' Academy af Management Review

2001, Vol.26, No, 1. 22-40,

IS THE RESOURCE-BASED "VIEW" A USEFUL

PERSPECTIVE FOR STRATEGIC MANAGEMENT
RESEARCH?
RICHARD L. PRIEM
University of Texas at Arlington

JOHN E. BUTLER
Hong Kong Polytechnic University

As a potential theory, the elemental resource-based view {RBV) is not currently a

theoretical structure. Moreover, RBV proponents have assumed stability in product
markets and eschewed determining resources' values. As a perspective for strategic
management, imprecise definitions hinder prescription and static approaches rele-
gate causality to a "black box." We outline conceptual challenges for improving this
situation, 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" the distribution of research funding, and the re-
(RBV) of strategic management is manifest in its search agenda itself. Yet, these individuals
rapid diffusion throughout the strategy litera- have vested interests in the propagation of
ture. Yet, there has been little critical evaluation "their" concept. Thus, periodic critical examina-
of the RBV as a theoretical system (see Ryall, tions of the ideas underlying fashionable re-
1998, for an exception) or of its potential contri- search genres might be warranted to ensure
butions to strategic management (see McWil- maximum returns from research effort. This
liams & Smart, 1995, for an exception). In this might be particularly true for developing aca-
article we attempt to restrain, at least briefly, demic fields, such as strategic management.
the RBV's momentum while encouraging efforts The second question we address—concerning
to clarify its fundamental theoretical statements the usefulness of the RBV for strategic manage-
and to specify its likely contributions to knowl- ment^—is important, because new perspectives
edge. We take an initial step toward a more tend to be better suited toward answering some
rigorous critique and hopeful clarification of the issues rather than others. Identification of these
RBV by addressing two elemental questions: (1) high-potential issues might help to direct theory
Is the foundational and unembellished RBV ac- building and research while simultaneously
tually a theory? {2) Is the RBV likely to be useful clarifying the potential contributions of the RBV
for building understanding in strategic manage- to the strategy field.
ment?
We approach these questions as follows. First,
Sociologists have shown that inquiries into we evaluate the degree of diffusion by the RBV
the status of i d e a s ^ a s in the first question throughout the strategy literature using the
above, concerning the theoretical status of the eighteen strategy research topics identified by
RBV—are important to scientific progress. This Schendel and Hofer (1979). We then examine the
is because groups of adherents sprout up basic RBV framework, as proffered in Barney's
around certain concepts. Such linked individu- {1991) expository article, to see if it satisfies key
als, called "invisible colleges" by Crane (1972), requirements for theoretical systems (e.g., Mc-
influence the direction of graduate education. Kelvey, 1997; see also Bacharach, 1989; Dubin,
1976; Hunt, 1991; Rudner, 1966; Thomas & Tymon.
1982; Whetten, 1989). Thus, the analysis is under-
We thank Cyndy Cycyota, lohn Hulpke, Tom Lumpkin, taken from a logical positivist rather than post-
Geoff Waring, and Katherine Xin for helpiul comments on
earlier versions of this article and Katja Schroei Brown for positivist perspective. We pay particular atten-
able research assistance. tion to such issues as determining the analytic
22
2001 Piiem and Butlei 23

or synthetic nature of statements in the RBV, sification and how diversification must match
the logic of the RBV, and the RBV's aptness for the "core competencies" of the firm for optimal
strategic management given the key character- performance {e.g., Peteraf, 1993; Prahalad &
istics of the strategy discipline (e.g., Meyer, Hamel, 1990; Wernerfelt, 1984; see Ryall, 1998, for
1991). Next, we examine RBV-driven research to a discussion of this approach). Penrose's discus-
determine the extent to which it has contributed sion of the role of resources in diversification
to theory building in strategic management and, provides a view of firm expansion into new
for empirical papers, how the HBV has been products and markets. The RBV might be useful
tested. Finally, we develop suggestions from in addressing this issue.
these analyses for productive directions in fu- Other theorists have emphasized the more
ture resource-based strategy research. fundamental contribution of resources to sus-
tainable advantage for single-business firms by
examining how or why resources contribute to
DEFINITION AND DIFFUSION OF THE RBV the advantage of one firm over another in a
Wernerfelt's {1984) conceptual article entitled particular product/market (e.g., Barney, 1991;
"A Resource-Based View of the Firm" recently Conner, 1991; Powell, 1992a,b). This "business-
was selected as one of the most influential pa- level" question of how to compete is elemental
pers published in the Strategic Management in determining both the RBV's theoretical basis
Jouznal prior to 1990 (Wernerfelt, 1995). The arti- and its potential contributions to strategic man-
cle begins with the statement, "For the firm, agement. As a growing firm achieves "a satis-
resources and products are two sides of the factory and reasonably secure position" in its
same coin" (1984: 171). Wernerfelt then goes on to original business and generates resources in
analyze, from a resource perspective, the effi- excess of those required for maintaining that
cacy of sequential entry strategies for diversify- position, it may look to opportunities for diver-
ing firms. One major contribution of this article sification (Penrose, 1959: 136). With the business-
was to direct strategy scholars back toward re- level RBV, however, researchers attempt expla-
sources as important antecedents to products nations for resource-based advantages in single
and, ultimately, firm performance. In early con- industries—that is, how the growing firm
ceptual work in strategic management, scholars achieves its initial, "secure" position. These ex-
generally had given equivalent attention to firm planations lay the conceptual foundation for
strengths and weaknesses versus the opportu- subsequent analyses of how resource-based ad-
nities and threats in the competitive environ- vantages may be leveraged via diversification.
ment (e.g., Andrews, 1971; Ansoff, 1965; Learned, Thus, the primary, business-level RBV is of prin-
Christensen, Andrews, & Guth, 1965). The publi- cipal interest in our study.
cation of Porter's (1980) influential book, Compef- The Wernerfelt (1984) and Barney {1991} arti-
ifive Strategy, shifted the emphasis toward ex- cles are seminal works in the RBV stream. While
ternal, industry-based competitive issues. Wernerfelt emphasizes resources and diversifi-
Wernerfelt's (1984) article served as a reminder cation, Barney provides what is arguably the
that both strategy scholars and "managers often most detailed and formalized depiction of the
fail to recognize that a bundle of assets, rather business-level resource-based perspective. His
than the particular product market combination "organizing framework"—"that organizational
chosen for its deployment, lies at the heart of resources that are valuable, rare, difficult to im-
their firm's competitive position" {Dierickx & itate and non-substitutable can yield sustained
Cool, 1989: 1504). competitive advantage" {Meyer, 1991: 823)—has
Rumelt (1984), Barney (1986, 1991), Dierickx and supplied the footing for many RBV studies, with
Cool (1989), and others have contributed to the subsequent work based on either his framework
subsequent development of the RBV of strategic or an extension.
management. The conceptual work in this When extending Barney's (1991) framework,
stream generally has focused on the character- however, most researchers have defined any
istics of firm resources that can contribute to a new terms of interest without formally specify-
sustainable competitive advantage. Some theo- ing the original, underlying RBV terms. Indeed,
rists have followed Penrose {1959) quite closely, in much of the conceptual and empirical RBV
emphasizing how resources contribute to diver- work, researchers have either paraphrased Bar-
 Academy of Management Review January

