Critically Analyse The Resource Based View Of The Firm Business Essay

In the face of planetary competition, the battle for relevancy and viability has forced administrations to follow an progressively strategic attack to direction patterns across all aspects of the concern. The district of human resources is no exclusion. In the kingdom of HRM there is an on-going hunt for “ the Holy Grail of set uping a causal nexus between HRM and public presentation ” ( Legge 2001: 23 ) . The Resource-Based View of the house ( hereon: the RBV ) ( Barney, 1986, 1991 ; Penrose, 1959 ; Wernerfelt, 1984 ) is one relevant theory in this popular argument. This essay critically analyses the RBV in item. It discusses the theory ‘s cardinal rules and standards, so its virtues and demerits in relation to its application to organizational public presentation, its comparative position as an applicable theory per Se, every bit good as its possible influence on competitory advantage. Additionally, this essay will foreground a modern-day position on ways to bettering the theory in visible radiation of its many unfavorable judgments, every bit good as offering thoughts for targeted future research on organizational public presentation. Finally, this essay suggests that when analyzing the nexus between HRM and organizational public presentation, the extra component of intra-organisational political relations demands to be taken into history.

The RBV ‘s basic rule is that an administration ‘s capacity for competitory advantageA is restricted to its direction of its ain package of resources ( Wernerfelt, 1984:172 ; Rumelt, 1984:557-558 ) . The RBV describes the resources ‘ features in four caput classs, discussed below – Value, Rarity, Inimitability and Non-substitutability ( or VRIN ) . First, ‘Value ‘ describesA a resource ‘s ability to enable a house to use a value-creating scheme, by either surpassing its rivals or cut downing its ain defects ( Barney, 1991: p99 ; A Amit & A ; Schoemaker, 1993:36 ) . Second, ‘Rarity’A assumes that for a resource to be of value, it must be rare or alone in footings of handiness as a resource to other houses ( Barney, 1986a:1232-1233 ; Dierickx and Cool, 1989:1504 ; Barney, 1991:100 ) . Third, the RBV suggests that an administration ‘s human capital direction patterns can lend significantly to prolonging competitory advantage by making specific cognition, accomplishments and civilization within the house that are hard to copy ( Afiouni, 2007 ; Luftman & A ; Kempaiah, 2007 ; Mata et al. , 1995 ) . Therefore, ‘inimitability ‘ describes the value that comes from a resource if rivals are non able to double this strategic plus absolutely ( Peteraf, 1993:183 ; Barney, 1986b:658 ) . This could be due to what Rumelt ( 1984:567 ) calls ‘isolating mechanisms ‘ , an account as to why houses might non be capable of copying a resource to the grade that they can postulate with the house who has the valuable resource ( Peteraf, 1993 ; Mahoney & A ; Pandian, 1992 ) . In bend, this isolating mechanism is affected by causal ambiguity, a term which describes what is said to happen if the beginning from which an administration ‘s competitory advantage stems is unknown ( Peteraf, 1993 ; Lippman & A ; Rumelt, 1982 ) . As an illustration, if the resource in inquiry is knowledge-based or socially complex, causal ambiguity is more likely to happen, as these types of resources are more likely to be alone to the house in which they reside ( Peteraf, 1993 ; Mahoney & A ; Pandian, 1992 ) . Finally, ‘Non-substitutability’A – even if a resource is rare, potentially value-creating and inimitable, an every bit of import facet is the deficiency of replaceability for the resource that could be taken up by another administration ( Dierickx & A ; Cool, 1989:1509 ; Barney, 1991: 111 ) .

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As such, when sing the RBV, this is the necessary basis, as summarised by Crook et Al. ( 2008 ) : designation of administration ‘s cardinal resources ; rating of such resources harmonizing to the four caput standards ; and eventually, the nurturing and protection of these resources, because making so can better organizational public presentation. Important to observe is that the features mentioned are separately necessary, but notA separately sufficient conditionsA for a sustained competitory advantage ( Dierickx and Cool, 1989, p1506 ; Priem & A ; Butler, 2001:25 ) . In other words, within the model of the RBV, the concatenation is every bit strong as its weakest nexus and therefore requires the resource to expose each of the four features to be a possible beginning of a sustainable competitory advantage ( Barney, 1991:105-107 ) . Indeed, to transform a impermanent competitory advantage into a sustained competitory advantage requires that these resources areA heterogeneousA in nature and non absolutely nomadic ( Lopez, 2005:662, Helfat & A ; Peteraf, 2003:1004 ; Barney, 1991: 105-106 ; Peteraf, 1993:180 ) . The RBV explains its ability to present sustainable competitory advantage when resources are managed in such a manner that their results are inimitable by rivals, which finally creates a competitory advantage or ‘barrier ‘ ( Smith & A ; Rupp, 2002:48 ) . As such, gestating the RBV involves sing several interconnected elements that are internal to the concern, and accordingly bordering them within the context of an single administration. Because of this extremely internalised position, it is non surprising that bookmans and administrations likewise have encountered trouble with the RBV in footings of possible restrictions and contradictions.

