-tainable advantage for single-business firms byexamining how or why resources contribute tothe advantage of one firm over another in aparticular product/market (e.g., Barney, 1991;Conner, 1991; Powell, 1992a,b). This "business-level" question of how to compete is elementalin determining both the RBV's theoretical basisand its potential contributions to strategic man-agement. As a growing firm achieves "a satis-factory and reasonably secure position" in itsoriginal business and generates resources inexcess of those required for maintaining thatposition, it may look to opportunities for diver-sification (Penrose, 1959: 136). With the business-level RBV, however, researchers attempt expla-nations for resource-based advantages in singleindustries—that is, how the growing firmachieves its initial, "secure" position. These ex-planations lay the conceptual foundation forsubsequent analyses of how resource-based ad-vantages may be leveraged via diversification.Thus, the primary, business-level RBV is of prin-cipal interest in our study.

The Wernerfelt (1984) and Barney {1991} arti-cles are seminal works in the RBV stream. WhileWernerfelt emphasizes resources and diversifi-cation, Barney provides what is arguably themost detailed and formalized depiction of thebusiness-level resource-based perspective. His"organizing framework"—"that organizationalresources that are valuable, rare, difficult to im-itate and non-substitutable can yield sustainedcompetitive advantage" {Meyer, 1991: 823)—hassupplied the footing for many RBV studies, withsubsequent work based on either his frameworkor an extension.

When extending Barney's (1991) framework,however, most researchers have defined anynew terms of interest without formally specify-ing the original, underlying RBV terms. Indeed,in much of the conceptual and empirical RBVwork, researchers have either paraphrased Bar-

Academy of Management Review January

ney's (1991) RBV statements or simply cited hisarticle without augmented definition (e.g., Bates& Flynn, 1995; Brush & Artz, 1999; Litz, 1996; Mc-Williams & Smart, 1995; Michalisin, Smith, &Kline, 1997; Mosakowski, 1998; Powell, 1992a,b;RindovQ & Fombrun, 1999; Yeoh & Roth, 1999).Attempts to further define underlying RBV con-structs or specify causal relationships havebeen sparse. Table 1 provides representative

RBV definitions that refer to Barney's (1991) con-ceptual work. Because of its influence, its at-tempt to formalize the RBV as theory, and therelative lack of subsequent definitional work,we selected Barney's (1991) article to provide theprimary, baseline definitions of the "single-business" RBV for our investigation.

Barney (1991) notes that two assumptions areelemental to the RBV: (1) resources are distrib-

RBV Article

TABLE 1Sample Definitions of and Relationships Among Underlying HBV Constructs

Definitions and Underlying Relationships

Powell (1992a: 552)

Bates & Flynn (1995: 235)

Litz (1996: 1356)

Michalisin, Smith, & Kline (1997: 360)

Bowen & Wiersema (1999: 628-629)

Brush & Artz (1999: 223)

Combs & Ketchen (1999: 869)

Rindova & Fombrun (1999: 694)

"The resource view holds that, in order to generate sustainable competitiveadvantage, a resource must provide economic value and must be presentlyscarce, difficult to imitate, nonsubstitutable, and not readily obtainable infactor markets (Barney, 1991; Dierickx & Cool, 1989; Peteral, 1990)."

"This theory rests on two key points. First, that resources are the determinantsof firm performance (Barney, 1991; Schulze, 1992), and second that resourcesmust be rare, valuable, difficult to imitate and nonsubstitutable by other rareresources. When the latter occurs, a competitive advantage has been created(Barney, 1991)."

"Barney's (1991) conceptual work on resource characteristics was especiallyhelpful. He proposed that resources be characterized as simuilaneouslyvaluable, rare, nonsubstitutable, and inimitable. To the extent that anorganization's physical assets, inira-structure, and workforce satisfy thesecriteria, they qualify as resources."

"Such resources, coined s(rafegic assets, are simultaneously valuable, rare,imperfectly imitable and nonsubstitutable (Barney, 1991). RBV proponentsassert that ownership or control of strategic assets determine [sic] whichfirms can earn superior profits and which firms do not. Unfortunately, thereis little empirical research to support that prescription (Miller 8E Shamsie,1996).

"... as the strategy literature argues, a firm's performance dependsfundamentally on its ability to have a distinctive, sustainable competitiveadvantage which derives from the possession and utilization of unique, non-imitable, non-transferable, firm-specific resources (Barney, 1991; Peteraf, 1993;Wernerfelt, 1984)."

".. . some gaps in the available theories raise new challenges. Barney's (1991)four criteria for resources to confer a competitive advantage—value, rarity,imitability, and substitutability—are limited in their practical usefulnessfor this problem because they are context insensitive (i.e., noncontingent)."

"To be a source of sustained above-average performance, resources must meetthree criteria. They must be: (1) valuable, meaning buyers are willing topurchase the resources' outputs at prices significantly above their costs; (2)rare, so that buyers cannot turn to competitors with the same or substituteresources; and (3) imperfectly imitable, meaning it is difficult for competitorsto either imitate or purchase the resources (Barney, 1991; Peteraf, 1993)."

"Resource-based theory (Penrose, 1959; Barney, 1991) attributes advantage in anindustry to a firm's control over bundles of unique material, human, organiza-tional and locational resources and skills that enable unique value-creatingstrategies (Barney, 1991), Heterogeneous resources create distinct strategicoptions for a firm that, over time, enable its managers to exploit differentlevels of economic rent (Peteraf, 1993). A firm's resources are said to be asource of competitive advantage to the degree that they are scarce,specialized, appropriable (Amit & Schoemaker, 1993), valuable, rare, difficultto imitate or substitute (Barney, 1991)."

2001 Priem and BufJer

uted heterogeneously across firms, and (2) theseproductive resources cannot be transferred fromfirm to firm without cost (i.e., resources are"sticky"). These assumptions are the axioms ofthe RBV. Given the assumptions, Barney (1991)makes two fundamental arguments. First, re-sources that are both rare (i.e., not widely held)and valuable (i.e., contribute to firm efficiency oreffectiveness) can produce competitive advan-tage. Second, when such resources are alsosimultaneously not imitable (i.e., they cannoteasily be replicated by competitors), not substi-tutable (i.e., other resources cannot fulfill thesame function), and not transferable (i.e., theycannot be purchased in resource markets;Dierickx & Cool, 1989), those resources may pro-duce a competitive advantage that is long lived(sustainable). Thus, rarity and value are eachnecessary but not sufficient conditions for com-petitive advantage, whereas nonimitability,nonsubstitutability, and nontransferability areeach necessary but not sufficient conditions forsustainability of an existing competitive advan-tage.