ney's (1991) RBV statements or simply cited his RBV definitions that refer to Barney's (1991) con-
article without augmented definition (e.g., Bates ceptual work. Because of its influence, its at-
& Flynn, 1995; Brush & Artz, 1999; Litz, 1996; Mc- tempt to formalize the RBV as theory, and the
Williams & Smart, 1995; Michalisin, Smith, & relative lack of subsequent definitional work,
Kline, 1997; Mosakowski, 1998; Powell, 1992a,b; we selected Barney's (1991) article to provide the
RindovQ & Fombrun, 1999; Yeoh & Roth, 1999). primary, baseline definitions of the "single-
Attempts to further define underlying RBV con- business" RBV for our investigation.
structs or specify causal relationships have Barney (1991) notes that two assumptions are
been sparse. Table 1 provides representative elemental to the RBV: (1) resources are distrib-

TABLE 1
Sample Definitions of and Relationships Among Underlying HBV Constructs
RBV Article Definitions and Underlying Relationships

Powell (1992a: 552) "The resource view holds that, in order to generate sustainable competitive
advantage, a resource must provide economic value and must be presently
scarce, difficult to imitate, nonsubstitutable, and not readily obtainable in
factor markets (Barney, 1991; Dierickx & Cool, 1989; Peteral, 1990)."
Bates & Flynn (1995: 235) "This theory rests on two key points. First, that resources are the determinants
of firm performance (Barney, 1991; Schulze, 1992), and second that resources
must be rare, valuable, difficult to imitate and nonsubstitutable by other rare
resources. When the latter occurs, a competitive advantage has been created
(Barney, 1991)."
Litz (1996: 1356) "Barney's (1991) conceptual work on resource characteristics was especially
helpful. He proposed that resources be characterized as simuilaneously
valuable, rare, nonsubstitutable, and inimitable. To the extent that an
organization's physical assets, inira-structure, and workforce satisfy these
criteria, they qualify as resources."
Michalisin, Smith, & Kline (1997: 360) "Such resources, coined s(rafegic assets, are simultaneously valuable, rare,
imperfectly imitable and nonsubstitutable (Barney, 1991). RBV proponents
assert that ownership or control of strategic assets determine [sic] which
firms can earn superior profits and which firms do not. Unfortunately, there
is little empirical research to support that prescription (Miller 8E Shamsie,
1996).
Bowen & Wiersema (1999: 628-629) "... as the strategy literature argues, a firm's performance depends
fundamentally on its ability to have a distinctive, sustainable competitive
advantage which derives from the possession and utilization of unique, non-
imitable, non-transferable, firm-specific resources (Barney, 1991; Peteraf, 1993;
Wernerfelt, 1984)."
Brush & Artz (1999: 223) ".. . 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 usefulness
for this problem because they are context insensitive (i.e., noncontingent)."
Combs & Ketchen (1999: 869) "To be a source of sustained above-average performance, resources must meet
three criteria. They must be: (1) valuable, meaning buyers are willing to
purchase the resources' outputs at prices significantly above their costs; (2)
rare, so that buyers cannot turn to competitors with the same or substitute
resources; and (3) imperfectly imitable, meaning it is difficult for competitors
to either imitate or purchase the resources (Barney, 1991; Peteraf, 1993)."
Rindova & Fombrun (1999: 694) "Resource-based theory (Penrose, 1959; Barney, 1991) attributes advantage in an
industry to a firm's control over bundles of unique material, human, organiza-
tional and locational resources and skills that enable unique value-creating
strategies (Barney, 1991), Heterogeneous resources create distinct strategic
options for a firm that, over time, enable its managers to exploit different
levels of economic rent (Peteraf, 1993). A firm's resources are said to be a
source of competitive advantage to the degree that they are scarce,
specialized, appropriable (Amit & Schoemaker, 1993), valuable, rare, difficult
to imitate or substitute (Barney, 1991)."
2001 Priem and BufJer

uted heterogeneously across firms, and (2) these Table 2 for a listing). This comprehensive pene-
productive resources cannot be transferred from tration of the RBV into the strategy literature
firm to firm without cost (i.e., resources are shows the high level of research resources be-
"sticky"). These assumptions are the axioms of ing expended pursuing HBV-related questions
the RBV. Given the assumptions, Barney (1991) and suggests that a more rigorous investigation
makes two fundamental arguments. First, re- of the RBV's efficacy and its usefulness for strat-
sources that are both rare (i.e., not widely held) egy research might be overdue. As a first step in
and valuable (i.e., contribute to firm efficiency or this investigation, we next examine the degree
effectiveness) can produce competitive advan- to which the RBV appears to meet the criteria
tage. Second, when such resources are also required ol theoretical systems.
simultaneously not imitable (i.e., they cannot
easily be replicated by competitors), not substi-
tutable (i.e., other resources cannot fulfill the EXAMINING THE RBV AS THEORY
same function), and not transferable (i.e., they The degree to which the RBV is likely to enrich
cannot be purchased in resource markets; strategy research depends, in part, on the extent
Dierickx & Cool, 1989), those resources may pro- to which it becomes a theory of competitive ad-
duce a competitive advantage that is long lived vantage. Accurately identifying the current the-
(sustainable). Thus, rarity and value are each oretical state of the RBV might aid its future
necessary but not sufficient conditions for com- development. In this section we examine the
petitive advantage, whereas nonimitability, degree to which the RBV presently possesses the
nonsubstitutability, and nontransferability are explanatory and predictive power generally as-
each necessary but not sufficient conditions for sociated with theories. We limit our investiga-
sustainability of an existing competitive advan- tion to whether the RBV arguments regarding
tage. competitive advantage currently meet generally
From these core ideas, arguments have been accepted criteria for classifying a set of state-
advanced that single-business firms can ments as a theory. We do not address whether
achieve sustainable competitive advantage the RBV represents a new theory of the firm {e.g.,
from such resources as information technology Conner, 1991), because in the RBV set forth by
{Mata, Fuerst, & Barney, 1995; Powell, 1997), stra- Wernerfelt (1984) and Barney {1991), key issues
tegic planning {Michalisin et al., 1997; Powell, explained in theories of the firm are not ad-
1992a), organizational alignment {Powell, 1992b), dressed. These issues include why the firm ex-
human resources management (Flood, Smith, & ists in place of alternate systems for organizing
Derfus, 1996; Lado & Wilson, 1994; Wright & Mc- economic activities and what determines the
Mahan, 1992), trust (Barney & Hansen, 1994), or- scope of the firm (e.g., Alchian & Demsetz, 1972;
ganizational culture {Fiol, 1991; Oliver, 1997), ad- Alchian & Woodward, 1987; Coase, 1937; Seth &
ministrative skills (Powell, 1993), top Thomas, 1994). "A firm's fundamental objective
management skills (Castanias & Helfat, 1991), (to make money)" (Conner, 1991: 123) does not
and guanxi (Tsang, 1998), among others. More- explain why it exists as a form of organizing
over, the number of proponents who have ele- economic activity compared (o ofher possibie
vated the RBV from the status of "view" to "the- forms {see the literature on property rights; e.g.,
ory" has enhanced its visibility and also Alchian & Demsetz, 1972; Alchian & Woodward,
suggests widespread acceptance (e.g., Barney, 1987).
1996; Conner, 1991; Grant, 1991; Mahoney & Pan- To examine the degree to which the RBV is
dian, 1992; Maijoor & van Witteloostuijn, 1996). now or is likely to become a theory of competi-
To evaluate more formally the breadth of dif- tive advantage, we first evaluate fundamental
fusion of the RBV throughout the strategy liter- RBV statements as to their "lawlike" status. We
ature, we map RBV studies versus the eighteen then investigate aspects of the logic of the RBV
strategy research topics originally identified by for theoretical force and internal consistency.
Schendel and Hofer (1979) and later used by
Shrivastava {1987) to categorize strategic man-
agement research programs. Since 1991 thirteen Lawlike Generalizations in the RBV
of the eighteen research topic areas have been We evaluate the RBV as a theoretical system
examined from the perspective oi the RBV {see by relying on the schemes and definitions pro-
26 Academy of Management Review January

