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® Academy oi Management Review2001, Vol. 26, No. 1, 41-56.

IS THE RESOURCE-BASED "VIEW" A USEFULPERSPECTIVE FOR STRATEGICMANAGEMENT RESEARCH? YES

JAY B. BARNEYThe Ohio State University

Here I examine each of the major issues raised by Priem and Butler (this issue) aboutmy 1991 article and subsequent resource-based research. While it turns out that Priemand Butler's direct criticisms oi the 1991 article are unfounded, they do remindresource-based researchers of some important requirements of this kind of research.I also discuss some important issues not raised by Priem and Butler—the resolutionsof which will be necessary if a more complete resource-based theory of strategicadvantage is to be developed.

Priem and Butler's (this issue) critique of my1991 Journal of Management article raises sev-eral important issues, about both the article andsubsequent developments in the resource-basedview (RBV) of the firm. While I disagree withmost of these authors' criticisms, they clearlyprovide a service by creating a forum withinwhich the creation, development, and future ofresource-based models of competition can bediscussed and debated.

Priem and Butler's criticisms fall into fourbroad categories: (1) that the resource-basedtheory I develop in the 1991 paper is tautologi-cal, (2) that my argument fails to acknowledgethat many different resource configurationscould generate the same value for firms and,thus, would not be sources of competitive ad-vantage, (3) that the role of product markets isunderdeveloped in the argument, and (4) thatthe theory developed in the article has limitedprescriptive implications. I discuss each of thesecriticisms in turn. At the end of this response, Ialso discuss several important issues in thefield of strategic management that are ad-dressed neither in the 1991 paper nor in subse-quent resource-based work. These issues, Ithink, constitute part of the research agendathat resource-based and other theorists must ad-

Comments and suggestions from Asli Arikan. ValentinaDelia Corte, Konstantina Kiousis, Michael Leiblein, DougMiller, Mike Peng, Mauro Sciarelli, and Heli Wang havebeen helpful in writing this article. I began writing thisarticle while visiting the Marketing Department at BoconniUniversity in Milan, Italy. I am grateful for the space andintellectual climate I was provided there.

dress if the field of strategic management is tocontinue to progress.

THE TAUTOLOGY CRITIQUE

Priem and Butler's first and, in many ways,most important critique of the 1991 article is thatthe RBV presented is tautological—that its pri-mary assertions are true by definition and, thus,not subject to empirical test (Williamson, 1999).Following Bacharach (1989), the authors attemptto demonstrate the tautological nature of the1991 argument by substituting the definitions ofvalue, rarity, and strategic advantage giventhere into what they characterize as one of thecentral empirical assertions of the RBV: onlyvaluable and rare resources can be sources ofcompetitive advantage. The assertions thus de-rived are clearly tautological. However, the factthat Priem and Butler are able to restate parts ofthe 1991 argument in ways that make it tauto-logical is not the same thing as demonstratingthat the argument is, in fact, tautological.

It is important to recognize that, at this defini-tional level, all strategic management theoriesare tautological in the way Priem and Butlerdescribe. For example. Porter's (1980) assertionsabout the relationship between industry attrac-tiveness and firm performance can be reducedto tautology by observing that firms in attractiveindustries will outperform firms in unattractiveindustries and by defining industry attractive-ness in terms of the ability of firms to performwell. Transaction cost economics also can bereduced to tautology: hierarchical forms of gov-ernance will replace market forms of gover-

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42 Academy of Management Review January

nance when the costs of market governance aregreater than the costs of hierarchical gover-nance. Indeed, this is known as the Coasiantautology. Thus, the ability to restate a theory inways that make it tautological provides no in-sights about the empirical testability of the the-ory whatsoever.'

Of course, the critical issue is not whether atheory can be restated in such a way as to makeit tautological—since this can always be done—but whether at least some of the elements of thattheory have been parameterized in a way thatmakes it possible to generate testable empiricalassertions. For example. Porter's theory isclearly not tautological since he specifies theconditions that make an industry more or lessattractive independent of the performance offirms in that industry. Porter parameterizes in-dustry attractiveness through the well-known"five forces" framework, a parameterization thatenables Porter to make empirically testable as-sertions of the form, firms operating in industriescharacterized by high rivalry, high threat of sub-stitutes, high threat oi entry, high buyer power,and high supplier power will perform at a lowerlevel than firms operating in industiies withoutthese attributes.

In a similar way, Williamson (1975) parame-terizes the attributes of transactions in waysthat make it possible to specify conditions underwhich the costs of market governance will begreater than the costs of hierarchical gover-nance. Williamson has explored several ver-sions of this parameterization, but the most crit-ical transaction attribute he has identifiedseems to be transaction-specific investment.This parameterization enables Williamson tomake empirically testable assertions of theform, transactions characterized by high trans-action-specific investment will be less costly to

' Moreover, because a theory is tautological does notmean that it might not be insightful and even empiricallyfruitful. For example, all game theoretic models are tauto-logical in the sense that the hypotheses they generate arecompletely determined by the assumptions adopted in themodels and the laws of mathematics applied to these as-sumptions. However, these tautological models can some-times generate quite counterintuitive insights that can, inprinciple, lead to important empirical research. Again, theissue is not tautology, per se, but, rather, whether the prop-ositions derived from a tautology can be parametrized in away that makes empirical testing possible.

manage through hierarchical governance thanthrough market governance.

Thus, the real theoretical challenge presentedby Priem and Butler is not "Can the RBV pre-sented in the 1991 paper be restated in a waythat makes it tautological?" but is, rather, "Aresome aspects of this resource-based theory pa-rameterized in ways that can generate testablehypotheses?" In the next sections I examine theextent to which each of the components of thisresource-based theory are parameterized inways that can generate testable propositions.

Parameterizing Value

Clearly, of all the theory elements in the 1991article, the value variable is the least fully pa-rameterized. This is because, as Priem and But-ler correctly observe, the determination of thevalue of a firm's resources is exogenous to theresource-based theory presented in the 1991 ar-ticle. In fact, the exogenous nature of value de-termination is stated in the 1991 article:

These environmental models help isolate thosefirm attributes that exploit opportunities and/orneutralize threats, and thus specify which firmattributes can be considered as resources. Theresource-based model then suggests what addi-tional characteristics that these resources mustpossess if they are to generate sustained compet-itive advantage (Barney, 1991: 100; emphasisadded).

Since the determination of the value of a re-source is exogenous to the argument presentedin the 1991 article, it is not surprising that theconditions under which resources will and willnot be valuable are not fully specified there.