From these core ideas, arguments have beenadvanced that single-business firms canachieve sustainable competitive advantagefrom such resources as information technology{Mata, Fuerst, & Barney, 1995; Powell, 1997), stra-tegic planning {Michalisin et al., 1997; Powell,1992a), organizational alignment {Powell, 1992b),human resources management (Flood, Smith, &Derfus, 1996; Lado & Wilson, 1994; Wright & Mc-Mahan, 1992), trust (Barney & Hansen, 1994), or-ganizational culture {Fiol, 1991; Oliver, 1997), ad-ministrative skills (Powell, 1993), topmanagement skills (Castanias & Helfat, 1991),and guanxi (Tsang, 1998), among others. More-over, the number of proponents who have ele-vated the RBV from the status of "view" to "the-ory" has enhanced its visibility and alsosuggests widespread acceptance (e.g., Barney,1996; Conner, 1991; Grant, 1991; Mahoney & Pan-dian, 1992; Maijoor & van Witteloostuijn, 1996).

To evaluate more formally the breadth of dif-fusion of the RBV throughout the strategy liter-ature, we map RBV studies versus the eighteenstrategy research topics originally identified bySchendel and Hofer (1979) and later used byShrivastava {1987) to categorize strategic man-agement research programs. Since 1991 thirteenof the eighteen research topic areas have beenexamined from the perspective oi the RBV {see

Table 2 for a listing). This comprehensive pene-tration of the RBV into the strategy literatureshows the high level of research resources be-ing expended pursuing HBV-related questionsand suggests that a more rigorous investigationof the RBV's efficacy and its usefulness for strat-egy research might be overdue. As a first step inthis investigation, we next examine the degreeto which the RBV appears to meet the criteriarequired ol theoretical systems.

EXAMINING THE RBV AS THEORY

The degree to which the RBV is likely to enrichstrategy research depends, in part, on the extentto which it becomes a theory of competitive ad-vantage. Accurately identifying the current the-oretical state of the RBV might aid its futuredevelopment. In this section we examine thedegree to which the RBV presently possesses theexplanatory and predictive power generally as-sociated with theories. We limit our investiga-tion to whether the RBV arguments regardingcompetitive advantage currently meet generallyaccepted criteria for classifying a set of state-ments as a theory. We do not address whetherthe RBV represents a new theory of the firm {e.g.,Conner, 1991), because in the RBV set forth byWernerfelt (1984) and Barney {1991), key issuesexplained in theories of the firm are not ad-dressed. These issues include why the firm ex-ists in place of alternate systems for organizingeconomic activities and what determines thescope of the firm (e.g., Alchian & Demsetz, 1972;Alchian & Woodward, 1987; Coase, 1937; Seth &Thomas, 1994). "A firm's fundamental objective(to make money)" (Conner, 1991: 123) does notexplain why it exists as a form of organizingeconomic activity compared (o ofher possibieforms {see the literature on property rights; e.g.,Alchian & Demsetz, 1972; Alchian & Woodward,1987).

To examine the degree to which the RBV isnow or is likely to become a theory of competi-tive advantage, we first evaluate fundamentalRBV statements as to their "lawlike" status. Wethen investigate aspects of the logic of the RBVfor theoretical force and internal consistency.

Lawlike Generalizations in the RBV

We evaluate the RBV as a theoretical systemby relying on the schemes and definitions pro-

26 Academy of Management Review January

TABLE 2Research Programs in Strategic Management Related to the RBV of the Firm

Research Topic Research Program Representative Authors

Strategy concepts

Strategic managementprocesses

Board ol directors

General management rolesin strategy management

Social responsibility

Strategy formulation

Environmental analysis

Strategy implementationand evaluation

Strategy content

Formal planning systems

Strategic control

Entrepreneurship and newventures

Multibusiness multiculturalfirms

Other

1. Alternative frameworks2. Agency theory3. Network theory and Austrian economics4. Theory of the firm

5. Innovations and advantage6. Organizational learning

7. Contingency model

Behavioral models and culture; cuifure/resource selection

Top management teams

Managerial action and prescriptions

Social and natural environmental issues

Competitive strategy and buildingcompetitiveness

Environment and resource relationships

Industry structure/knowledge

Human resource management as aresource

Strategic assets and planning

Strategic information support systems

Alliance formationResources and performance

International strategic management

Mergers, acquisition, and diversification

Underlying resources that lead to qualityPhilosophy ol science

Barney (1991)Sherer, Rogovsky, & Wright (1998)Zaheer 8E Zaheer (1997)Barney (1996); Conner (1991)Conner & Prahalad (1996); Foss (1996a,b)Bates & Flynn (1995)Grant (1996)Garud & Nayyar (1994)Collis (1994)

Fiol (1991); Knez & Camerer (1994);Levinthal & Myatt (1994); Oliver (1997)

Flood, Smith, & Derfus (1996)

Marino (1996); Parkinson (1995)

Hart (1995): Litz (1996): Russo & Fouts(1997)

Black & Boal (1994); Wernerfelt (1984)

Fahy (1996); Maijoor & van Witteloostuijn(1996); Miller & Shamsie (1996)

Lado & Wilson (1994)

Boxall (1996); Flood, Smith, & Derfus(1996); Lado & Wilson (1994); Wright &McMahan(1992)

Michalisin. Smith, & Kline (1997); Powell(1992a)

Mata, Furst, & Barney (1995)

Eisenhardt & Schoonhoven (1996)Robbins & Wiersema (1995)

Collis (1991); Moon (1997); Taylor,Beechler, & Napier (1996)

Ingram & Thompson (1995); Markides &Williamson (1996)

Powell (1995)Godfrey & Hill (1995)

posed by Rudner (1966), Bacharach (1989), Whet-ten (1989), Hunt (1991), and McKelvey (1997), withreference to others' ideas where that clarifiesthe specific exposition for the RBV. This is not tosay that there is not significant debate about whatconstitutes a theory. However, both Hunt (1991)and McKelvey (1997) suggest that consensus hasbuilt around the definition of theory originally of-fered by Rudner: "A theory is a systematicallyrelated set of statements, including some lawlikegeneralizations, that is empirically testable" (1966:10). Hunt notes further, "The purpose of theory is to

increase scientific understanding through a sys-tematized structure capable of both explainingand predicting phenomena" (1991: 149).