TABLE 2
Research Programs in Strategic Management Related to the RBV of the Firm
Research Topic Research Program Representative Authors

Strategy concepts 1. Alternative frameworks Barney (1991)

2. Agency theory Sherer, Rogovsky, & Wright (1998)
3. Network theory and Austrian economics Zaheer 8E Zaheer (1997)
4. Theory of the firm Barney (1996); Conner (1991)
Conner & Prahalad (1996); Foss (1996a,b)
5. Innovations and advantage Bates & Flynn (1995)
6. Organizational learning Grant (1996)
Garud & Nayyar (1994)
7. Contingency model Collis (1994)
Strategic management Behavioral models and culture; cuifure/ Fiol (1991); Knez & Camerer (1994);
processes resource selection Levinthal & Myatt (1994); Oliver (1997)
Board ol directors Top management teams Flood, Smith, & Derfus (1996)
General management roles Managerial action and prescriptions Marino (1996); Parkinson (1995)
in strategy management
Social and natural environmental issues Hart (1995): Litz (1996): Russo & Fouts
Social responsibility (1997)
Competitive strategy and building Black & Boal (1994); Wernerfelt (1984)
Strategy formulation competitiveness
Fahy (1996); Maijoor & van Witteloostuijn
Environmental analysis Environment and resource relationships (1996); Miller & Shamsie (1996)
Strategy implementation Lado & Wilson (1994)
and evaluation Industry structure/knowledge
Strategy content Human resource management as a Boxall (1996); Flood, Smith, & Derfus
resource (1996); Lado & Wilson (1994); Wright &
McMahan(1992)
Formal planning systems Strategic assets and planning Michalisin. Smith, & Kline (1997); Powell
(1992a)
Strategic control Strategic information support systems Mata, Furst, & Barney (1995)
Entrepreneurship and new Alliance formation Eisenhardt & Schoonhoven (1996)
ventures Resources and performance Robbins & Wiersema (1995)
Multibusiness multicultural International strategic management Collis (1991); Moon (1997); Taylor,
firms Beechler, & Napier (1996)
Other Mergers, acquisition, and diversification Ingram & Thompson (1995); Markides &
Williamson (1996)
Underlying resources that lead to quality Powell (1995)
Philosophy ol science Godfrey & Hill (1995)

posed by Rudner (1966), Bacharach (1989), Whet- increase scientific understanding through a sys-
ten (1989), Hunt (1991), and McKelvey (1997), with tematized structure capable of both explaining
reference to others' ideas where that clarifies and predicting phenomena" (1991: 149).
the specific exposition for the RBV. This is not to Here we focus on the criterion mandating that
say that there is not significant debate about what at least some lawlike generalizations be present
constitutes a theory. However, both Hunt (1991) in a theory. For a system of statements to have
and McKelvey (1997) suggest that consensus has the force of a scientific theory, some of the state-
built around the definition of theory originally of- ments must be lawlike in that they (1) are gen-
fered by Rudner: "A theory is a systematically eralized conditionals, (2) have empirical content,
related set of statements, including some lawlike and (3) exhibit nomic necessity.
generalizations, that is empirically testable" (1966: Generalized conditionals. Generalized condi-
10). Hunt notes further, "The purpose of theory is to tionals are "if/then" statements. The RBV clearly
2001 Priem and Butler 27