That said, it would be inappropriate to sug-gest that the 1991 article fails to give at leastsome guidance as to how the value of a resourcecan be determined. In particular, the article in-dicates that resource value must be determinedby models of the competitive environmentwithin which a firm competes. Indeed, since1991, work has continued on using these kinds ofmodels to estimate resource value.

This work falls into two large categories: (1)efforts to use structure-conduct-performance (S-C-P; Bain, 1956)-based theories to specify theconditions under which different firm resourceswill be valuable and (2) efforts to determine thevalue of firm resources that apply other theories

2001 Barney 43

derived from industrial organization models(I/O) of perfect and imperfect competition (Con-ner, 1991). In my own work I acknowledge theinsights that can be generated from applyingthe S-C-P framework to understanding the valueof firm attributes (Barney, 1991: 100), but I havefocused more on non-S-C-P-based theories ofthe value of firm attributes.

Consider, for example, my 1997 discussion ofthe ability of cost leadership strategies to gen-erate sustained competitive advantages (Bar-ney, 1997: Chapter 6). I begin this discussion bydescribing several firm attributes that may beassociated with cost leadership (e.g., volume-derived economies of scale, cumulative volume-derived learning curve economies, policychoices, and so forth) and then show how theseattributes can generate economic value in atleast some market settings. The logic I use todemonstrate the value of these attributes is amarket structure logic that is consistent withtraditional microeconomics (see Figure 6.4 inBarney, 1997). Only after identifying the condi-tions under which cost leadership can generateeconomic value do I turn the discussion to theconditions under which cost leadership can be asource of competitive advantage (i.e., rare) andsustained competitive advantage (i.e., rare andcostly to imitate).

Nor am I the only researcher that has followedup on the suggestions in the 1991 article for howto value firm resources. Theoretically, progresson this front can be found in Leonard-Barton(1992), Barney and Hansen (1994), McWilliamsand Smart (1995), and Hunt (1997, 2000), amongothers. Empirically, two of the papers cited byPriem and Butler (i.e.. Brush & Artz, 1999, andMiller & Shamsie, 1996). are important preciselybecause they address the value of resourcesquestion. Additional empirical work has beendone by Barnett, Greve, and Park (1994),Makadok (1998, 1999), Poppo and Zenger (1998),and many others. In all high-quality resource-based work, researchers must begin by address-ing the value of resources with theoretical toolsthat specify the market conditions under whichdifferent resources will and will not be valuable.Although additional work is required, I believewe are developing a more complete understand-ing of these conditions.

Thus, although the value variable in Barney(1991) is not fully parameterized, in the articlethere is recognition of the importance of doing

this and even a suggestion of some ways itmight be done. While, strictly speaking, Priemand Butler's critique does not directly apply tothe 1991 argument, it does apply to resource-based theorists who have tried to examine theimplications of resource-based logic withoutconsidering the market conditions under whicha firm's resources will and will not be valuable.Indeed, if I were to write the 1991 article today, Iwould definitely enhance the discussion ofvalue along the lines outlined here. The briefdiscussion of value in the 1991 article couldhave indicated to some that determining thevalue of resources is less important than deter-mining the rarity and imitability of resources—apoint of view with which I clearly disagree.

Parameterizing Rarity

Priem and Butler also suggest that the termrare is not parameterized in the 1991 article and,thus, that any assertions including "rare" mustbe tautological. I certainly agree that since theconcept of rarity is not exogenous to the RBVdeveloped in the 1991 paper, if rare was notparameter ized in that art icle, then anyassertions made with this term must remain tau-tological. However, in fact, rare is parameterizedin the 1991 article. Although this parameteriza-tion is not as complete as I would like, it isnevertheless specific enough to generate empir-ically testable assertions.

The parameterization of rare is discussed inthe last paragraph of the section titled Rare Re-sources:

How rare a valuable firm resource must be inorder to have the potential for generating a com-petitive advantage is a difficult question .. . Ingeneral, as long as the number of firms that pos-sess a particular valuable resource . . . is lessthan the number of firms needed to generate per-fect competition dynamics in an industry . . . thatresource has the potential of generating a com-petitive advantage (Barney, 1991: 107).

Of course, a complete parameterization of rarewould enable a researcher to specify the maxi-

^ As will become clear later, I wish I had not used the termindustry in this parametrization of the concept of rarity.Rather, I should have focused simply on the number of firmsthat must possess a resource in order to generate perfectcompetition dynamics, independent of whether those firmsoperated in a particular industry.


mum number of competing firms that can pos-sess a particular resource and still have perfectcompetition based on that resource not exist.However, in 19911 was unaware of a sufficientlyrigorous theory to specify such a number. I sus-pect, in fact, that such a theory would show thathow rare a particular resource must be in orderfor perfect competition based on that resource tonot exist will depend upon several attributes ofthe market structure within which firms arecompeting.

However, even though in the 1991 article I donot specify the maximum number of competingfirms fhat can possess a resource beyond whichperfect competition will exist, I do suggest thatsuch a number exists. Moreover, even without acomplete parameterization of resource rarity, itis still possible to observe that if only one com-peting firm possesses a particular valuable re-source, perfect competition around this resourcewill not exist. In fact, this assertion is made inthe 1991 article (Barney, 1991: 107). This makes itpossible to generate testable assertions of theform:

If only one competing firm possesses aparticular valuable resource (wherethe value of that resource is deter-mined in ways that are exogenous tothe theory developed in the 1991 arti-cle), then that firm can gain a compet-itive advantage (i.e., it can improve itsefficiency and effectiveness in waysthat competing firms cannot).

One example of this form of a testable asser-tion can be found in Barney (1986b). In that arti-cle I examine the ability of organizational cul-ture to be a source of competitive advantage.Much of that argument can be summarizedthrough an empirical assertion of the form:

// only one competing firm possesses avaluable organizational culture(where the value of that culture is de-termined in ways that are exogenousto the theory developed in the 1991article), then that firm can gain a com-petitive advantage (i.e., it can im-prove its efficiency and effectivenessin ways that competing firms cannot).

Both these assertions are clearly testable. If afirm uniquely possesses a valuable resourceand cannot improve its efficiency and effecfive-

ness in ways that generate competitive advan-tages, then these assertions are contradicted.One could test these assertions by measuringthe extent to which a firm uniquely possesses avaluable resource (e.g., a valuable organization-al culture), measuring the activities that differ-ent firms engage in to improve their efficiencyand effectiveness, and then seeing if there aresome activities a firm with the unique cultureengages in to improve its effectiveness and ef-ficiency—activities not engaged in by othercompeting firms.