Here we focus on the criterion mandating thatat least some lawlike generalizations be presentin a theory. For a system of statements to havethe force of a scientific theory, some of the state-ments must be lawlike in that they (1) are gen-eralized conditionals, (2) have empirical content,and (3) exhibit nomic necessity.

Generalized conditionals. Generalized condi-tionals are "if/then" statements. The RBV clearly

2001 Priem and Butler 27

contains such statements: Proponents of the HBVassert that if a firm attribute is rare and valu-able, then that attribute is a resource that cangive the firm competitive advantage. And if aresource that accords a firm competitive advan-tage is hard to imitate and is not substitutable,then that resource can provide the firm withsustainable competitive advantage (Barney,1991). Both of these statements, central to theRBV, are generalized conditionals and meetRudner's (1966) first criterion for lawlike gener-alizations.

Empirical content. Management scholars fre-quently address this criterion when discussingrequirements for good theory, following Pop-per's (1959) falsifiability requirement (e.g.,Bacharach, 1989; McKelvey, 1997). Bacharach(1989), for example, has suggested that manyorganizational-level theories are so vague theycan never be empirically tested.

The empirical content criterion, however, ad-dresses the semantics and logic of theory, ratherthan vagueness. The empirical content criterionhelps separate purely analytic statements,which are true because of their "either/or" formor because of the way their terms are defined,from synthetic statements, which we can knowto be true only after investigation (Hunt, 1991}.Nontheoretical, analytic statements can be de-termined to be true or false based on their logicor their definition of terms. For example, "eitherthe sun is shining or it is not," and one does nothave to look out the window to verify the state-ment. The same can be true for definitions. A"firm that improves its efficiency will exhibit alarger output-to-input ratio," because efficiencyis defined as the ratio of outputs to inputs. Thus,a confrontation with data is not required to de-termine the correctness of analytic statements.Synthetic statements, such as "if managers areolder, then they tend to be more risk averse," aresaid to have empirical content because the "realworld" must determine their correctness. Theyare not true simply "by definition."

The statements found in the RBV are logicallysynthetic, as can be seen by their if/then form,shown in the earlier analysis of the generalizedconditional criterion. One way to examinewhether they are synthetic or analytic based ontheir deiinitions oi teims is to replace each termin a basic statement of the theory with its defi-nition in the theory. This process allows one tobetter evaluate whether the statements are, or

are not, true by definition. In the earlier examplethis would be done by replacing the term "effi-ciency" with its definition: a "firm that improvesits ratio of outputs to inputs (efficiency) will ex-hibit a larger output-to-input ratio." Followingthe replacement, it becomes clear that this is ananalytic statement, with no empirical content.For more complex theoretical statements, re-placing the theory's terms with their definitionsfrom the theory may result in several possiblerevised statements. Several of these statementsmay appear plausibly synthetic. If one suchstatement is analytic, however, further concep-tual work is required before the underlyingstatement can become a lawlike generalization.

This process has been used previously in themanagement literature—by Bacharach whenexamining Young's (1988) critique of populationecology's structural inertia theory and Vecchio's(1987) critique of situational leadership theory.Bacharach concludes, "In these two examples, atautological proposition or hypothesis is self-verifying and, therefore, not subject to disconfir-mation" (1989: 505). To maximize consistency inour application of the process, we use only theprecise statements and definitions from Barney(1991) in the substitutions, although we discussthe work of others later. For ease of exposition,we examine those terms associated with com-petitive advantage first and set aside issuesassociated with sustainability and substitut-ability.

The fundamental RBV theoretical statementwe investigate is "that valuable and rare organ-izational resources can be a source of competi-tive advantage" (Barney, 1991: 107). In his 1991article Barney cites others' prior definitions offirm resources as including "all assets, capabil-ities, organizational processes, firm attributes,information, knowledge, etc. controlled by a firmthat enable the firm to conceive of and imple-ment strategies that improve its efficiency andeffectiveness (Daft, 1983)" and as "firm attributesthat may enable firms to conceive of and imple-ment value-creating strategies (Hitt & Ireland,1986; Thompson & Strickland, 1983)" (Barney,1991: 101). He defines resources as valuable"when they enable a firm to conceive of or im-plement strategies that improve its efficiencyand effectiveness" and "when they exploit op-portunities or neutralize threats in a firm's envi-ronment" (Barney, 1991: 106). Barney definescompefi/ive advantage as a firm "implementing

28 Academy of Management Reviev/ January

a value creating strategy not simultaneously be-ing implemented by any current or potentialcompetitors"; further, he reasons that competi-tive advantage cannot exist for identical firms,because since "these firms all implement thesame strategies, they will improve their effi-ciency and effectiveness in the same way, andto the same extent" (1991: 102, 104). Harity is notspecifically defined but is used in its generalsense.

Substituting these specific definitions for theterms in the above theoretical statement pro-duces revised statements, including

1. "Uncommon organizational attributes thatenable lirms to conceive of and implementvalue-creating strategies can be a source ofimplementing a value-creating strategy notsimultaneously being implemented by anycurrent or potential competitors,"

2. "Uncommon organizational attributes thatenabie a firm to conceive of or implementstrategies that improve its efficiency andeffectiveness can be a source that may en-able a firm to conceive of or implementstrategies that improve its efficiency andeffectiveness," and

3. "Uncommon organizational attributes thatexploit opportunities and neutralize threatsin a firm's environment can be a source ofimplemeniing an opportunity-exploitingand threat-neutralizing strategy not simul-taneously being implemented by any cur-rent or potential competitors."

