firm resources and sustained competitive advantage

FIRM RESOURCES AND SUSTAINED COMPETITIVE ADVAN-TAGE, BARNEY,JAY B, JOURNAL OF MANAGEMENT, 1991

DATE: 10/27/2015 ID: 20155636NAME: RIRI KUSUMARANI

ITM 501 - INNOVATION MANAGEMENT (2014)

ONE SENTENCE SUMMARY

10/27/2015ITM 501 - INNOVATION MANAGEMENT 2

The proposed framework can be used to analyze resources potential as source for sustained competitive advantage of a firm

when firm resources are heterogeneous and immobile

1960’S FRAMEWORK

SWOT Analysis

Show How Firms Sustain their competitive advantages by implementing strategies

Exploiting StrengthsResponding to OpportunitiesNeutralizing ThreatsAvoiding Weaknesses

Porter’s Five Forces Model

Attributes of an attractive industry and suggests greater opportunities with less threats

ASSUMPTION IN PROPOSED FRAMEWORK

Firms in an industry may be heterogeneous with respect to the strategic resources they control

Resources may not be perfectly mobile, therefore Heterogeneity can be long-lasting

CONCEPT IN THIS PAPER : FIRM RESOURCES

All assets, capabilities, organizational processes, firm attributes, information, knowledge etc. that are controlled by firms to be used as strength for improving efficiency and effectiveness (Daft,1983)

Three Categories in this paper:

Physical capital. Ex: technologies, infrastructures, location, access to materi-als etc

Human capital. Ex: training, experience,relationship,worker & manager skills Organizational capital . Ex:reporting structure, planning, controlling, informal

relations among groupThese resources can act as barriers or enabler of a firms ability to implement valuable strategies for sustaining competitive advantage.

Even so, this paper focus only on the function as enabler of firms sustainable competitive advantage

CONCEPT IN THIS PAPER : COMPETITIVE ADVANTAGE & SUSTAINED COMPETITIVE ADV.

Competitive AdvantageFirm is implementing a value creating strategy not simultaneously being implemented by other firms

Sustained Competitive AdvantageFirm is implementing a value creating strategy not simultaneously being implemented by other firms and when other firms are unable to duplicate the benefits of the strategy

Does not mean it will last forever. But will not be competed away through the duplication efforts.

The inability of existing and potential firms to duplicate strategy

Schumpeterian Shocks : A firm enjoying a sustained competitive adv. may experience major shifts in the structure of competition.

RESOURCE HETEROGENEITY AND IMMOBILITY

The search for sources of sustained competitive advantage must focus on firms’ resource heterogene-ity and immobility

Homegeneity & Mobility If an industry is populated with identical firms that have access to similar resources, it is impossible for

these firms to enjoy sustained competitive advantage. In order to be a first-mover advantage, firms in an industry must be heterogeneous in terms of the re-

sources they control Entry barriers and mobility barriers can be source of sustained competitive advantage when resources

are heterogeneous and immobile.

ATTRIBUTES OF RESOURCES AS SOURCE FOR SUSTAINED COMPETITIVE ADVANTAGE

Valuable Enable firms to implement strategies for

increasing effectiveness and efficiency Exploit opportunities , Neutralizing threats

Rareness If a resources is valuable but easy to ob-

tain, it can not be used as source of com-petitive advantage

However, valuable and common resources can also be used to ensure firms’ survival.

If number of firms possess a valuable of resources is less than the number of firms needed to generate perfect competi-tion industry : It’s a source!

Imitability Valuable & rareness resources must be difficult to

imitate in order to be considered as source for sus-tained competitive advantage.

Imperfectly imitable because: Dependent upon unique historical conditions The link between firms sus. competitive adv. and re-

sources is casually ambiguous Resource generating firms’ advantage is socially com-

plex Physical Technology resources is not included in

this attributes

Substituability Resources must be no strategically equiv-

alent valuable resources that are them-selves either not rare or imitable.

ATTRIBUTES OF RESOURCES AS SOURCE FOR SUSTAINED COMPETITIVE ADVANTAGE (2)

PROPOSED FRAMEWORK

Examples on applying this framework are given in the paper : Strategic Planning Information processing systems Positive reputations

FORMAL & INFORMAL STRATEGIC PLANNING AS RESOURCE FOR S.C.A

Value & Rareness Valuable :

Enable to recognize opportunities & threats Enable to recognize & exploit firms re-

sources not Rare:

Thoroughly described & documented

Imitability & Substituable imitable :

Through documentation in public sources Other firms can learn to do the same strat-

egy substitutable:

Through strategic informal planning Valuable :

Enable to recognize opportunities & threats Firms that recognize the importance of this

processs will likely to gain S.C.A Rare:

Firms try to prevent processes from unfolding

Imperfectly imitable Processes are socially complex

substitutable Substitutable through formal planning?

Form

alin

form

al

INFORMATION PROCESSING SYSTEMS AS RESOURCE FOR S.C.A


Enable to recognize opportunities & threats Enable to recognize & exploit firms re-

sources not Rare:

Machines are available to purchase across markets

If embedded through formal-informal man-agement decision making process, then it can be considered as rare


Because machines can be purchased, then they are highly imitable

The presence of highly experienced man-agement team makes IPS as source of S.C.A

substitutable: Through strategic informal planning

POSITIVE REPUTATION AS RESOURCE FOR S.C.A


Positive reputation among customers and suppliers

Rare: If only a few firms have positive reputa-

tions


Difficult to duplicate because of historical setting

Known as Socially complex relation substitutable:

Substitute with Guarantee and reassurance?

IMPLICATIONS

Social Welfare and S.C.A Higher level of performance a firm with a resources are due to the efficiency it exploits the advantages,

and not to the effort of firm to create a imperfectly competitive conditions in a way that fails to maximize social welfare.

Organization Theory Behavior and S.C.A Proposed framework suggests research in organizational theory and behavior can act as a rich source to

find resources that are valuable, rare, non-imitable and no substitute. It anticipates a more intimate integration of the organizational and the economic as a way to study S.C.A

Firm Endowments and S.C.A Assumption that managers are limited by their ability to manipulate all the attributes and characteristic of

their firms However this make firms resources imperfectly imitable

LIMITATION & COMMENT ON PAPER

This paper is written more than 24 years ago, some perspective might have changed. This paper is based on the assumption that in order to be considered as source of S.C.A , a

resource must be Heterogeneous and immobile. Question raised : what about homoge-neous and mobile resources?

Comment on reading Is there any tradeoff when firms try to engage in sustained competitive advantage? The role of openness and sustained competitive advantage? As a barrier or enabler? Does sustaining competitive advantage more important than surviving the competition? Difficulties in finding resources that match 4 criteria for source of S.C.A All resources that a firm has must be having valuable point, if not, they will not be acquired

by the firm. So what is the definition of valuable ?