As mentioned, the RBV comes up against a figure of unfavorable judgments, get downing with its cogency as a theory per Se. As Priem & A ; Butler ( 2001 ) point out, the RBV can be seen as pleonastic. Barney ( 1991:106 ) defined a competitory advantage as a value-creating scheme that is based on resources that are, among other features, ‘valuable ‘ . This logical thinking is efficaciously round and hence operationally invalid. Furthermore, the ‘rarity ‘ standard of RBV is flawed, if non disused. The construct that resources need to be rare to be able to work as a beginning of a sustained competitory advantage is otiose ( Hoopes, Madsen & A ; Walker, 2003: 890 ) , in that the deductions of the other constructs ( Value, Inimitability and Non-substitutability ) are that any resource that follows from the old features is rare inherently. Sing the ‘sustainability ‘ standard, its deficiency of an exact definition makes its premiss hard to analyze through empirical observation. Barney ‘s statement ( 1991:102-103 ) that the competitory advantage is sustained if current and future challengers have ceased their imitative attempts is versatile from the point of position of developing a theoretical model, but is a disadvantage from a more practical point of position, as there is no expressed end-goal.

Priem & A ; Butler ( 2001 ) point out three other unfavorable judgments of the RBV. First, that different resource constellations can bring forth the same value for houses and therefore would non be competitory advantage ( and the theory ‘s application becomes cosmopolitan and hence uneffective ) ; 2nd, that the function of merchandise markets is developing in the RBV theory due to its extremely internalised position ; 3rd and eventually, that the theory has really limited normative deductions. This latter point, on the ‘how to ‘ facet of the RBV, will be given more attending subsequently. Equally good as Priem & A ; Butler ‘s ( 2008 ) observations, other bookmans argue that the VRIN standards are inherently excessively difficult if non impossible to carry through ( eg, Crook et al. , 2008 ; Hoopers et al. , 2003 ) and that measurings of a resource ‘s VRIN value is capable to speculation. Sanchez & A ; Heene ‘s ( 2004 ) work summarises a big majority of scholarly unfavorable judgment: that the RBV assumes there that a house can be profitable in a extremely competitory market every bit long as it can work advantageous resources, but this may non needfully be the instance, particularly if it ignores external factors refering the industry as a whole. A house should besides see external issues, such as those expounded in Porter ‘s Industry Structure Analysis, for illustration.

In consideration of extrapolatable unfavorable judgments of the RBV though, Lippman & A ; Rumelt ‘s ( 1982 ) early work high spots the long-run deductions of the RBV ‘s premises. As mentioned, a outstanding beginning of sustainable competitory advantages is causal ambiguity ( Lippman & A ; Rumelt, 1982:420 ) . While the interplay between inimitability and causal ambiguity is valuable, if ‘ambiguity ‘ entails confusion and a deficiency of managerial comprehension about how to better the concern, this could negatively impact organizational public presentation. Through external market alterations, the initial sustainable competitory advantage could be invalidated or could germinate into a failing ( Priem and Butler, 2001:33 ; Peteraf, 1993:187 ; Rumelt, 1984:566 ) . The RBV provides the apprehension that certain alone bing resources will ensue in superior public presentation and finally construct a competitory advantage. Sustainability of such an advantage will be determined by the ability of rivals to copy such resources. However, the bing resources of a house may non be equal to ease hereafter market demands, due to the inevitable volatility of modern-day markets. As a work-around to this kind of issue, Hoopes et Al. ( 2003:981 ) suggests a more expansive treatment of sustained differences among houses, and develops a wide theory of competitory heterogeneousness. This at least helps refocus the RBV with a more external position.