These are analytic statements that are true bydefinition, indicating that this elemental state-ment of the RBV is not a lawlike generalization.This suggests that this statement from the RBV,dealing directly with competitive advantage, isnot amenable to empirical tests (e.g., Bacharach,1989; Hunt, 1991). Bacharach argues that state-ments that are not testable—"no matter howprofound and aesthetically pleasing"—still donot meet the test of being a theory (1989: 512).Thus, Barney's definitions indicate that addi-tional conceptual work is needed if the founda-tion of the RBV is to meet the lawlike generali-zation standard. The underlying problem in thestatement "that valuable and rare organization-al resources can be a source of competitive ad-vantage" (Barney, 1991: 107) is that competitiveadvantage is defined in terms of value and rar-ity, and the resource characteristics argued tolead to competitive advantage are value andrarity. Instead, the characteristics and outcomes

must be conceptualized independently to pro-duce a synthetic statement.

Nomic necessity. // the earlier statement fromthe RBV were reformulated to meet the empiricalcontent requirement, then the reformulationcould be examined for the third criterion: nomicnecessity. Nomic necessity is the characteristicof theory that demands "the occurrence of somephenomenon must be associated with someother phenomenon; the relationship cannot be,simply, by chance" (Hunt, 1991: 111). Thus, to bea lawlike generalization, a statement must pos-sess theoretical force by describing relation-ships that must occur, rather than by specifyingaccidental or spurious relationships (Gaski,1985). For example, the statement "the rising sunwarms the earth" possesses nomic necessity be-cause if it is true, when the sun rises the earthmust warm, and when the sun sets the earthmust cool. Statements such as "all members ofthe top management team are men" or "if firmsare in the data storage industry, then they areprofitable" do not have nomic necessity. Even ifthey are true at the time the statements aremade, one can easily imagine counterfactualconditions that could falsify them.

The Logic oJ the RBV

One step toward making RBV statements syn-thetic might be through the use of different,more widely accepted definitions of competitiveadvantage. They then could be examined fortheir logical consistency more independently ofdefinitional issues. Barney notes, "It is not diffi-cult to see that if a firm's valuable resources areabsolutely unique among a set of competingand potentially competing firms, those re-sources will generate at least a competitive ad-vantage" (1991: 107). When competitive advan-tage is defined as a firm "implementing a valuecreating strategy not simultaneously being im-plemented by any current or potential competi-tors" (Barney, 1991: 102), this is an analytic state-ment that is true based on the commonlyaccepted definitions of "absolutely unique" and"not simultaneously being implemented byany." The statement follows from Barney's pre-viously argued, correct assertion that competi-tive advantage cannot exist for identical firms,because since "these firms all implement thesame strategies, they will improve their effi-


ciency and effectiveness in the same way, andto the same extent" (1991: 104).

The diametrical statement, however—thatunique firms possess competitive advantage^does not logically follow without the help ofdefinitional dependence. This can be seen whena more traditional definition of competitive ad-vantage is substituted. Schoemaker definescompetitive advantage as a firm "systematical-ly creating above average returns" (1990: 1179).Ii this definition of competitive advantage weresubstituted into Barney's statement, equifinalitysuggests that there might be many approaches,or different resource configurations, that couldachieve a particular level of return. Indeed,rather than the rarity of the resources used, it isthe relative difference in the amount of valuegenerated by firms that is elemental to compet-itive advantage under Schoemaker's (1990) defi-nition. For example, in a heterogeneous firmduopoly, wherein one firm pursues a cost lead-ership strategy and the other a differentiationstrategy, if both firms generate the same return,there is no competitive advantage (Porter, 1980).And multiple heterogeneous firms in an indus-try each may pursue different strategies thateach generates (he same level oi value and,thus, no competitive advantage.

This is not to argue that uniqueness (or rarity)in product differentiation, or even in resources,is not important, because often it is. Rather, theconclusion is that when the current formulationof the RBV is made more synthetic by reducingdefinitional dependencies, value is the funda-mental component determining the extent ofcompetitive advantage. If a firm consistentlygenerates value greater than that generated byother firms in its industry, it must have at leastone rare resource. If a firm has rare resources,however, it does not follow that it will generatevalue greater than that of other firms in its in-dustry. In the next section we carry this argu-ment further, suggesting that the values of re-sources are determined by demand-sidecharacteristics, which are exogenous to the RBVmodel.

AN ELEMENTAL FALLACY OF THE RBV

The RBV has encouraged strategy researchersto explore "the usefulness of analyzing firmsfrom the resource side rather than from the prod-uct side" (Wernerfelt, 1984: 171). The increased

attention to firm resources has been beneficialin helping (1) to clarify the potential contribu-tions of resources to competitive advantage, (2)to introduce strategy scholars to a number ofuseful descriptive theories from industrial or-ganization economics (e.g., Alchian & Demsetz,1972, on "teamwork" production, or DeVany &Saving, 1983, on price as a signal of quality), and(3) to alleviate a previous analytical overempha-sis on the opportunities and threats that arisefrom the product side.

In arguing for the RBV, Barney (1991) notes thatin previous strategy research, with its stronganalytical emphasis on the competitive environ-ment, researchers implicitly adopted two impor-tant simplifying assumptions. The first was thatfirms within an industry are homogeneous re-garding resources and strategies. The secondwas that firm resources are highly mobile. Con-trary to these implicit assumptions,

the resource-based view of the firm substitutestwo alternate assumptions in analyzing sourcesof competitive advantage. First, this model as-sumes that firms within an industry (or group)may be heterogeneous with respect to the strate-gic resources they control. Second, this modelassumes that these resources may not be per-fectly mobile across firms, and thus heterogene-ity can be long lasting (Barney, 1991: 101).

These explicit RBV assumptions are likely moreaccurate reflections of reality than were the im-plicit simplifying assumptions they replacedfrom the environment-focused models.