contains such statements: Proponents of the HBV are not, true by definition. In the earlier example
assert that if a firm attribute is rare and valu- this would be done by replacing the term "effi-
able, then that attribute is a resource that can ciency" with its definition: a "firm that improves
give the firm competitive advantage. And if a its ratio of outputs to inputs (efficiency) will ex-
resource that accords a firm competitive advan- hibit a larger output-to-input ratio." Following
tage is hard to imitate and is not substitutable, the replacement, it becomes clear that this is an
then that resource can provide the firm with analytic statement, with no empirical content.
sustainable competitive advantage (Barney, For more complex theoretical statements, re-
1991). Both of these statements, central to the placing the theory's terms with their definitions
RBV, are generalized conditionals and meet from the theory may result in several possible
Rudner's (1966) first criterion for lawlike gener- revised statements. Several of these statements
alizations. may appear plausibly synthetic. If one such
Empirical content. Management scholars fre- statement is analytic, however, further concep-
quently address this criterion when discussing tual work is required before the underlying
requirements for good theory, following Pop- statement can become a lawlike generalization.
per's (1959) falsifiability requirement (e.g., This process has been used previously in the
Bacharach, 1989; McKelvey, 1997). Bacharach management literature—by Bacharach when
(1989), for example, has suggested that many examining Young's (1988) critique of population
organizational-level theories are so vague they ecology's structural inertia theory and Vecchio's
can never be empirically tested. (1987) critique of situational leadership theory.
The empirical content criterion, however, ad- Bacharach concludes, "In these two examples, a
dresses the semantics and logic of theory, rather tautological proposition or hypothesis is self-
than vagueness. The empirical content criterion verifying and, therefore, not subject to disconfir-
helps separate purely analytic statements, mation" (1989: 505). To maximize consistency in
which are true because of their "either/or" form our application of the process, we use only the
or because of the way their terms are defined, precise statements and definitions from Barney
from synthetic statements, which we can know (1991) in the substitutions, although we discuss
to be true only after investigation (Hunt, 1991}. the work of others later. For ease of exposition,
Nontheoretical, analytic statements can be de- we examine those terms associated with com-
termined to be true or false based on their logic petitive advantage first and set aside issues
or their definition of terms. For example, "either associated with sustainability and substitut-
the sun is shining or it is not," and one does not ability.
have to look out the window to verify the state- The fundamental RBV theoretical statement
ment. The same can be true for definitions. A we investigate is "that valuable and rare organ-
"firm that improves its efficiency will exhibit a izational resources can be a source of competi-
larger output-to-input ratio," because efficiency tive advantage" (Barney, 1991: 107). In his 1991
is defined as the ratio of outputs to inputs. Thus, article Barney cites others' prior definitions of
a confrontation with data is not required to de- firm resources as including "all assets, capabil-
termine the correctness of analytic statements. ities, organizational processes, firm attributes,
Synthetic statements, such as "if managers are information, knowledge, etc. controlled by a firm
older, then they tend to be more risk averse," are that enable the firm to conceive of and imple-
said to have empirical content because the "real ment strategies that improve its efficiency and
world" must determine their correctness. They effectiveness (Daft, 1983)" and as "firm attributes
are not true simply "by definition." that may enable firms to conceive of and imple-
The statements found in the RBV are logically ment value-creating strategies (Hitt & Ireland,
synthetic, as can be seen by their if/then form, 1986; Thompson & Strickland, 1983)" (Barney,
shown in the earlier analysis of the generalized 1991: 101). He defines resources as valuable
conditional criterion. One way to examine "when they enable a firm to conceive of or im-
whether they are synthetic or analytic based on plement strategies that improve its efficiency
their deiinitions oi teims is to replace each term and effectiveness" and "when they exploit op-
in a basic statement of the theory with its defi- portunities or neutralize threats in a firm's envi-
nition in the theory. This process allows one to ronment" (Barney, 1991: 106). Barney defines
better evaluate whether the statements are, or compefi/ive advantage as a firm "implementing
28 Academy of Management Reviev/ January

a value creating strategy not simultaneously be- must be conceptualized independently to pro-
ing implemented by any current or potential duce a synthetic statement.
competitors"; further, he reasons that competi- Nomic necessity. // the earlier statement from
tive advantage cannot exist for identical firms, the RBV were reformulated to meet the empirical
because since "these firms all implement the content requirement, then the reformulation
same strategies, they will improve their effi- could be examined for the third criterion: nomic
ciency and effectiveness in the same way, and necessity. Nomic necessity is the characteristic
to the same extent" (1991: 102, 104). Harity is not of theory that demands "the occurrence of some
specifically defined but is used in its general phenomenon must be associated with some
sense. other phenomenon; the relationship cannot be,
Substituting these specific definitions for the simply, by chance" (Hunt, 1991: 111). Thus, to be
terms in the above theoretical statement pro- a lawlike generalization, a statement must pos-
duces revised statements, including sess theoretical force by describing relation-
ships that must occur, rather than by specifying
1. "Uncommon organizational attributes that accidental or spurious relationships (Gaski,
enable lirms to conceive of and implement 1985). For example, the statement "the rising sun
value-creating strategies can be a source of warms the earth" possesses nomic necessity be-
implementing a value-creating strategy not cause if it is true, when the sun rises the earth
simultaneously being implemented by any must warm, and when the sun sets the earth
current or potential competitors," must cool. Statements such as "all members of
2. "Uncommon organizational attributes that
enabie a firm to conceive of or implement the top management team are men" or "if firms
strategies that improve its efficiency and are in the data storage industry, then they are
effectiveness can be a source that may en- profitable" do not have nomic necessity. Even if
able a firm to conceive of or implement they are true at the time the statements are
strategies that improve its efficiency and made, one can easily imagine counterfactual
effectiveness," and conditions that could falsify them.
3. "Uncommon organizational attributes that
exploit opportunities and neutralize threats
in a firm's environment can be a source of
implemeniing an opportunity-exploiting
and threat-neutralizing strategy not simul- The Logic oJ the RBV
taneously being implemented by any cur-
rent or potential competitors." One step toward making RBV statements syn-
thetic might be through the use of different,
These are analytic statements that are true by more widely accepted definitions of competitive
definition, indicating that this elemental state- advantage. They then could be examined for
ment of the RBV is not a lawlike generalization. their logical consistency more independently of
This suggests that this statement from the RBV, definitional issues. Barney notes, "It is not diffi-
dealing directly with competitive advantage, is cult to see that if a firm's valuable resources are
not amenable to empirical tests (e.g., Bacharach, absolutely unique among a set of competing
1989; Hunt, 1991). Bacharach argues that state- and potentially competing firms, those re-
ments that are not testable—"no matter how sources will generate at least a competitive ad-
profound and aesthetically pleasing"—still do vantage" (1991: 107). When competitive advan-
not meet the test of being a theory (1989: 512). tage is defined as a firm "implementing a value
Thus, Barney's definitions indicate that addi- creating strategy not simultaneously being im-
tional conceptual work is needed if the founda- plemented by any current or potential competi-
tion of the RBV is to meet the lawlike generali- tors" (Barney, 1991: 102), this is an analytic state-
zation standard. The underlying problem in the ment that is true based on the commonly
statement "that valuable and rare organization- accepted definitions of "absolutely unique" and
al resources can be a source of competitive ad- "not simultaneously being implemented by
vantage" (Barney, 1991: 107) is that competitive any." The statement follows from Barney's pre-
advantage is defined in terms of value and rar- viously argued, correct assertion that competi-
ity, and the resource characteristics argued to tive advantage cannot exist for identical firms,
lead to competitive advantage are value and because since "these firms all implement the
rarity. Instead, the characteristics and outcomes same strategies, they will improve their effi-
2001 Priem and Butler 29