Of course, there are difficult measurementproblems associated with testing assertions ofthis form. Measurement problems RBV research-ers face, however, are similar fo those otherstrategy researchers face, including those look-ing to test implications derived from transactioncost economics and agency theory (Godfrey &Hill, 1995). Moreover, Priem and Butler's argu-ment is not that assertions derived from fhe 1991are difficult to test but, rather, that they are, inprinciple, not testable.

All this said, it is clear that additional work isneeded to complete the parameterization of theconcept of rarity. Indeed, unlike the theoreticalwork and empirical work that have enabled amore complete parameterization of resourcevalue, there has been less work on developing amore complete parameterization of the rarityvariable. In most empirical and theoretical workon rarity since the 1991 article, researchers haveeither implicitly focused on the competitive im-plications of valuable and unique resources(Barney, 1988) or have been rather imprecise inspecifying how rare a resource must be amongcompeting firms to still generate competitiveadvantages. Priem and Butler certainly providean important service by reminding us of theimportance of further refining the parameteriza-tion of the concept of rarity, even though theirspecific critique of the concept of rarity in the1991 article as tautological is incorrect.

Parameterizing Imitability

Ironically, Priem and Butler do not commenton the extent to which arguments in the 1991article can be used to derive empirically test-

^ This discussion temporarily sets aside substitutabilityconsiderations.

2001 Barney 45

able assertions about the relationship betweenthe imitability of valuable and rare firm re-sources and sustained competitive advantage.At one point in their article, Priem and Butlerstate, "For ease of exposition, we examine thoseterms associated with competitive advantagefirst and set aside issues associated with sus-tainability" (p. 27). But tautology questions arenever subsequently raised concerning the imi-tability variable.*

This is, of course, because the concept of imi-tability is clearly parameterized in the 1991 ar-ticle. This parameterization makes it possible togenerate testable assertions of the form:

A firm that possesses a particularvaluable resource fwhere fhe value ofthat resource is determined in waysthat are exogenous to the theory de-veloped in the 1991 article) that is rare(possessed by fewer firms than re-quired to generate perfect competitiondynamics) and obtained in unique his-torical circumstances can gain a sus-tained competitive advantage (i.e.,can improve its efficiency and effec-tiveness in ways that competing firmscannot and in ways that competingfirms cannot imitate over time).

Additional empirical assertions about the re-lationship between firm resources and sus-tained competitive advantages can be gener-ated by substituting the other attributes ofresources that can lead to costly imitation citedin the 1991 article for "unique historical condi-tions"—that is, causal ambiguity and socialcomplexity.

Indeed, even if Priem and Butler were correctabout assertions that included the terms vaJu-abJe and rare being tautological, which they arenot, the fact that empirical assertions can bederived from the 1991 article's analysis of imita-bility and sustained competitive advantage un-dermines their general assertion that the RBVdeveloped in the 1991 article is tautological. Af-ter all, in few theories do researchers fully pa-

•• Indeed, in their discussion of the prescriptive limits ofthe RBV, Priem and Butler acknowledge that those resourceattributes associated with the sustainability of competitiveadvantages identified in Barney (1991) do have prescriptiveimplications and, thus, are not tautological in the ways theyassert resource value and rarity are.

rameterize all the concepts they use to deriveempirical assertions. However, if at least someof these concepts are parameterized, then it ispossible to deduce testable empirical assertionsfrom these theories.

Porter (1980), for example, parameterizes in-dustry attractiveness but does not provide theo-retical tools for determining when an industrydoes or does not exist (Caves & Porter, 1977). It isstill possible, however, to deduce testable em-pirical assertions from Porter's work. In thesame way, Williamson (1975) parameterizes theattributes of transactions that can have the ef-fect of making hierarchical governance lesscostly than market governance, but he does notinitially provide theoretical tools for examiningthe impact of production costs on governancechoices (Riordan & Williamson, 1985). Porter andWilliamson, like all theorists, make choicesabout which aspects of their theory to parame-terize, and which aspects not to parameterize,based primarily on decisions about which as-pects of the theory being developed seem mostlikely to generate important testable empiricalassertions.

In the 1991 article I gave the parameterizationof imitability the most attention because I be-lieved the empirical assertions derived from thisconcept were likely to be among the most impor-tant to come out of resource-based theory. Afterall, what is most new about resource-based the-ory is not an explanation of temporary compet-itive advantages for firms. These competitiveadvantages can be understood simply as dis-equilibrium phenomena in a more traditionalI/O theoretical framework. Following Lippmanand Rumelt (1982), I concluded that what wasmost new about resource-based theory was theability to specify conditions under which firmswould possess competitive advantages in equi-librium. Thus, reasons why a firm's valuableand rare resources can be costly to imitate be-come very important in the 1991 article.

Indeed, the RBV research cited by Priem andButler since the 1991 article seems to be consis-tent with these expectations. Research on thecompetitive implications of such firm resourcesas knowledge, learning, culture, teamwork, andhuman capital, among others, was given a sig-nificant boost by resource-based theory—a the-ory that indicated it was these kinds of re-sources that were most likely to be sources ofsustained competitive advantage for firms.

46 Academy ol Management Review January

Thus, while Priem and Butler clearly demon-strate that it is possible to restate the RBV de-veloped in the 1991 article in a way that is tau-tological, their critique that the argument in the1991 article is itself fautological is unfounded. Atits core, these authors' critique fails to acknowl-edge the ways that the key variables in the 1991article are parameterized.

Empirical Tests of the RBV

Of course, logical debates about whether the1991 argument is tautological would be moot inthe face of rigorous empirical tests. Indeed, asPriem and Butler suggest, in numerous sub-sequent works—many of them empirical—researchers have cited the 1991 paper. However,many of fhese citations are used primarily tohelp establish the context of some empirical re-search—for example, fhat the focus is on theperformance implications of some internal at-tribute of a firm—and are not really direct testsof the theory developed in the 1991 article. None-theless, there is some empirical work that con-stitutes quite direct tests of the resource-basedtheory I developed in the 1991 paper.