For a full comprehension of the RBV, however,one must recognize that it, too, includes implicitsimplifying assumptions. Whereas the simplify-ing assumptions of environment-focused mod-els of competitive advantage are made on theresource side, the implicit assumptions of theRBV are made on the demand side. Resourcesare said to be valuable "when they exploit op-portunities or neutralize threats in a firm's envi-ronment" or "when they enable a firm to con-ceive of or implement strategies that improve itsefficiency and effectiveness" (Barney, 1991: 106).Earlier, value was shown to be a fundamentalconcept to both the RBV and to relative compet-itive advantage. The RBV value definitionsclearly show, however, that it is the market en-vironment, through opportunities and threats,that determines the degree of value held byeach firm resource in the RBV. As the competi-tive environment changes, resource values may


change. Thus, resource value is determinedfrom a source exogenous to the RBV. This, ineffect, holds constant (i.e., outside the model)product and customer factors, because if productand customer factors vary, then resource valuesmay vary, and unpredictable resource valuechanges will result in indeterminate outcomesin resource-based analyses. Therefore, just asthe prior environment-focused models simpli-fied strategic analysis with an implicit assump-tion of homogeneous and mobile factor markets.

the RBV itself simplifies strategic analysis withan implicit assumption of homogeneous and im-mobile product markets (i.e., unchanging de-mand; see McWilliams & Smart, 1995, for a sim-ilar argument from the perspective of the S-C-P[structure-conduct-performance] paradigm).

Figure 1 shows how product markets influ-ence factor value through a simplified model fora single factor of production and a single prod-uct, where neither the factor costs nor the factorquantities are fixed (e.g.. Cole, 1973: 436-443).

HGURE 1A Simplified Equilibrium Model Showing a Product Market and Factor Value

output

Product market (a)

Qfactor

Q.output

0output p p faclor

Production function (b)QQ =

Factor market (c)

2001 Priem and Butlei 31

The rightward shift in the demand curve in theproduct market (panel a) is transmitted throughthe production function (panel b), which wouldproduce a rightward shift in demand in the fac-tor market (panel c). The outcome would be alarger quantity of the factor supplied at a higherprice as equilibrium moves upward along thesupply curve (panel c). Thus, value in the factormarket is influenced by demand in the productmarket (this is especially apparent if factorquantity is held constant with a vertical supplycurve). Yet, product demand remains external tothe RBV.

One must be aware of the simplifying as-sumptions when drawing conclusions from RBV-based analyses. Although partial equilibriummodels of factor markets alone or product mar-kets alone can produce considerable insight,these approaches might carry particular risksfor conceptualizing complex strategy issues.Strategic management requires general solu-tions that are in concordance with its generalmanagement orientation. Yet, even generalmodels, such as that shown in Figure 1, must bemade even more dynamic for usefulness in strat-egic management. For example, entrepreneurialinsights concerning future demand shifts inproduct or factor markets may allow acquisitionof long-lasting factors at low cost. First moveradvantage would result, because follow-on com-petitors could only acquire these factors athigher cost. Subsequent changes in customerpreferences, however, would result in furthershifts in demand that could easily reduce thefactors' values and erode the advantage. Prac-ticing strategists do not have the luxury of ce-teris paribus assumptions that all other aspectsof a strategic situation remain equal. Thus, onemight suspect that a synthesis of the resource-and environment-based perspectives might bean important next step toward a more completestrategy theory, as will be discussed later.

IS THE RBV SUITABLE FOR STRATEGYRESEARCH?

Perspectives or "views" need not be completetheories in order to contribute to our understand-ing of strategic management. SWOT analysis isone example of a perspective that has improvedstrategy scholars' understanding and has beenuseful for practitioners. In this section we inves-tigate the suitability of the RBV for strategy re-

search by considering the characteristics ofstrategic management and how they may affectthe operational validity of the RBV for strategypractitioners.

Characteristics of Strategy and the RBV

The field of strategic management has a num-ber of distinctive characteristics that includeembracing practitioners and valuing prescrip-tion (Barney, 1992). Meyer has noted, for exam-ple, that "true to its general management orien-tation, the field of strategy has consistently usedfirm level performance as the definitive depen-dent variable" (1991: 824). One strategy re-searcher interviewed in Meyer's study assertedthat "research questions are inherently uninter-esting or trivial unless they include an expli-cated linkage to performance" (1991: 825). Thus,a fundamental question for strategy researchersis the utility of the RBV in developing meaning-ful management tools in the form of actionableprescriptions for practitioners (see, for example,Eccles & Nohria, 1992, and Mosakowski, 1998).

Thomas and Tymon (1982) address this issuein their discussion of research relevance. Theydefine "operational validity" as "the ability ofthe practitioner to implement the action impli-cations of a theory by manipulating its causal(or independent) variables" (1982: 348). Opera-tional validity is a necessary but not sufficientcondition for managerially relevant research.According to Thomas and Tymon's definition, ifthe fiBV were a theory that was descriptivelyaccurate and that generated prescriptions forstrategy practitioners, it would not be operation-ally valid unless it was also practicable formanagers to manipulate the key independentvariables. Simply advising practitioners to ob-tain rare and valuable resources in order toachieve competitive advantage and, further,that those resources should be hard to imitateand nonsubstitutable for sustainable advan-tage, does not meet the operational validity cri-terion. Effective prescription must also include,at a minimum, criteria on which each alterna-tive resource can be judged on each resourcecharacteristic. Industrial organization (I/O) eco-nomics can provide criteria for the imitabilityand substitutability characteristics associatedwith sustainability (e.g., Lippman & Rumelt,1982). These criteria include a resource's causalambiguity or social complexity (Barney, 1991).

Academy of Management fleview January

Prescription regarding competitive advantageitself, however, still is hindered because the cri-teria for value in the RBV remain, at present, inan exogenous "black box."

Boundaries of the RBV

When this problem is resolved, the appropri-ate contexts lor prescription still must beaddressed. Dubin (1976) and Whetten (1989) haveargued that an aspect of theory as important asthe theories themselves is the identiiication ofthe contexts within which theories are expectedto hold. This notion can be seen, ior example, inHofstede's (1991) assertion that many U.S. man-agement theories might not apply in other coun-tries and in Eisenhardt's (1989) finding that com-prehensive and speedy decisions might beparticularly beneficial in "high-velocity" envi-ronments. In fact, in most theories contexts areestablished within which particular assertionshold (e.g.. Burns & Stalker, 1961; Lawrence &Lorsch, 1967). Relative to other strategy theories,however, little effort to establish appropriatecontexts for the RBV has been apparent.