ciency and effectiveness in the same way, and attention to firm resources has been beneficial
to the same extent" (1991: 104). in helping (1) to clarify the potential contribu-
The diametrical statement, however—that tions of resources to competitive advantage, (2)
unique firms possess competitive a d v a n t a g e ^ to introduce strategy scholars to a number of
does not logically follow without the help of useful descriptive theories from industrial or-
definitional dependence. This can be seen when ganization economics (e.g., Alchian & Demsetz,
a more traditional definition of competitive ad- 1972, on "teamwork" production, or DeVany &
vantage is substituted. Schoemaker defines Saving, 1983, on price as a signal of quality), and
competitive advantage as a firm "systematical- (3) to alleviate a previous analytical overempha-
ly creating above average returns" (1990: 1179). sis on the opportunities and threats that arise
Ii this definition of competitive advantage were from the product side.
substituted into Barney's statement, equifinality In arguing for the RBV, Barney (1991) notes that
suggests that there might be many approaches, in previous strategy research, with its strong
or different resource configurations, that could analytical emphasis on the competitive environ-
achieve a particular level of return. Indeed, ment, researchers implicitly adopted two impor-
rather than the rarity of the resources used, it is tant simplifying assumptions. The first was that
the relative difference in the amount of value firms within an industry are homogeneous re-
generated by firms that is elemental to compet- garding resources and strategies. The second
itive advantage under Schoemaker's (1990) defi- was that firm resources are highly mobile. Con-
nition. For example, in a heterogeneous firm trary to these implicit assumptions,
duopoly, wherein one firm pursues a cost lead-
ership strategy and the other a differentiation the resource-based view of the firm substitutes
strategy, if both firms generate the same return, two alternate assumptions in analyzing sources
there is no competitive advantage (Porter, 1980). of competitive advantage. First, this model as-
sumes that firms within an industry (or group)
And multiple heterogeneous firms in an indus- may be heterogeneous with respect to the strate-
try each may pursue different strategies that gic resources they control. Second, this model
each generates (he same level oi value and, assumes that these resources may not be per-
thus, no competitive advantage. fectly mobile across firms, and thus heterogene-
ity can be long lasting (Barney, 1991: 101).
This is not to argue that uniqueness (or rarity)
in product differentiation, or even in resources, These explicit RBV assumptions are likely more
is not important, because often it is. Rather, the accurate reflections of reality than were the im-
conclusion is that when the current formulation plicit simplifying assumptions they replaced
of the RBV is made more synthetic by reducing from the environment-focused models.
definitional dependencies, value is the funda- For a full comprehension of the RBV, however,
mental component determining the extent of one must recognize that it, too, includes implicit
competitive advantage. If a firm consistently simplifying assumptions. Whereas the simplify-
generates value greater than that generated by ing assumptions of environment-focused mod-
other firms in its industry, it must have at least els of competitive advantage are made on the
one rare resource. If a firm has rare resources, resource side, the implicit assumptions of the
however, it does not follow that it will generate RBV are made on the demand side. Resources
value greater than that of other firms in its in- are said to be valuable "when they exploit op-
dustry. In the next section we carry this argu- portunities or neutralize threats in a firm's envi-
ment further, suggesting that the values of re- ronment" or "when they enable a firm to con-
sources are determined by demand-side ceive of or implement strategies that improve its
characteristics, which are exogenous to the RBV efficiency and effectiveness" (Barney, 1991: 106).
model. Earlier, value was shown to be a fundamental
concept to both the RBV and to relative compet-
itive advantage. The RBV value definitions
AN ELEMENTAL FALLACY OF THE RBV clearly show, however, that it is the market en-
The RBV has encouraged strategy researchers vironment, through opportunities and threats,
to explore "the usefulness of analyzing firms that determines the degree of value held by
from the resource side rather than from the prod- each firm resource in the RBV. As the competi-
uct side" (Wernerfelt, 1984: 171). The increased tive environment changes, resource values may
30 Academy of Management Review January

change. Thus, resource value is determined the RBV itself simplifies strategic analysis with
from a source exogenous to the RBV. This, in an implicit assumption of homogeneous and im-
effect, holds constant (i.e., outside the model) mobile product markets (i.e., unchanging de-
product and customer factors, because if product mand; see McWilliams & Smart, 1995, for a sim-
and customer factors vary, then resource values ilar argument from the perspective of the S-C-P
may vary, and unpredictable resource value [structure-conduct-performance] paradigm).
changes will result in indeterminate outcomes Figure 1 shows how product markets influ-
in resource-based analyses. Therefore, just as ence factor value through a simplified model for
the prior environment-focused models simpli- a single factor of production and a single prod-
fied strategic analysis with an implicit assump- uct, where neither the factor costs nor the factor
tion of homogeneous and mobile factor markets. quantities are fixed (e.g.. Cole, 1973: 436-443).

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

output

[Link]

Product market (a)

Q factor

0 output p p faclor
Production function (b) Factor market (c)
QQ =
2001 Priem and Butlei 31

The rightward shift in the demand curve in the search by considering the characteristics of
product market (panel a) is transmitted through strategic management and how they may affect
the production function (panel b), which would the operational validity of the RBV for strategy
produce a rightward shift in demand in the fac- practitioners.
tor market (panel c). The outcome would be a
larger quantity of the factor supplied at a higher
price as equilibrium moves upward along the Characteristics of Strategy and the RBV
supply curve (panel c). Thus, value in the factor The field of strategic management has a num-
market is influenced by demand in the product ber of distinctive characteristics that include
market (this is especially apparent if factor embracing practitioners and valuing prescrip-
quantity is held constant with a vertical supply tion (Barney, 1992). Meyer has noted, for exam-
curve). Yet, product demand remains external to ple, that "true to its general management orien-
the RBV. tation, the field of strategy has consistently used
One must be aware of the simplifying as- firm level performance as the definitive depen-
sumptions when drawing conclusions from RBV- dent variable" (1991: 824). One strategy re-
based analyses. Although partial equilibrium searcher interviewed in Meyer's study asserted
models of factor markets alone or product mar- that "research questions are inherently uninter-
kets alone can produce considerable insight, esting or trivial unless they include an expli-
these approaches might carry particular risks cated linkage to performance" (1991: 825). Thus,
for conceptualizing complex strategy issues. a fundamental question for strategy researchers
Strategic management requires general solu- is the utility of the RBV in developing meaning-
tions that are in concordance with its general ful management tools in the form of actionable
management orientation. Yet, even general prescriptions for practitioners (see, for example,
models, such as that shown in Figure 1, must be Eccles & Nohria, 1992, and Mosakowski, 1998).
made even more dynamic for usefulness in strat- Thomas and Tymon (1982) address this issue
egic management. For example, entrepreneurial in their discussion of research relevance. They
insights concerning future demand shifts in define "operational validity" as "the ability of
product or factor markets may allow acquisition the practitioner to implement the action impli-
of long-lasting factors at low cost. First mover cations of a theory by manipulating its causal
advantage would result, because follow-on com- (or independent) variables" (1982: 348). Opera-
petitors could only acquire these factors at tional validity is a necessary but not sufficient
higher cost. Subsequent changes in customer condition for managerially relevant research.
preferences, however, would result in further According to Thomas and Tymon's definition, if
shifts in demand that could easily reduce the the fiBV were a theory that was descriptively
factors' values and erode the advantage. Prac- accurate and that generated prescriptions for
ticing strategists do not have the luxury of ce- strategy practitioners, it would not be operation-
teris paribus assumptions that all other aspects ally valid unless it was also practicable for
of a strategic situation remain equal. Thus, one managers to manipulate the key independent
might suspect that a synthesis of the resource- variables. Simply advising practitioners to ob-
and environment-based perspectives might be tain rare and valuable resources in order to
an important next step toward a more complete achieve competitive advantage and, further,
strategy theory, as will be discussed later. that those resources should be hard to imitate
and nonsubstitutable for sustainable advan-
tage, does not meet the operational validity cri-
IS THE RBV SUITABLE FOR STRATEGY terion. Effective prescription must also include,
RESEARCH? at a minimum, criteria on which each alterna-
tive resource can be judged on each resource
Perspectives or "views" need not be complete
characteristic. Industrial organization (I/O) eco-
theories in order to contribute to our understand-
nomics can provide criteria for the imitability
ing of strategic management. SWOT analysis is
and substitutability characteristics associated
one example of a perspective that has improved
with sustainability (e.g., Lippman & Rumelt,
strategy scholars' understanding and has been
1982). These criteria include a resource's causal
useful for practitioners. In this section we inves-
ambiguity or social complexity (Barney, 1991).
tigate the suitability of the RBV for strategy re-
 Academy of Management fleview January