Consider, for example, Henderson and Cock-burn's (1994) examination of the impact of"componenf competence" and "architecturalcompetence" on the research productivity ofpharmaceutical firms. Henderson and Cockburnmeasure the value of these competencies by es-timating their impact on the research productiv-ity of pharmaceutical firms, under the assump-tion that pharmaceutical firms with moreproductive research efforts will outperformpharmaceufical firms with less productive re-search efforts. They measure the rarity of thesecompetencies by showing that their level variesacross competing pharmaceutical firms, andthey measure the imitability of these competen-cies by showing that firm differences in fhe levelof these competencies remain very stable overtime. To the extent that high levels of researchproductivity are valuable in the pharmaceuticalindustry, Henderson and Cockburn's results areconsistent with the RBV developed in my 1991article.

Makadok (1999) authored another paper inwhich the argument developed in the 1991 paperis tested. In his article Makadok examines theimpact of differential levels of economies ofscale on the ability of money market mutual

funds to increase their market share. He mea-sures the value of these economies of scale byfirsf estimating the impact of the size of a familyof funds on both its weighted-average, risk-adjusted gross yield and its weighted-averageexpense ratio, and then shows that these yieldsand expenses affecf the market share of the fam-ily of funds. Makadok measures the rarity ofeconomies of scale by showing that they varyacross families of funds, and he examines theimitability of these scale differences by examin-ing their impact on the market shares of familiesof funds over time. Consistent with the 1991 ar-ticle, because economies of scale are not pathdependent, causally ambiguous, or sociallycomplex, Makadok does not expect these capa-bility differences to be a source of sustainedcompetitive advantage. In fact, the impact ofscale differences on market share becomessmaller over time—results that are again con-sistent with the 1991 argument.

Moreover, not all empirical tests of the 1991argument are consistent with that argument. Forexample, Poppo and Zenger (1998) examinedsome implications of the 1991 paper (developedby Conner & Prahalad, 1996) and found resultsthat are inconsistent with resource-based ex-pectations and more consistent with transactioncost expectations. Unfortunately, data limita-tions make it difficult to understand exactlywhere the resource-based argument falls short:is it around the value of resources, their rarity, ortheir imitability? However, such contrary empir-ical results would certainly not be possible ifresource-based theory in general and the 1991argument in particular were purely tautological.

Thus, Priem and Butler demonstrate that it ispossible to restate the 1991 argument as if itwere tautological, but they fail to demonstratethat the argument is, in fact, tautological. In-deed, it is possible to derive empirically testableassertions from the 1991 article—assertions thathave, in fact, been tested.

EQUIFINALITY IN THE RBV

Although Priem and Butler do not label it as amajor limitation of the RBV, they do suggest thatanother weakness of this logic, as developed inthe 1991 article, is the problem of equifinality:there may be many different resource configu-rations that could generate the same value forfirms and, thus, would not be sources of compet-

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itive advantage. Their solution to this supposedproblem is to adopt what they describe as amore "traditional" definition of competitive ad-vantage: a firm "systematically creating aboveaverage returns" (Schoemaker, 1990: 1179). Thisleads them to suggest that it is not the value andrarity of a resource that generates competitiveadvantage (as defined by Schoemaker, 1990) but,rather, the reiafive vaJue of different resourcesand capabilities.

However, in the 1991 article I explicitly recog-nized the potential problem of equifinality. Infact, that is why I introduced the substitutabilityvariable into the 1991 argument. Substitutabilityis defined with respect to strategic equivalence:

"Two valuable firm resources . . . are strategi-cally equivalent when they can each be exploitedseparately to implement the same strategies"(Barney, 1991: 111).

The general conclusion is that even if a resourceis valuable, rare, and costly to imitate, if it hasstrategically equivalent substitutes that arethemselves not rare or not costly to imitate, thenit cannot be a source of sustained competitiveadvantage. The existence of strategic substi-tutes indicates that strategic equifinality existsin a competitive situation and, thus, that com-petitive advantage cannot exist. If strategic sub-stitutes do not exist, then strategic equifinalitydoes not exist, and competitive advantages arepossible. Thus, substitutability deals with ambi-guities that may be introduced into empiricalassertions derived from the RBV because of theproblem of equifinality.

Although the equifinality critique presentedby Priem and Butler is unfounded, their decisionto adopt "systematically creating above aver-age returns" as the appropriate definition ofcompetitive advantage in this part of their cri-tique is interesting. This definition implicitly re-introduces the concept of industry into the dis-cussion of competitive advantage. In order toknow whether a firm's returns are above aver-age, an average must be calculated. That aver-age almost certainly would be calculated on thebasis of returns of firms in a particular industry.Thus, in their definition of competitive advan-tage, Priem and Butler compare a particularfirm's performance with the performance ofother firms in that industry.

In the 1991 article I chose a definition of com-petitive advantage that did not depend on de-

fining a firm's industry for three reasons. First,determining the theoretically appropriateboundaries of a particular industry can be verydifficult. On the margin, decisions about whichfirms to include within the boundary of an in-dustry, and which to exclude, are quite arbi-trary. Moreover, these decisions can have veryimportant implications for the calculated aver-age returns in an industry and, thus, importantimplications for determining whether a particu-lar firm has a competitive advantage.^ This canintroduce a significant degree of arbitrarinessinto research on competitive advantage.

Second, defining industry boundaries as-sumes a level of stability in technology andcompetition that, in many situations, is inappro-priate. It was often inappropriate in 1991. It iseven more inappropriate in the twenty-first cen-tury, when traditional industry boundaries arebeing destroyed and when competition cancome from numerous sources, not just from firmswithin the well-defined boundaries of an indus-try. In the new economy it will often be inappro-priate to adopt a definition of competitive ad-vantage that builds on concepts assuming atechnological and competitive stability thatdoes not exist. In the long run, I suspect that thetradition of introducing industry controls intothe empirical analysis of firm performance willbe replaced by a tradition of introducing con-trols for the competitiveness of the contextwithin which a firm is operating—a context thatcan only be imperfectly described using the con-cept of industry.

Third and finally, resource-based logic takesas its unit of analysis the firm. To maintaintheoretical consistency, it was important for meto adopt a firm-level dependent variable. Thus,rather than adopt a definition of competitiveadvantage that required the concept of an in-

^ For example, when Alcoa attempted to acquire RomeCable, the combined firm's "competitive advantage" de-pended significantly on how this firm's industry was de-fined. If this industry was defined as "insulated wire andcable," the combined firm's market share was only 1.6 per-cent, and its market power-based competitive advantagewas quite small. If this industry was defined as "insulatedaluminum wire and cable," the combined firm's marketshare was 16.3 percent. In this setting it presumably enjoyeda much more substantial market power-based competitiveadvantage (Scherer, 1980:552). Unfortunately, both these def-initions of industry were quite reasonable.