There are two recent exceptions. Miller andShamsie (1996) used a resource-based orienta-tion in examining the performance of seven ma-jor Hollywood film studies over thirty years thatbegan with a period of stability but turned intoone of change. Control over property-based re-sources was associated with higher levels ofstudio performance during the period of stabil-ity while knowledge-based resources contrib-uted to higher levels of performance during theperiod of environmental turbulence. Thus, withtheir study. Miller and Shamsie (1996) took a steptoward establishing boundaries for the RBV byhypothesizing contexts within which particularresources were determined to be more or lessvaluable. Their work was one of the first at-tempts to integrate the RBV model and environ-mental models by identifying resource valuesthrough characteristics of product markets.

Similarly, in their recent work. Brush and Artz(1999) determined that different capabilities arenecessary to provide different classes ol servicein the veterinary industry. Their contingency ap-proach has important implications for industrypractitioners making resource investments.Continued development of such contingencytheories of resource value might be a helpful

step in clarifying the role and likely contribu-tions of the RBV in strategy research.

All-inclusive Resources

The RBV tendency toward resource classifica-tions that are all inclusive might have made itmore difficult to establish contextual bound-aries. Although there have been differences inthe way resources are deiined (ci. Barney, 1991;Wernerfelt, 1984), the following quotation is typ-ical regarding inclusiveness:

By a resource is meant anything which could bethought of as a strength or weakness of a givenfirm. More formally, a firm's resources at a giventime could be defined as those (tangible and in-tangible) assets which are tied semipermanentlyto the firm (see Caves. 1980). Examples of re-sources are: brand names, in-house knowledge oftechnology, employment of skilled personnel,trade contracts, machinery, efficient procedures,capital, etc. (Wernerfelt, 1984: 172).

That virtually anything associated with thefirm can be a resource suggests that prescrip-tions for dealing in certain ways with certaincategories of resources might be operationallyvalid, whereas other categories of resourcesmight be inherently difficult lor practitioners tomeasure and manipulate. One example of a re-source that might be difficult to measure andmanipulate is tacit knowledge (Polyani, 1962,1966). Some have argued for tacit knowledge—that understanding gained from experience butthat cannot be expressed to another person andis unknown to oneself—as a source of competi-tive advantage (e.g., Coff, 1997; Lado, Boyd, &Wright, 1992; McAulay, Russell, & Sims, 1997;Saviotti, 1998). This may be descriptively correct,but it is likely to be quite difficult for practitio-ners to effectively manipulate that which is in-herently unknowable.

In addition, even if a resource can be manip-ulated, RBV researchers must be clearer con-cerning the practitioner level at which prescrip-tions can be made. The "CEO resources"investigated by Castanias and Helfat (1991) areone example: prescriptions to top managers ofpoorly performing firms that they are the sourceof the problem and should think about voluntar-ily exiting clearly would be considered unhelp-ful. This is a case where viewing CEOs asresources would have more prescriptive impli-cations for boards of directors than for the CEOs

2001 Priem and Buffer 33

themselves. Similarly, viewing boards of direc-tors as resources would have more prescriptiveimplications for the CEOs who appoint boardsor the governments that regulate them than forthe boards themselves. Thus, some resourcesmay be of less interest to strategy researchersthan others, depending in part on whether theresource can be manipulated and in part on thegroup—frequently CEOs—for whom prescrip-tions are desired. Identifying specific resourcesthat may be particularly effective for certain ac-tors in certain contexts might be a helpful firststep in establishing boundaries for (and contri-butions of) the RBV in strategic management.

The Process Black Box and the RBV

Miller and Shamsie (1996) assert that the strat-egy literature contains numerous references toresources being useful, without careful attentionto when, where, and how they may be useful.The "how" questions address the issue of theprocess black box in strategy research (Law-rence, 1997; Whetten, 1989). When, where, andwho are the three questions, Whetten has ar-gued, necessary to "set the boundaries of gen-eralizability, and as such constitute the range ofthe theory" (1989: 492). Miller and Shamsie's(1996) work has raised and begun to answer im-portant when, where, and how questions aboutknowledge-based resources and firm perfor-mance. It appears that they were able to do so,however, without the RBV itself making an ele-mental contribution to their reasoning: resource-based "logic" was not required to make theircontingency arguments. Attempts to develop a"knowledge-based" theory of the firm, followingin part from the RBV, can be found in Connerand Prahalad's (1996) and Kogut and Zander's(1996) work. Again, however, the foundationalRBV appears not to be essential in making thesearguments (Foss 1996a,b).

Static and Dynamic Approaches to the RBV

Although the RBV began as a dynamic ap-proach emphasizing change over time (e.g.,Dierickx & Cool, 1989; Penrose, 1959; Wernerfelt,1984), much of the subsequent literature hasbeen static in concept. The typical sequence ofarguments offered in the static RBV literature isas follows. First, a variation of the theoreticalstatement we examined earlier—that some re-

source can produce competitive advantage—ispresented. Then the heterogeneity and, there-fore, rarity of that resource are established.Next, resource value is demonstrated by assert-ing that the resource can produce competitiveadvantage. Finally, isolating mechanisms areconfirmed, making resource replication difficultand thereby suggesting that the advantage maybe sustainable. Variations on this argumenthave been advanced for resources ranging fromstrategic planning and top management skills(Castanias & Helfat, 1991; Michalisin et al., 1997;Powell, 1992a) to organizational culture andguanxi (Fiol, 1991; Oliver, 1997; Tsang, 1998).

Yet, this static RBV argument has notable po-tential limitations for strategic management re-search. First, the static argument is descriptive:it identifies generic characteristics of rent-generating resources without much attention todiffering situations or resource comparisons. Inthe Castanias and Helfat (1991) article, for exam-ple, although CEOs (as resources) are argued tohave superior or inferior management skills,there is no basis for discriminating among su-perior and inferior CEOs, other than waiting forthe performance results. Second, the processesthrough which particular resources providecompetitive advantage remain in a black box(Lawrence, 1997, provides a discussion of thisissue in strategy research). We do not know, forexample, how the resources generate sustain-able rents, other than through their heterogene-ity. Why is it that some heterogeneous resourcesgenerate value, whereas other heterogeneousresources do not? Third, some resources studied,such as tacit knowledge, are inherently difficultfor practitioners to manipulate. Thus, these re-sources likely fail Thomas and Tymon's (1982)test of operational validity. Fourth, in static RBVstudies researchers sometimes take a frequentlyresearched strategy subject area, relabel the in-dependent variables as "resources" and the de-pendent variables as "competitive advantage,"and use measures common to much cross-sectional strategy research as operation-alizations (e.g., Powell, 1992a). Such studiesshow that the resource-based labels are not nec-essary for much strategy research. Fifth, thestatic RBV arguments suffer from the In Searchof Excellence (Peters & Waterman, 1982) problemin that it is quite easy to identify, a posteriori,many "valuable" resources in high-performingfirms.