Prescription regarding competitive advantage step in clarifying the role and likely contribu-
itself, however, still is hindered because the cri- tions of the RBV in strategy research.
teria for value in the RBV remain, at present, in
an exogenous "black box."
All-inclusive Resources
The RBV tendency toward resource classifica-
Boundaries of the RBV tions that are all inclusive might have made it
more difficult to establish contextual bound-
When this problem is resolved, the appropri- aries. Although there have been differences in
ate contexts lor prescription still must be the way resources are deiined (ci. Barney, 1991;
addressed. Dubin (1976) and Whetten (1989) have Wernerfelt, 1984), the following quotation is typ-
argued that an aspect of theory as important as ical regarding inclusiveness:
the theories themselves is the identiiication of
the contexts within which theories are expected By a resource is meant anything which could be
to hold. This notion can be seen, ior example, in thought of as a strength or weakness of a given
Hofstede's (1991) assertion that many U.S. man- firm. More formally, a firm's resources at a given
time could be defined as those (tangible and in-
agement theories might not apply in other coun- tangible) assets which are tied semipermanently
tries and in Eisenhardt's (1989) finding that com- to the firm (see Caves. 1980). Examples of re-
prehensive and speedy decisions might be sources are: brand names, in-house knowledge of
particularly beneficial in "high-velocity" envi- technology, employment of skilled personnel,
ronments. In fact, in most theories contexts are trade contracts, machinery, efficient procedures,
established within which particular assertions capital, etc. (Wernerfelt, 1984: 172).
hold (e.g.. Burns & Stalker, 1961; Lawrence & That virtually anything associated with the
Lorsch, 1967). Relative to other strategy theories, firm can be a resource suggests that prescrip-
however, little effort to establish appropriate tions for dealing in certain ways with certain
contexts for the RBV has been apparent. categories of resources might be operationally
There are two recent exceptions. Miller and valid, whereas other categories of resources
Shamsie (1996) used a resource-based orienta- might be inherently difficult lor practitioners to
tion in examining the performance of seven ma- measure and manipulate. One example of a re-
jor Hollywood film studies over thirty years that source that might be difficult to measure and
began with a period of stability but turned into manipulate is tacit knowledge (Polyani, 1962,
one of change. Control over property-based re- 1966). Some have argued for tacit knowledge—
sources was associated with higher levels of that understanding gained from experience but
studio performance during the period of stabil- that cannot be expressed to another person and
ity while knowledge-based resources contrib- is unknown to oneself—as a source of competi-
uted to higher levels of performance during the tive advantage (e.g., Coff, 1997; Lado, Boyd, &
period of environmental turbulence. Thus, with Wright, 1992; McAulay, Russell, & Sims, 1997;
their study. Miller and Shamsie (1996) took a step Saviotti, 1998). This may be descriptively correct,
toward establishing boundaries for the RBV by but it is likely to be quite difficult for practitio-
hypothesizing contexts within which particular ners to effectively manipulate that which is in-
resources were determined to be more or less herently unknowable.
valuable. Their work was one of the first at- In addition, even if a resource can be manip-
tempts to integrate the RBV model and environ- ulated, RBV researchers must be clearer con-
mental models by identifying resource values cerning the practitioner level at which prescrip-
through characteristics of product markets. tions can be made. The "CEO resources"
Similarly, in their recent work. Brush and Artz investigated by Castanias and Helfat (1991) are
(1999) determined that different capabilities are one example: prescriptions to top managers of
necessary to provide different classes ol service poorly performing firms that they are the source
in the veterinary industry. Their contingency ap- of the problem and should think about voluntar-
proach has important implications for industry ily exiting clearly would be considered unhelp-
practitioners making resource investments. ful. This is a case where viewing CEOs as
Continued development of such contingency resources would have more prescriptive impli-
theories of resource value might be a helpful cations for boards of directors than for the CEOs
2001 Priem and Buffer 33

themselves. Similarly, viewing boards of direc- source can produce competitive advantage—is
tors as resources would have more prescriptive presented. Then the heterogeneity and, there-
implications for the CEOs who appoint boards fore, rarity of that resource are established.
or the governments that regulate them than for Next, resource value is demonstrated by assert-
the boards themselves. Thus, some resources ing that the resource can produce competitive
may be of less interest to strategy researchers advantage. Finally, isolating mechanisms are
than others, depending in part on whether the confirmed, making resource replication difficult
resource can be manipulated and in part on the and thereby suggesting that the advantage may
group—frequently CEOs—for whom prescrip- be sustainable. Variations on this argument
tions are desired. Identifying specific resources have been advanced for resources ranging from
that may be particularly effective for certain ac- strategic planning and top management skills
tors in certain contexts might be a helpful first (Castanias & Helfat, 1991; Michalisin et al., 1997;
step in establishing boundaries for (and contri- Powell, 1992a) to organizational culture and
butions of) the RBV in strategic management. guanxi (Fiol, 1991; Oliver, 1997; Tsang, 1998).
Yet, this static RBV argument has notable po-
tential limitations for strategic management re-
The Process Black Box and the RBV
search. First, the static argument is descriptive:
Miller and Shamsie (1996) assert that the strat- it identifies generic characteristics of rent-
egy literature contains numerous references to generating resources without much attention to
resources being useful, without careful attention differing situations or resource comparisons. In
to when, where, and how they may be useful. the Castanias and Helfat (1991) article, for exam-
The "how" questions address the issue of the ple, although CEOs (as resources) are argued to
process black box in strategy research (Law- have superior or inferior management skills,
rence, 1997; Whetten, 1989). When, where, and there is no basis for discriminating among su-
who are the three questions, Whetten has ar- perior and inferior CEOs, other than waiting for
gued, necessary to "set the boundaries of gen- the performance results. Second, the processes
eralizability, and as such constitute the range of through which particular resources provide
the theory" (1989: 492). Miller and Shamsie's competitive advantage remain in a black box
(1996) work has raised and begun to answer im- (Lawrence, 1997, provides a discussion of this
portant when, where, and how questions about issue in strategy research). We do not know, for
knowledge-based resources and firm perfor- example, how the resources generate sustain-
mance. It appears that they were able to do so, able rents, other than through their heterogene-
however, without the RBV itself making an ele- ity. Why is it that some heterogeneous resources
mental contribution to their reasoning: resource- generate value, whereas other heterogeneous
based "logic" was not required to make their resources do not? Third, some resources studied,
contingency arguments. Attempts to develop a such as tacit knowledge, are inherently difficult
"knowledge-based" theory of the firm, following for practitioners to manipulate. Thus, these re-
in part from the RBV, can be found in Conner sources likely fail Thomas and Tymon's (1982)
and Prahalad's (1996) and Kogut and Zander's test of operational validity. Fourth, in static RBV
(1996) work. Again, however, the foundational studies researchers sometimes take a frequently
RBV appears not to be essential in making these researched strategy subject area, relabel the in-
arguments (Foss 1996a,b). dependent variables as "resources" and the de-
pendent variables as "competitive advantage,"
and use measures common to much cross-
Static and Dynamic Approaches to the RBV sectional strategy research as operation-
alizations (e.g., Powell, 1992a). Such studies
Although the RBV began as a dynamic ap- show that the resource-based labels are not nec-
proach emphasizing change over time (e.g., essary for much strategy research. Fifth, the
Dierickx & Cool, 1989; Penrose, 1959; Wernerfelt, static RBV arguments suffer from the In Search
1984), much of the subsequent literature has of Excellence (Peters & Waterman, 1982) problem
been static in concept. The typical sequence of in that it is quite easy to identify, a posteriori,
arguments offered in the static RBV literature is many "valuable" resources in high-performing
as follows. First, a variation of the theoretical firms.
statement we examined earlier—that some re-
34 Academy of Management Review January