48 Academy of Management fleview January

dustry, I defined competitive advantage at thefirm level.

In general, there are at least two ways to de-fine competitive advantage at the firm level.First, as is done in the 1991 article, a firm'scompetitive advantage can be defined with re-spect to the actions of other firms—either cur-rent or potential competitors. In this approach, afirm is said to have a competitive advantagewhen it is engaging in activities that increaseits efficiency or effectiveness in ways that com-peting firms are not, regardless of whether thoseother firms are in a particular firm's industry.

Second, a firm's competitive advantage can bedefined with respect to return expectations of thatfirm's owners. Stockholders, as residual claim-ants, develop expectations about the returns afirm will generate. In this definitional approach,firms that generate higher returns than were ex-pected by stockholders (at constant levels of risk)have a competitive advantage. This definition ofcompetitive advantage is often called an eco-nomic rent and is the definition of competitiveadvantage explored in Bamey (1986a).

Although these two firm-level approaches to de-fining competitive advantage are different, theycan be related. For example, one reason a firmmay be able to generate an economic rent is thatit is able to increase its efficiency and effective-ness in ways that other firms are not. If expecta-tions about firm returns are based on firms that donot possess this competitive advantage, this com-petitive advantage can generate an economicrent. Also, sustainability is possible in both ofthese definitional approaches. According to thefirst definition of a competitive advantage, a firmpossesses a sustained competitive advantagewhen it is improving its efficiency and effective-ness in ways that competing firms are not and.when these other firms have ceased efforts to im-itate these activities. In the second definition afirm creates a sustained economic rent when it isable to consistently exceed the performance ex-pectations of its owners, despite that these expec-tations will be adjusted given a firm's prior per-formance levels. In this sense, a sustainedeconomic rent reflects the creative and entrepre-neurial ability of firms to constantly discover howto generate value with their resources in waysthat outside owners cannot anticipate.

That these two definitions of competitive ad-vantage can be related, however, does not meanthat they will always be. A firm may possess a

competitive advantage by exploiting valuable,rare, costly to imitate, and nonsubstitutable re-sources, but whether this competitive advan-tage is a source of economic rents depends onthe conditions under which the resources con-trolled were acquired or developed. If the cost ofacquiring or developing these special resourcesequals the value they create when used to con-ceive of and implement a strategy, they will notbe a source of economic rent (Barney, 1986a).This kind of analysis is difficult to do if compet-itive advantage is defined in terms of a firmexperiencing "above average returns" in an in-dustry, because in this definition the causes ofcompetitive advantage are not distinguishedfrom the effects.

Given the proliferation of different definitionsof competitive advantage in the strategic man-agement literature, it might be time to abandonthis term altoge-ther. Rather than refer to thedefinitionally ambiguous "competitive advan-tage," researchers should specify exactly what itis they are trying to explain: above-industry-average profits (as in Priem & Butler), a firmimproving its efficiency and effectiveness inways that competing firms are not (what mightbe called "strategic advantage," as in Barney,1991), or economic rents (as in Barney, 1986a).

Finally, Priem and Butler's argument that it isa resource's relative value and not its value andrarity that determines the extent to which a re-source can be a source of above-industry-average profits, I think, confuses cause and ef-fect. Clearly, the competitive actions two firmsengage in might have very different conse-quences for the relative value of these firms. Allresource-based logic suggests is that these dif-ferences reflect differences in the underlying re-sources of firms that enable them to engage insome competitive actions and not others. Thatis, if the relative value of a firm's competitiveactions are effects, then resource-based logicindicates that attributes of firm resources—theirvalue, rarity, imitability, and substitutability—are the causes.

THE PRODUCT MARKET CRITIQUE

Priem and Butler's next critique of the 1991article focuses on the underdeveloped role ofproduct markets in the RBV I develop there. Ihave already acknowledged that the question ofvalue is exogenous to the RBV developed in the

2001 Barney 49

1991 paper. Indeed, in that article I argue that acomplete model of strategic advantage wouldrequire the full integration of models of the com-petitive environment (i.e., product market mod-els) with models of firm resources (i.e., factormarket models). In fact, in their article Priemand Butler present a very simple model of factorand product markets that partially accom-plishes this integration (see their Figure 1), butobserve that this simple model fails to recognizethe role of "entrepreneurial insights concerningfuture demand shifts in product or factor mar-kets" and "first mover advantage [that] wouldresult, because follow-on competitors could onlyacquire . . . factors [of production] at higher cost"(p. 31).

I, of course, agree with all these points. In fact,I wrote an article in 1986 in which I made them(Barney, 1986a). In this sense, the 1991 articlereally needs to be understood within the contextof the 1986 paper. In the 1986 article I developjust the kind of factor market/product marketmodel that Priem and Butler think is important.In the 1991 article I then focus only on the factormarket side of the equation—not because thefactor market/product market issues are not im-portant, but because I had addressed them in aprevious article.

THE INAPPLICABILITY CRITIQUE

Priem and Butler also critique the RBV devel-oped in the 1991 article by stating that it haslimited prescriptive ability. They cite four as-pects of RBV theory that limit its applicability: (1)the attributes of resources that can generatestrategic advantages and sustained strategicadvantages identified by the theory are notamenable to managerial manipulation, (2) thecontext within which the theory applies is notspecified, (3) the definition of resources is allinclusive, and (4) the theory is static and notdynamic. I examine each of these alleged weak-nesses of the RBV developed in the 1991 articlebelow.

Managerial Manipulation of Resources

Priem and Butler correctly observe that manyof the attributes of resources that make themlikely to be sources of sustained strategic ad-vantage—especially path dependence and so-cial complexity—are not amenable to manage-

rial manipulation. However, the fact that thekinds of firm resources that are most likely to besources of sustained strategic advantage arenot amenable to manipulation does not implythat resource-based logic has no managerialimplications. This implies only that the nature ofthose managerial implications might be differ-ent from those Priem and Butler would prefer(Mosakowski, 1998).

In fact, resource-based logic has several veryimportant practical implications for managers.For example, this logic can be used to help man-agers in firms experiencing strategic disadvan-tages to gain strategic parity through identify-ing those valuable and rare resources their firmcurrently does not possess and pointing out thatthe value of these resources can be duplicatedeither by imitation or substitution. In this sense,resource-based logic can be used to provide atheoretical underpinning to the process ofbenchmarking in which many firms engage.