Together, these issues suggest that the cur-rent high level of abstraction iound in the staticapproach to the RBV might be one thing thatcould limit its usefulness for strategy research-ers. RBV studies from this approach would likelybe more helpful if the key underlying constructswere carefully defined and the specific mecha-nisms purported to generate competitive advan-tage carefully detailed. The problems of staticstudies might be exacerbated when theoristsextend the RBV to second-order issues and be-yond, wherein the ability to leain to developeffective resources is in itself a resource, theability to establish an environment that encour-ages such learning is a resource, and onward inan infinite regress (see Collis, 1994, for a discus-sion).

DISCUSSION

Our investigation suggests several conclu-sions concerning the present state of the single-business RBV, both as a theory or potential the-ory of competitive advantage and as a usefulperspective for strategy research. Theory-related conclusions include the following: (1)considerable conceptual work remains beforethe RBV can meet the requirements of a theoret-ical structure; (2) the RBV makes implicit as-sumptions about product markets, just as earlierenvironment-based models made implicit as-sumptions about resources; and (3) the funda-mental "value" variable is exogenous to theRBV. As a perspective for strategy research, (4)overly inclusive definitions of resources make itmore difficult to establish contextual and pre-scriptive boundaries, and (5) static, cross-sectional approaches to RBV development mayresult in causal hows and whys remaining in ablack box.

Given these conclusions, one could betempted to speculate that the RBV is simply afad of management scholarship (Abrahamson,1991, 1996) and that it has gained acceptanceprimarily because of its wide applicability andintriguing terminology (e.g., tradability, substi-tutability, causal ambiguity). Such speculationwould be premature. The RBV, although nolonger an especially "young" framework, mightyet achieve theory status with additional con-ceptual work to begin to overcome the chal-lenges outlined below. Although as part of theexplication of our ideas we outline at least one

possible approach for overcoming each chal-lenge, identifying and implementing feasiblesolutions for each remain formidable tasks. Webelieve the critical challenges include formaliz-ing the RBV, answering the how questions, in-corporating the temporal component, and inte-grating the RBV with demand heterogeneitymodels.

Formalizing the RBV

One requirement for theory in the definitionpresented earlier (Rudner, 1966) is that the state-ments must be systematically related, therebypossessing internal consistency (Dubin, 1976).

To check for infernal consistency, all of the con-cepts in each statement of the theory must beclearly defined, all of the relationships among theconcepts musf be clearly specified, and all ofthe interrelationships among fhe statements inthe theory musf be clearly delineated (Hunt, 1991:152).

Also, the axioms underlying the theory must beidentified. When theories are so specified, theyare amenable to being evaluated through theprocess of formalization. "The attempt to evenpartially formalize a theory, by baring its essen-tial structure or morphology, can sharpen thediscussion of the theory and put it into a frame-work suitable for testing" (Hunt, 1991: 159).

The axioms underlying the RBV—that re-sources are heterogeneous and not perfectly mo-bile— have been clearly identified. The implicitassumptions identified earlier are typical ofmost theories. The concept definitions and inter-relationships, as well as the interrelationshipsamong the statements in the elemental RBV,however, require additional development andthen reevaluation against the requirements oftheory. Repetition of this process likely will payoff in greatly improved clarity and understand-ing and could lead to a testable RBV that fullymeets the requirements of a theoretical struc-ture.

Answering the How Questions

The I/O economics work that provides thefoundation for the RBV is primarily descriptiveand explanatory, whereas the strategy disci-pline is prescriptive (Barney, 1992; Me Williams& Smart, 1995; Meyer, 1991). Another challengefor RBV researchers is to answer enough how


questions—How can the resource be obtained?How and in which contexts does it contribute tocompetitive advantage? How does it interact/compare with other resources?—so that mean-ingiul prescriptions can be offered and, ulti-mately, behavioral dimensions can be includedin future RBV research {e.g., Schoemaker, 1990).Reed and DeFillippi (1990), for example, identi-fied causal ambiguity—based on the tacitness,complexity, and specificity oi a competency—^asan important source of sustainability of compet-itive advantage (see also Lippman & Rumelt,1982). Yet, when the causal relationships be-tween actions and competitive advantage areunknown even to the firm's own managers (e.g.,Barney, 1991), there is little potential for mean-ingful prescription. This was recognized byReed and DeFillippi when they limited their dis-cussion to "situations in which managers under-stand causal relationships better than theircompetitors, and where competencies can bemanipulated for advantage" (1990: 91). Prescrip-tion is possible in such situations.

Researchers are taking steps toward answer-ing how questions in RBV-related research (e.g..Brush & Artz, 1999; Miller & Shamsie, 1996; Yeoh& Roth, 1999). And methodologists are beginningto evaluate and suggest techniques for address-ing these questions in the RBV context (e.g.,Bowen & Wiersema, 1999; Rouse & Daellenbach,1999). The continuation of these trends will likelyaid in clarifying and improving the contributionof the RBV.

Incorporating the Temporal Component

One aspect of the RBV that could become itsown distinctive competence is that it explicitlyacknowledges a firm's history as an importantantecedent to current capabilities and opportu-nities (e.g., Barney, 1991). This temporal compo-nent could produce a deeper understanding inthe strategy literature of the complex interac-tions that occur over (ime between a firm's re-sources and its competitive environment. By ex-plicitly introducing the temporal component ofthe RBV into the analysis, for example, Dierickxand Cool (1989) were able to generate a numberof unique insights that may be particularly ap-plicable to strategic management. Their ideason the interconnectedness and erosion oi assetstocks, for example, may be particularly helpful

to practicing strategists because of the clearprescriptive implications.