Together, these issues suggest that the cur- possible approach for overcoming each chal-
rent high level of abstraction iound in the static lenge, identifying and implementing feasible
approach to the RBV might be one thing that solutions for each remain formidable tasks. We
could limit its usefulness for strategy research- believe the critical challenges include formaliz-
ers. RBV studies from this approach would likely ing the RBV, answering the how questions, in-
be more helpful if the key underlying constructs corporating the temporal component, and inte-
were carefully defined and the specific mecha- grating the RBV with demand heterogeneity
nisms purported to generate competitive advan- models.
tage carefully detailed. The problems of static
studies might be exacerbated when theorists
extend the RBV to second-order issues and be- Formalizing the RBV
yond, wherein the ability to leain to develop One requirement for theory in the definition
effective resources is in itself a resource, the presented earlier (Rudner, 1966) is that the state-
ability to establish an environment that encour- ments must be systematically related, thereby
ages such learning is a resource, and onward in possessing internal consistency (Dubin, 1976).
an infinite regress (see Collis, 1994, for a discus-
sion). To check for infernal consistency, all of the con-
cepts in each statement of the theory must be
clearly defined, all of the relationships among the
concepts musf be clearly specified, and all of
DISCUSSION the interrelationships among fhe statements in
the theory musf be clearly delineated (Hunt, 1991:
Our investigation suggests several conclu- 152).
sions concerning the present state of the single-
business RBV, both as a theory or potential the- Also, the axioms underlying the theory must be
ory of competitive advantage and as a useful identified. When theories are so specified, they
perspective for strategy research. Theory- are amenable to being evaluated through the
related conclusions include the following: (1) process of formalization. "The attempt to even
considerable conceptual work remains before partially formalize a theory, by baring its essen-
the RBV can meet the requirements of a theoret- tial structure or morphology, can sharpen the
ical structure; (2) the RBV makes implicit as- discussion of the theory and put it into a frame-
sumptions about product markets, just as earlier work suitable for testing" (Hunt, 1991: 159).
environment-based models made implicit as- The axioms underlying the RBV—that re-
sumptions about resources; and (3) the funda- sources are heterogeneous and not perfectly mo-
mental "value" variable is exogenous to the bile— have been clearly identified. The implicit
RBV. As a perspective for strategy research, (4) assumptions identified earlier are typical of
overly inclusive definitions of resources make it most theories. The concept definitions and inter-
more difficult to establish contextual and pre- relationships, as well as the interrelationships
scriptive boundaries, and (5) static, cross- among the statements in the elemental RBV,
sectional approaches to RBV development may however, require additional development and
result in causal hows and whys remaining in a then reevaluation against the requirements of
black box. theory. Repetition of this process likely will pay
Given these conclusions, one could be off in greatly improved clarity and understand-
tempted to speculate that the RBV is simply a ing and could lead to a testable RBV that fully
fad of management scholarship (Abrahamson, meets the requirements of a theoretical struc-
1991, 1996) and that it has gained acceptance ture.
primarily because of its wide applicability and
intriguing terminology (e.g., tradability, substi-
tutability, causal ambiguity). Such speculation Answering the How Questions
would be premature. The RBV, although no The I/O economics work that provides the
longer an especially "young" framework, might foundation for the RBV is primarily descriptive
yet achieve theory status with additional con- and explanatory, whereas the strategy disci-
ceptual work to begin to overcome the chal- pline is prescriptive (Barney, 1992; Me Williams
lenges outlined below. Although as part of the & Smart, 1995; Meyer, 1991). Another challenge
explication of our ideas we outline at least one for RBV researchers is to answer enough how
2001 Priem and Butler 35