Resource-based logic can also be used to helpmanagers in firms that have the potential forgaining sustained strategic advantages, butwhere that potential is not being fully realized,to more fully realize this potential. Resource-based logic can help managers more completelyunderstand the kinds of resources that can gen-erate sustained strategic advantages, help themuse this understanding to evaluate the fullrange of resources their firm may possess, andthen exploit those resources that have the po-tential to generate sustained strategic advan-tage. It can help identify what the most criticalresources controlled by a firm are and therebyincrease the likelihood that they will be used togain sustained strategic advantages.

Managers can also use resource-based logicto ensure that they nurture and maintain thoseresources that are sources of a firm's currentstrategic advantages. As suggested in the 1991article, strategic advantages for firms are oftenbased on bundles of related resources. Some ofthese resources are likely to be valuable buteither not rare, not imperfectly imitable, or notnonsubstitutable. Others of these resources arelikely to have these competitively important at-tributes. Nurturing and protecting this secondclass of resources are important, if a firm is tomaintain its sustained strategic advantage.

For example, suppose a firm possesses a nur-turing organizational culture. In some marketsettings, such a culture may be valuable. If only


one competing firm possesses this culture, it israre, and, thus, perfect competition dynamicsaround this culture are not likely to develop.Moreover, because an organizational culture de-velops over long periods of time (the role ofhistory) and is socially complex, it is likely to becostly to imitate. Finally, there are few obviousclose strategic substitutes for an organizationalculture. In this situation it is likely that a firm'sculture will be a source of sustained strategicadvantage. However, even if it takes many de-cades for an organizational culture with thesespecific attributes to develop, that culture canbe destroyed very quickly by senior managers ina firm if they make decisions inconsistent withthat culture. Resource-based logic helps identifythis kind of culture as a potentially importantsource of sustained strategic advantage. Armedwith this understanding, managers in an organ-ization might be less inclined to make decisionsthat have the effect of destroying the very re-source that is generating a sustained strategicadvantage for their firm.

However, while it is clear that resource-basedlogic can have very important managerial im-plications, this logic also indicates that thereare important prescriptive limits associatedwith resource-based theories of strategic advan-tage. First, to the extent that a firm's strategicadvantage is based on causally ambiguous re-sources, managers in that firm cannot know,with certainty, which of their resources actuallygenerate that strategic advantage. This can sig-nificantly limit prescriptions derived from thetheory.

Second, no theories of sustained strategicadvantage can be used by managers in firmshaving no potential for generating sustainedstrategic advantages fo create them. That is,resource-based logic cannot be used to createsustained strategic advantages when the poten-tial for these advantages does not already exist.Any theory that purports to be able to accom-plish this is proposing a "rule for riches," and, asis well known, there can be no "rule for riches."If the application of a theory to a firm withoutany special resources can be used to create stra-tegic advantages for that firm, then it could beused to create strategic advantages for any firm,and the actions undertaken by any one of thesefirms would not be a source of sustained strate-gic advantage. Even if a "rule for riches" createdeconomic value, that value would be fully ap-

propriated by those who invented and marketedthis rule.

Thus, although the resources identified by re-source-based logic as being most likely to gen-erate sustained strategic advantages frequentlyare not amenable to managerial manipulation,it certainly does not follow that there are noprescriptive implications of that resource-basedlogic. Indeed, that resource-based logic is con-sistent with causal ambiguity and "rules forriches" constraints on theory-derived prescrip-tion provides an important external validitycheck on this logic.^

Context Nonspecification

Priem and Butler also suggest that prescrip-tion from the RBV developed in the 1991 article islimited because there is no specification of thecontext within which the RBV is valid. This, ofcourse, is simply a different way of saying thatthe determination of the value of a firm's re-sources is exogenous to the RBV developed inthe 1991 article. This concern about the RBV hasalready been addressed and so will not be dis-cussed further here.

All-inclusive Definition of Resources

Priem and Butler argue that since the defini-tion of firm resources, as articulated in Barney(1991) and Wernerfelt (1984), includes almost anyfirm attribute, little prescriptive guidance can

^ Although their critique is not as developed as relatedcritiques about the managerial implications of the RBV,Priem and Butler do observe that luck plays an importantrole in determing a firm's strategic advantage or economicrents. They seem to believe that any firm advantages attrib-utable to luck cannot have managerial implications.Clearly, a firm's path-dependent and socially complex re-sources may be a manifestation of a firm's good luck. How-ever, even if a firm is lucky, it must still understand how it islucky in order to take full advantage of its fortunate circum-stances. The RBV can be important in specifying when a firmis and is not lucky. Also, acknowledging the role of luck indetermining a firm's competitive position is important inguiding a firm's future investment strategies. If most of afirm's success can be attributed to its good luck, then areasonable prescription might be to extract the full value ofthat good luck and then move on, reducing nonessentialinvestments as much as possible. A firm also may be luckyin developing causally ambiguous resources. As before, theprescriptive implications of these kinds of resources arelimited.

2001 Barney 51

be derived from the RBV. There is little doubtthat the definition of resources presented inthese two papers is, in fact, very inclusive. Thatinclusiveness, however, actually enhancesrather than reduces the prescriptive implica-tions of the RBV.

Resource-based theorists do not pretend to beable to generate a list of critical resources everyfirm must possess in order to gain sustained stra-tegic advantages. This is because, as has alreadybeen suggested, the value of particular resourcesdepends on the specific market context in whichthey are applied. However, theorists do describethe attributes that these valuable resources musthave if they are going to be sources of sustainedstrategic advantage for firms. After managers as-certain whether or not a particular resource isvaluable, they can then use resource-based logicto anticipate strategic advantages that a resourcemight create. Rather than limit its prescriptions tospecific resources that can be identified, a priori,managers can apply resource-based logic to anyresource whose value can be determined from themarket context within which the resource is to beapplied.

Indeed, this characteristic of resource-basedtheory undermines Priem and Butler's assertionthat recent advances of resource-based theory, in-cluding Miller and Shamsie's (1996) analysis ofresources in the motion picture industry and Con-ner and Prahalad's (1996) and Kogut and Zander's(1996) efforts to develop a "knowledge-based" the-ory of the firm, do not actually apply RBV logic. Infact, at least one contribution of RBV logic to theseresearch efforts has been to indicate those kindsof resources most likely to be sources of sustainedstrategic advantage for firms. Given that RBVlogic was instrumental in pointing to the kinds ofvariables that should be included in this recentwork (different kinds of assets in Miller and Sham-sie and tacit knowledge in Conner and Prahaladand Kogut and Zander), it is difficult to understandwhat Priem and Butler mean when they say thatthis work makes significant contributions "with-out the RBV itself making an elemental contribu-tion" (p. 33).