Harmonizing to the RBV the houses which perform better are those that hold valuable assets with certain features. However, the RBV scheme can non supply competitory advantage without being operationalised. Research workers frequently mention ( eg. Priem & A ; Butler, 2001 ; Hoopes et al. , 2003 ) , but have seldom addressed inquiries related to the operationalisation of the RBV. Operationalisation could at least formalize the theory ‘s thoughts and constructs into applicable theoretical accounts, easing all phases of scheme preparation and determination devising procedures. One cause of trouble in operationalising the RBV, nevertheless, is its high degree of abstraction. Strategic analysis should do clear why houses are able to acquire into advantageous places and how they are able to prolong these places ( Black & A ; Boal, 1994 ) . Otherwise it would be hard to recognize which RBV scheme will take to sustainable advantage. Consequently, operationalisation is a alone chance for directors to profit from the powerful scheme support that this theory can convey ( Peteraf,1993 ) . Part of the operationalisation procedure would be the alteration and development of resources aimed at overcoming future market competition. Morgan ( 2000 ) agrees, saying that the demand to update resources is a major direction undertaking since all concern environments reflect extremely unpredictable market and environmental conditions. An administration should work bing concern chances utilizing the present resources while bring forthing and developing a new set of resources to prolong its fight in the hereafter market environments ( Chaharbaghi & A ; Lynch, 1999:45 ) ; hence, an administration should be engaged in resource direction and resource development ( Song et al. , 2002:86 ; Afiouni, 2007 ) . In order to make human capital resource diverseness and stationariness, an administration must hold equal human capital direction patterns, organizational procedures, cognition direction patterns and systems, educational chance ( both formal and informal ) and societal interaction ( eg. community edifice ) patterns in topographic point ( Afiouni, 2007 ; Barney, 1991 ; Mata et al. , 1995 ; Schafer, 2004 ) .

Although non specifically addressed by the RBV, it is clear so that intra-organisational political relations and civilization are of import factors in the argument ( Bowen & A ; Ostroff, 2004 ) . To make a work force that providesA sustainable competitory advantageA and value creative activity, an administration must make an environment that allows their human capital to turn. This growing, expressed within people as increased cognition, increased motive, increased battle, company repute ( Zander & A ; Zander, 2005:1521 ) etc. , can be used to make sustained competitory advantage that would be really hard for rivals to copy. Additionally, by virtuousness of its imperfect and invariably germinating nature, this growing could be seen to carry through the RBV ‘s full VRIN standard ( Afiouni, 2007 ; Agarwal & A ; Ferratt, 2001 ; Santala & A ; Parvinen, 2007:172 ) . Because of its organizational deductions, support for this kind of transformational strategy must come from the top of the political ranks in an administration ( eg. Wright et al. , 2005 ; Sheehan et al. , 2007 ) , and should be translated through substantial HRM enterprises and non limited to a tokenistic ‘seat at the tabular array ‘ for HR ( Sheehan et al. , 2007 ) .

It is suggested that the RBV holds some relevancy for understanding the nexus between HRM and organizational public presentation, in footings of the attending it draws to the worth of human resources. Because of its built-in importability and deficiency of future-orientation, it is suggested that the Holy Grail can merely be found beyond consideration of RBV in its current signifier. As mentioned, research workers should give due attending to operationalising ( and simplifying ) the RBV, every bit good as incorporating extra theoretical considerations ( eg competitory heterogeneousness and political influence concerns ) . Consequently, what is cardinal for associating ( S ) HRM with organizational public presentation may still be an elusive reply. It can be surmised, nevertheless, that civilization, political relations, context and recognition of the singularity of an administration and its inability to be analysed statically as a theoretical or empirical unit, will assist bookmans and administrations likewise develop a greater apprehension of SHRM and its effects on public presentation, ergo its ultimate function in supplying competitory advantage.

It can be surmised, nevertheless, that civilization ( organizational, cultural etc. ) and political relations ( intra-organisational, systemic ) , context ( economic growth/recession, industry, etc. ) and recognition of the singularity of an administration and its inability to be analysed statically as a theoretical or empirical unit will assist bookmans and administrations likewise develop a greater apprehension of SHRM and its effects on public presentation, ergo its ultimate function in supplying competitory advantage.


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