questions—How can the resource be obtained? to practicing strategists because of the clear
How and in which contexts does it contribute to prescriptive implications.
competitive advantage? How does it interact/ Barney's (1991) definition of sustainable com-
compare with other resources?—so that mean- petitive advantage as occurring when competi-
ingiul prescriptions can be offered and, ulti- tors have ceased attempts at imitation also
mately, behavioral dimensions can be included lends itself to temporal theory building. Further,
in future RBV research {e.g., Schoemaker, 1990). these ideas are amenable to empirical test
Reed and DeFillippi (1990), for example, identi- through such methods as the "rate perspective"
fied causal ambiguity—based on the tacitness, described by McKelvey (1997: 365). One empiri-
complexity, and specificity oi a competency—^as cal exemplar is Miller and Shamsie's (1996) lon-
an important source of sustainability of compet- gitudinal investigation oi the Hollywood iilm
itive advantage (see also Lippman & Rumelt, industry. Their study reflects firm-level history,
1982). Yet, when the causal relationships be- although they do not specifically examine it.
tween actions and competitive advantage are Particularly salient topics for investigation
unknown even to the firm's own managers (e.g., with assistance irom the RBV might include how
Barney, 1991), there is little potential for mean- firm resources and capabilities are accumu-
ingful prescription. This was recognized by lated and eroded (Dierickx & Cool, 1989) and
Reed and DeFillippi when they limited their dis- how resources' relative values may be aiiected
cussion to "situations in which managers under- by market changes (Miller & Shamsie, 1996). The
stand causal relationships better than their temporal factor could provide new insights in
competitors, and where competencies can be strategic management, just as it is beginning to
manipulated for advantage" (1990: 91). Prescrip- in organizational behavior (e.g., Harrison, Price,
tion is possible in such situations. & Bell, 1998). Incorporating time remains a chal-
Researchers are taking steps toward answer- lenge for RBV scholars.
ing how questions in RBV-related research (e.g..
Brush & Artz, 1999; Miller & Shamsie, 1996; Yeoh
& Roth, 1999). And methodologists are beginning Integrating the RBV with Demand
to evaluate and suggest techniques for address- Heterogeneity Models
ing these questions in the RBV context (e.g., One of the earliest frameworks for developing
Bowen & Wiersema, 1999; Rouse & Daellenbach, firm strategy—SWOT analysis—was geared to-
1999). The continuation of these trends will likely ward identifying internal strengths and weak-
aid in clarifying and improving the contribution nesses, as well as external opportunities and
of the RBV. threats (Learned et a l . 1965). Bourgeois notes
that "the central tenet in strategic management
is that a match between environmental condi-
tions and organizational capabilities and re-
Incorporating the Temporal Component sources is critical to performance, and that a
One aspect of the RBV that could become its strategist's job is to iind or create this match"
own distinctive competence is that it explicitly (1985: 548). Thus, strategic management requires
acknowledges a firm's history as an important explicit attention to hoth the internal and the
antecedent to current capabilities and opportu- external, to production and demand, to re-
nities (e.g., Barney, 1991). This temporal compo- sources and products. For the RBV to fulfill its
nent could produce a deeper understanding in potential in strategic management, its ideas
the strategy literature of the complex interac- must be integrated with an environmental de-
tions that occur over (ime between a firm's re- mand model. Just as strategy requires general
sources and its competitive environment. By ex- management skills, strategic complexity de-
plicitly introducing the temporal component of mands general models. The limiting homogene-
the RBV into the analysis, for example, Dierickx ity and mobility assumptions concerning re-
and Cool (1989) were able to generate a number source markets that are common in industry-
of unique insights that may be particularly ap- based, environmental models have been noted
plicable to strategic management. Their ideas by RBV theorists (e.g., Barney, 1991). The contrary
on the interconnectedness and erosion oi asset limiting homogeneity and immobility assump-
stocks, for example, may be particularly helpful tions oi the RBV concerning product markets
36 Academy of Management Review January

were noted earlier, along with the RBV's exoge- long has been acknowledged to be a critical
nous determination of "value." Together, the factor ior entrepreneurial success. Coase (1937),
limiting assumptions suggest that a more inte- ior example, quoted Knight's view:
grated approach to theory building might pro-
duce a more strategy-useful, normative result. In the first place, goods are produced for a mar-
Some scholars have begun to take steps in ket, on the basis of entirely impersonal prediction
this direction. Hunt (1997, 2000) and Hunt and of wants, not lor the satisfaction oi the wants of
the producers themselves. The producer takes the
Morgan (1995), for example, have proposed a responsibility of forecasting the consumers'
"resource-advantage" (R-A) theory that "is a di- wants (1933: 268).
rect fusing of marketing's heterogeneous de-
mand theory with management's resource- This fundamental aspect of strategic judgment
based theory oi the firm" (Hunt, 1997: 59). Hunt's is exogenous to the RBV, yet sound strategic
(1997, 2000) developing perspective draws judgment requires hoth sides of Wernerfelt's
heavily on Alderson's (1957, 1965) "general the- (1984) metaphorical coin.
ory" of marketing. In this earlier resource- RBV theorists have argued persuasively that
demand theory, Alderson explained how heter- competitive advantage results from superior
ogeneous resources in their natural state were, knowledge, or luck, or a combination of the two
through a series oi sorts and transformations (Barney, 1986; Dierickx & Cool, 1989; Rumelt,
that resemble Porter's value chain (see Priem, 1984). Concerning superior knowledge, Alchian
Rasheed, & Amirani, 1997, for a comparison), and Demsetz (1972) much earlier asserted that
matched with the heterogeneous segments of the firm may provide a "superior information
demand on the customer side. Priem (1992) ac- service" relative to other forms oi organizing.
cessibly described Alderson's theory and recent "Superior combinations of inputs can be more
supportive iindings in I/O economics. economically identified and formed from re-
One clear challenge for RBV scholars is to "fill sources already used in the organization than
in the blanks" for value and demand in order to by obtaining new resources (and knowledge of
help the RBV become a perspective more in line them) frc5m the outside." Thus, "efficient produc-
with Bourgeois' (1985) "central tenet" of strategy. tion with heterogeneous resources is a result not
This could also help the RBV move closer toward of having hettei resources but in knowing moze
the status of a theory by establishing the RBV's accuiately the relative productive performances
position within a wider nomological network of those resources" (1972: 793). Concerning luck,
(Hunt, 1991). the late Isaiah Berlin concluded his essay on
political judgment with the thought that "there
is always the part played by pure luck—which,
CONCLUSION mysteriously enough, men of good judgment
seem to enjoy rather more often than others.
In this article we have taken some tentative This, too, is perhaps worth pondering" (1996: 30).
steps toward a more formal evaluation oi the
status and potential of the popular RBV of stra- The RBV may yet make more important contri-
tegic management. The RBV does not presently butions to knowledge in strategic management,
appear to meet the empirical content criterion in part because thorny and messy strategic
required oi theoretical systems (Bacharach, problems might not be amenable to solution
1989; Hunt, 1991; McKelvey, 1997). This does not through elegant theory. We have provided some
mean, however, that conceptual work initiated suggestions for where andthow the RBV may be
from a resource perspective is not theory. Miller able to contribute. The greatest potential likely
and Shamsie (1996), for example, presented a will only be realized through complementary
contingency theory developed in the context of and integrated use oi the RBV together with
firm resources. Nor does it mean that the RBV other, demand-oriented perspectives. Yet, eiforts
does not have potential to achieve theory status by RBV scholars to formalize the RBV, to answer
in the future. A concern, however, is that the the how questions, and to incorporate the tem-
elemental strategy concept of "value" remains poral component will each likely pay off in in-
outside the RBV. Yet, this value determination creased contributions. - :••
2001 Priem and Butlei 37

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Richard L Priem is a professor of strategic management and chair of the Department

of Management at the University of Texas at Arlington, where he received his Ph.D. He
was a Fulbright scholar at the University College of Belize and has visited at Hong
Kong 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 Kong
Polytechnic University. He received his Ph.D. in strategy from New York University. His
current research interests are in the areas of entrepreneurship and Southeast Asian
business practices.