Static Resource-Based Logic

Finally, Priem and Butler suggest that RBVprescription is limited because much of the worksubsequent to the 1991 article is static ratherthan dynamic in character. They do admit that

early RBV work is dynamic, citing Penrose (1959),Wernerfelt (1984), and Dierickx and Cool (1989),but they fail to cite the 1991 article as an exam-ple of dynamic RBV, even though later in theircritique they recognize that "Barney's (1991) def-inition of sustainable competitive advantage asoccurring when competitors have ceased at-tempts at imitation also lends itself to temporaltheory building" (p. 35).

Certainly, the quality of resource-based workpublished subsequent to the 1991 article varies.The very worst of it is clearly tautological—where those firm resources that can generate asustained strategic advantage are identified bytheir ability to generate a sustained strategicadvantage. In general, static theoretical andempirical work is more likely to be tautologicalin this sense than dynamic work.

I also agree with Priem and Butler that dy-namic research—where the conditions underwhich resources are developed or acquired inone period have implications for the strategicadvantages of firms in subsequent periods—isparticularly important in studying strategic ad-vantages, and particularly important for study-ing resource-based theories of strategic advan-tage. Empirically, in this research scholars needto adopt time series approaches similar to thoseused by Miller and Shamsie (1996), Makadok(1999), and others. Theoretically, researchersneed to adopt either an equilibrium or evolu-tionary approach to analysis.

In economics the traditional way to developdynamic theory has been to engage in equilib-rium analysis. By describing an economic sys-tem's equilibrium and then comparing thatequilibrium to a system's actual state, theoristscan predict how that economic system willchange over time. Thus, while equilibrium anal-ysis has often been criticized as static, in reality,theorists focus on equilibrium arguments in or-der to more fully understand the dynamics ofsystems that are not in equilibrium. In this con-text, observations that most economic systemsrarely reach equilibrium conditions miss thepoint of equilibrium analysis.

More recently, an alternative to equilibriumanalysis, rooted in what has become known asevolutionary economics, has been proposed(Nelson & Winter, 1982). Instead of focusing onan economic system's equilibrium and compar-ing this equilibrium to a system's current state,system dynamics are studied by comparing the


state of a system at one time with the state ofthat system at a later time. One of the advan-tages of this evolutionary approach is that it ispossible to study the dynamics of systems withequilibria that can only be specified by adopt-ing heroic (and often unrealistic) assumptions.

Both of these approaches to dynamic analysishave been applied in a resource-based context.For example, Lippman and Rumelt (1982), Bar-ney (1986a), and Makadok and Barney (in press)all apply equilibrium analysis to studying sus-tained strategic advantages from a resource-based perspective. Barnett et al. (1994), Levinthaland Myatt (1994), Foss, Knudsen, and Montgom-ery (1995), Hunt (1997), and Teece, Pisano, andShuen (1997) adopt evolutionary approaches tostudying sustained strategic advantages from aresource-based perspective.

Whether it is through equilibrium or evolu-tionary analysis, Priem and Butler are correct toemphasize the importance of dynamic analysisof sustained strategic advantage, for it is onlythrough this kind of analysis that the full impli-cations of resource-based logic for the sustainedstrategic advantages of firms can be under-stood.

DISCUSSION

As indicated earlier, Priem and Butler's criti-cisms of the 1991 article are unfounded. Some oftheir criticisms fail when examined in light ofthe totality of the argument presented in the1991 paper. Some of their criticisms focus onunderdeveloped aspects of the 1991 article, eventhough in the article there is an acknowledg-ment of the importance of these aspects of theargument and even suggestions of ways theycan be developed. These suggestions haveturned out to be fruitful approaches in furtherdeveloping the RBV. Finally, some of Priem andButler's criticisms focus on subsequent work tothe 1991 article and therefore do not constitutecriticisms of the 1991 paper per se.

Yet, although Priem and Butler's primary crit-icisms of the 1991 article are unfounded, theirobservations remind us of important attributesof the RBV—attributes that many applications ofthis logic have not fully appreciated. For exam-ple, Priem and Butler remind us that fhe value ofa firm's resources must be understood in thespecific market context within which a firm isoperating. While some authors have begun to

develop a more complete theory of resourcevalue, too many authors have simply assumedaway this question and, thus, have failed to helpdevelop a more complete theory of firm advan-tages. Fully parameterizing the rarity of firmresources has actually received less attentionsubsequent to the 1991 article than fully param-eterizing the value of those resources.

Priem and Butler's critique also reminds us ofthe logical limits of prescriptions derived fromtheories of sustained firm advantage. These the-ories often have important managerial implica-tions, but those implications are limited by the"rules for riches" paradox. Efforts to develop the-ories that, when applied, will always generatesustained strategic advantages clearly arefoolish.

Priem and Butler remind us as well that acomprehensive list of potential sources of sus-tained strategic advantage for firms cannot bederived from resource-based logic. This logic,however, does make it possible to specify theattributes that can lead some of these resourcesto be sources of sustained strategic advantage.This type of theory can generate both testableempirical assertions and concrete managerialprescriptions, even though it cannot generate acomprehensive list of potential sources of sus-tained strategic advantage.

Finally, Priem and Butler remind us of theimportant role dynamic analysis plays in re-source-based logic. In order to avoid tautologyproblems, authors of empirical resource-basedwork must usually adopt time series or someother form of dynamic analysis. Theoretically,either equilibrium or evolutionary analysis canbe applied to resource-based logic to under-stand the implications of competition for re-sources in one time period for competitionamong firms in another.

However, although Priem and Butler have re-minded us of some important attributes of theRBV, they fail to raise some of the very importantquestions in the field of strategic managementthat are fully addressed neither in the 1991 arti-cle nor in subsequent resource-based work.These questions include: (1) Where do a firm'sstrategic alternatives come from? (2) How arethe rents created through strategies appropri-ated? and (3) How are these strategies to beimplemented? I discuss each of these questionsbriefly below.

2001 Barney 53

Strategic Alternatives

Resource-based theory, as developed in andsubsequent to the 1991 article, includes a verysimple view about how resources are connectedto the strategies a firm pursues. It is almost asthough once a firm becomes aware of the valu-able, rare, costly to imitate, and nonsubstitut-able resources it controls, the actions the firmshould take to exploit these resources will beself-evident. That certainly may be true some ofthe time. For example, if a firm possesses valu-able, rare, costly to imitate, and nonsubstitut-able economies of scale, learning curve econo-mies, access to low-cost factors of production,and technological resources, it seems clear thatthe firm should pursue a cost leadership strat-egy (Barney, 1997: Chapter 6).