Barney's (1991) definition of sustainable com-petitive advantage as occurring when competi-tors have ceased attempts at imitation alsolends itself to temporal theory building. Further,these ideas are amenable to empirical testthrough such methods as the "rate perspective"described by McKelvey (1997: 365). One empiri-cal exemplar is Miller and Shamsie's (1996) lon-gitudinal investigation oi the Hollywood iilmindustry. Their study reflects firm-level history,although they do not specifically examine it.

Particularly salient topics for investigationwith assistance irom the RBV might include howfirm resources and capabilities are accumu-lated and eroded (Dierickx & Cool, 1989) andhow resources' relative values may be aiiectedby market changes (Miller & Shamsie, 1996). Thetemporal factor could provide new insights instrategic management, just as it is beginning toin organizational behavior (e.g., Harrison, Price,& Bell, 1998). Incorporating time remains a chal-lenge for RBV scholars.

Integrating the RBV with DemandHeterogeneity Models

One of the earliest frameworks for developingfirm strategy—SWOT analysis—was geared to-ward identifying internal strengths and weak-nesses, as well as external opportunities andthreats (Learned et a l . 1965). Bourgeois notesthat "the central tenet in strategic managementis that a match between environmental condi-tions and organizational capabilities and re-sources is critical to performance, and that astrategist's job is to iind or create this match"(1985: 548). Thus, strategic management requiresexplicit attention to hoth the internal and theexternal, to production and demand, to re-sources and products. For the RBV to fulfill itspotential in strategic management, its ideasmust be integrated with an environmental de-mand model. Just as strategy requires generalmanagement skills, strategic complexity de-mands general models. The limiting homogene-ity and mobility assumptions concerning re-source markets that are common in industry-based, environmental models have been notedby RBV theorists (e.g., Barney, 1991). The contrarylimiting homogeneity and immobility assump-tions oi the RBV concerning product markets


were noted earlier, along with the RBV's exoge-nous determination of "value." Together, thelimiting assumptions suggest that a more inte-grated approach to theory building might pro-duce a more strategy-useful, normative result.

Some scholars have begun to take steps inthis direction. Hunt (1997, 2000) and Hunt andMorgan (1995), for example, have proposed a"resource-advantage" (R-A) theory that "is a di-rect fusing of marketing's heterogeneous de-mand theory with management's resource-based theory oi the firm" (Hunt, 1997: 59). Hunt's(1997, 2000) developing perspective drawsheavily on Alderson's (1957, 1965) "general the-ory" of marketing. In this earlier resource-demand theory, Alderson explained how heter-ogeneous resources in their natural state were,through a series oi sorts and transformationsthat resemble Porter's value chain (see Priem,Rasheed, & Amirani, 1997, for a comparison),matched with the heterogeneous segments ofdemand on the customer side. Priem (1992) ac-cessibly described Alderson's theory and recentsupportive iindings in I/O economics.

One clear challenge for RBV scholars is to "fillin the blanks" for value and demand in order tohelp the RBV become a perspective more in linewith Bourgeois' (1985) "central tenet" of strategy.This could also help the RBV move closer towardthe status of a theory by establishing the RBV'sposition within a wider nomological network(Hunt, 1991).

CONCLUSION

In this article we have taken some tentativesteps toward a more formal evaluation oi thestatus and potential of the popular RBV of stra-tegic management. The RBV does not presentlyappear to meet the empirical content criterionrequired oi theoretical systems (Bacharach,1989; Hunt, 1991; McKelvey, 1997). This does notmean, however, that conceptual work initiatedfrom a resource perspective is not theory. Millerand Shamsie (1996), for example, presented acontingency theory developed in the context offirm resources. Nor does it mean that the RBVdoes not have potential to achieve theory statusin the future. A concern, however, is that theelemental strategy concept of "value" remainsoutside the RBV. Yet, this value determination

long has been acknowledged to be a criticalfactor ior entrepreneurial success. Coase (1937),ior example, quoted Knight's view:

In the first place, goods are produced for a mar-ket, on the basis of entirely impersonal predictionof wants, not lor the satisfaction oi the wants ofthe producers themselves. The producer takes theresponsibility of forecasting the consumers'wants (1933: 268).

This fundamental aspect of strategic judgmentis exogenous to the RBV, yet sound strategicjudgment requires hoth sides of Wernerfelt's(1984) metaphorical coin.

RBV theorists have argued persuasively thatcompetitive advantage results from superiorknowledge, or luck, or a combination of the two(Barney, 1986; Dierickx & Cool, 1989; Rumelt,1984). Concerning superior knowledge, Alchianand Demsetz (1972) much earlier asserted thatthe firm may provide a "superior informationservice" relative to other forms oi organizing."Superior combinations of inputs can be moreeconomically identified and formed from re-sources already used in the organization thanby obtaining new resources (and knowledge ofthem) frc5m the outside." Thus, "efficient produc-tion with heterogeneous resources is a result notof having hettei resources but in knowing mozeaccuiately the relative productive performancesof those resources" (1972: 793). Concerning luck,the late Isaiah Berlin concluded his essay onpolitical judgment with the thought that "thereis always the part played by pure luck—which,mysteriously enough, men of good judgmentseem to enjoy rather more often than others.This, too, is perhaps worth pondering" (1996: 30).

The RBV may yet make more important contri-butions to knowledge in strategic management,in part because thorny and messy strategicproblems might not be amenable to solutionthrough elegant theory. We have provided somesuggestions for where andthow the RBV may beable to contribute. The greatest potential likelywill only be realized through complementaryand integrated use oi the RBV together withother, demand-oriented perspectives. Yet, eifortsby RBV scholars to formalize the RBV, to answerthe how questions, and to incorporate the tem-poral component will each likely pay off in in-creased contributions. - :••

2001 Priem and Butlei 37

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Richard L Priem is a professor of strategic management and chair of the Departmentof Management at the University of Texas at Arlington, where he received his Ph.D. Hewas a Fulbright scholar at the University College of Belize and has visited at HongKong Polytechnic University and HKUST. His research interests include top manage-ment decision making and processes.

John E. Butler is an associate professor of strategic management at Hong KongPolytechnic University. He received his Ph.D. in strategy from New York University. Hiscurrent research interests are in the areas of entrepreneurship and Southeast Asianbusiness practices.

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