However, it may often be the case that the linkbetween resources and the strategies a firmshould pursue will not be so obvious. For exam-ple, sometimes it might happen that a firm'sresources will be consistent with several differ-ent strategies, all with the ability to create thesame level of competitive advantage. In thissituation, how should a firm decide which ofthese several different strategies it should pur-sue?

Even more important, there may be timeswhen choosing a strategy consistent with theresources a firm controls is a creative and evenentrepreneurial act. This might occur, for exam-ple, when a firm possesses valuable, rare, costlyto imitate, and nonsubstitutable resourcesbroadly seen as consistent with one strategy,and the firm is able to conceive of and imple-ment a very different strategy that exploits thesesame resources, but in very different ways.

To the extent that developing strategic alter-natives a firm can use to exploit the resources itcontrols is a creative and entrepreneurial pro-cess, resource-based models of strategic advan-tage may need to be augmented by theories ofthe creative and entrepreneurial process. Thesetheories could then be applied to understand thestrategic alternatives a firm might be able topursue, given the resources it controls. While Iam currently unaware of such a highly devel-oped theory, these observations suggest a veryclose relationship between theories of strategicadvantage and theories of creativity and entre-preneurship.

Rent Appropriation

As has already been suggested, resource-based theory can be used to evaluate the com-petitive potential of the different strategic alter-natives firms face. However, this logic, asdeveloped in the 1991 article and as it hasevolved since, does not address how the eco-nomic rents a strategy might create are appro-priated by a firm's stakeholders. It might be thecase, for example, that implementing a particu-lar strategy generates real economic rents for afirm but that those rents are fully appropriatedby a firm's employees, its customers, or even itssuppliers.

Some scholars have begun to examine thisrent appropriation process (e.g., Coff, 1999).Their work focuses on the relative bargainingpower of a firm's stakeholders and the role ofteam production (Alchian & Demsetz, 1972) indetermining how rents are distributed among afirm's stakeholders. While this work is promis-ing, it still does not constitute a complete theoryof the rent appropriation process. For example,how do different stakeholders come to enjoy dif-ferent bargaining positions? Why isn't the valueof a stakeholder's bargaining position reflectedin the cost of the investments necessary to cre-ate that position? Under what conditions willteam production reduce the ability of employeesto appropriate rents created by a firm's strate-gies? Why would employees agree to employ-ment conditions that significantly reduce theirability to appropriate the rents created when afirm implements its strategies?

Strategy Implementation

Finally, in the 1991 article, issues of strategyimplementation do not receive sufficient atten-tion. As a theoretical convenience, I adopted thesimple view that once a firm understands how touse its resources to implement strategies thatcan be sources of sustained strategic advan-tage, implementation follows, almost automati-cally. This view is inconsistent both with agencytheory arguments taken from organizationaleconomics (Jensen & Meckling, 1976) and a hugebody of organizational behavior literature onmotivation, cooperation, and managerial deci-sion making.

In general, there have been two approaches toaddressing strategy implementation issues in


the context of resource-based theory. First, somehave suggested that the ability to implementstrategies is, itself, a resource that can be asource of sustained strategic advantage. Workon the role of "cooperative capabilities" in im-plementing strategic alliance strategies (e.g.,Hansen, Hoskisson, & Barney, 2000) and the im-pact of "trustworthiness" on exchange opportu-nities for a firm (Barney & Hansen, 1994) is con-sistent with this first approach.

Second, it has also been suggested that im-plementation depends on resources that are notthemselves sources of sustained advantage but,rather, are strategic complements to the othervaluable, rare, costly to imitate, and nonsubsti-tutable resources controlled by a firm (Barney,1995, 1997).

Which of these approaches ultimately is mostfruitful in bringing the analysis of strategy im-plementation into resource-based logic is anopen question. It is clear, however, that addi-tional work is required.

CONCLUSION

There is little doubt that Priem and Butlerhave provided an important service to the fieldof strategic management in general and to re-source-based theorists in particular. Throughouttheir article they highlight those aspects of re-source-based theory that require further devel-opment and refinement and end up calling forincreased efforts to understand its theoreticaland empirical implications. In this sense, Priemand Butler end up answering the question posedin the title of their own paper—"Is the resource-based 'view' a useful perspective for strategicmanagement research?"—with a resounding yes.

In addition, Priem and Butler have given me arare opportunity to go back and think about apaper I wrote over a decade ago. In this processI have asked myself the question "Would I writethe same paper today?" Certainly, some aspectsof the 1991 article have, I think, stood the test oftime. The notions of resource heterogeneity andresource immobility remain, I think, importantcontributions, as do the discussions of rarity,imitability, and substitutability.'' While still con-troversial among many strategy researchers, I

' Some observers have concluded that, taken to its ex-treme, the RBV indicates that all firms are unique. However,the 1991 article only suggests that resources may be heter-

believe that the equilibrium approach to under-standing sustained strategic advantage in the1991 paper is very powerful. I also believe the1991 article was helpful in reintroducing firmattributes into strategic management researchafter a period in which work focused almostexclusively on industry determinants of firmperformance. I have also been very gratified tosee at least portions of the 1991 argument beingapplied in nonstrategic management disci-plines (e.g., human resource management, man-agement information systems, and marketing)and to strategic management questions (e.g.,knowledge-based theories of competitive ad-vantage, resource-based theories of the firm, re-source-based theories of innovation, and re-source-based theories of interfirm cooperation)in ways I did not anticipate. ~

That said, I think I would make some changesto the article if I wrote it today, and many ofthose changes involve the issues that Priem andButler focus on. For example, I think I wouldspend more time on the question of value andhow to parameterize it and how value is relatedto market structure. I would adopt a simplerdefinition of resources (i.e., resources are thetangible and intangible assets a firm uses tochoose and implement its strategies). I wouldlink the argument much more closely to othereconomic traditions, including Ricardian(Ricardo, 1817) economics and evolutionary eco-nomics. And I would explicitly raise the issue oftautology, suggest how this issue could beavoided, and strongly argue for the importanceof temporal empirical tests of the argument.

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Jay B. Barney holds the Bank One Chair for Excellence in Corporate Strategy at theFisher College of Business, The Ohio State University. He received his Ph.D. at YaleUniversity and has previously served on the faculties at UCLA and Texas A&M. Hisresearch interests focus on the resource-based view of the firm and organizationaleconomics.

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