Strategic Management Journal, VoL.

15, 5-9 (1994)

r
I
COMPETITIVE ORGANIZATIONAL BEHAVIOR:
TOWARD AN ORGANIZATIONALLY-BASED THEORY
OF COMPETITIVE ADVANTAGE
JAY 6. BARNEY
Fisher College of Business, The Ohio State University, Columbus, Ohio, U.S.A.

\ EDWARD J. ZAJAC
J. L. Kellogg Graduate School of Management, Northwestern University, Evanston,
Illinois, U.S.A.

Strategy implementation scholars have traditionally focused their attention on behavioral

and social phenomena in a firm that enable it to both choose and implement its strategies.
Unfortunately, some of this work has assumed that it is possible to study strategy
implementation independent of the content of a firm’s strategies, and independent of the
particular competitive context within which a firm operates. Recent developments in the
resource-based view of the firm reaffirm the importance of studying the strategic consequences
of behavioral and social phenomena within a firm, but suggest that separating this work
from the content of strategy, or from the competitive context of a firm, is inappropriate.
The papers in this special issue focus on important behavioral and social phenomena in a
firm (e.g., organizational behavior), but do so in an explicit competitive context (e.g.,
competitive organizational behavior).

Interest in the competitive consequences of structures), organizational behavior (e.g., leader-

organizational phenomena has grown significantly
over the last several years. Traditionally, this
interest has manifested itself in ‘strategy
implementation’ research. Traditional strategy
implementation scholars have studied the pro-
cesses through which a firm chooses its strategies,
as well as the processes through which those
strategies are implemented. In this effort, these
scholars have relied heavily on ideas and theories
taken from organizational economics (e.g., trans-
action cost economics, agency theory), organiza-
tion theory (e.g., models of formal organizational
Key words: Competitive organizational behavior,
strategy implementation,resource-based view, strategy
formulation
ship, individual and group decision making),
and related disciplines. Indeed, several Strategic
Management Journal Special Issues have been
dedicated to advancing this tradition of strategy
implementation research (e.g., Hambrick’s, 1989,
issue on strategic leaders and leadership, Chakra-
varthy and Doz’s, 1992, issue on strategy process,
Pettigrew’s (1992) issue on fundamental themes
in strategy process research, and Bowman and
Singh’s (1993) issue on corporate restructuring).
While traditional strategy implementation
research has clearly made an important contri-
bution to the field of strategic ” management.
”
Some Of this work has adopted the (convenient)
assumption that strategy implementation Pro-
cesses can be studied independent of the content

CCC 0143-2095/94/100005-05
@ 1994 by John Wiley & Sons, Ltd.
6 J . B. Barney and E. J . Zajac
of a firm’s strategies, and independent of the
particular market and competitive context within
which a firm’s strategies are implemented. Recent
developments in the resource-based view of the
firm (Wernerfelt, 1984; Rumelt, 1984; Barney,
1986a) suggest that these assumptions are inap-
propriate. This logic suggests, among other
things, that strategy implementation skills must
be specific to the particular strategies being
implemented by a firm, and that strategy
implementation skills possessed by large numbers
of competing firms cannot be a source of
competitive advantage for any one firm. Thus,
the quality of a firm’s strategy implementation
cannot be evaluated independent of the content
of a firm’s strategies, nor independent of the
broader competitive context within which a firm
is operating.
In this sense, the resource-based view of the
firm can be seen as a logical extension of
traditional strategy implementation work. Cer-
tainly, resource-based logic recognizes the stra-
tegic importance of behavioral and social phenom-
ena in enabling firms to conceive of, choose,
and implement their strategies (Barney, 1986b,
1991). Indeed, such strategically relevant
behavioral and social phenomena inside a firm
are designated as resources, capabilities, and
competencies by resource-based theorists
(Wernerfelt, 1984; Prahalad and Hamel, 1990).
However, this perspective also recognizes that
the competitive value of these phenomena cannot
be understood independent of the specific strat-
egies a firm is pursuing, nor independent of the
specific competitive context within which a firm
operates.
This reasoning has led us to choose what, to
many, may seem like an unusual title for a
Strategic Management Journal Special Issue:
Competitive Organizational Behavior. However,
we think this title is appropriate. On the one
hand, the term ‘organizational behavior’ clearly
signals the importance of behavioral and social
phenomena in each of the papers in this special
issue. In the end, most strategic phenomena
involve individuals in firms making decisions,
taking actions, and exercising leadership. Strategy
research that ignores these phenomena does so
at great peril. On the other hand, the term
‘competitive’ clearly signals our belief that the
competitive consequences of these behavioral
and social phenomena cannot be understood
independent of the strategic and competitive
context within which a firm is operating. Conceiv-
ing, choosing, and implementing a strategy does
not take place in a competitive vacuum. Each of
us, separately, has called for this kind of
‘competitive organizational behavior’ research,
in which economic and behavioral research
traditions are combined (Barney, 1992; Zajac,
1992). In this special issue, we have taken the
opportunity to invite several scholars to continue
its development.
THE RELATIONSHIP BETWEEN
COMPETENCE AND COMPETITION IN
COMPETITIVE ORGANIZATIONAL
BEHAVIOR RESEARCH
Clearly, both competition (the competitive con-
text within which a firm operates) and competen-
cies (the strategically relevant behavioral and
social phenomena inside a firm) are important
issues in competitive organizational behavior
research. The papers in this special issue can be
divided into three groups, depending upon how
they approach the analysis of competition and
competencies. The first group of papers (Barnett,
Greve, and Park; Rao; and Levinthal and Myatt)
examine the impact of a firm’s competitive
environment o n the development and evolution
of its competencies. This ‘competition leads to
competence’ approach suggests that, as firms
learn how to overcome specific competitive
challenges, they develop potentially valuable
resources and capabilities. These resources and
capabilities, in turn, can give firms important
competitive advantages in subsequent competitive
settings-advantages that are not available to
firms that did not have to respond to the original
competitive threats, and thus did not develop
the relevant competencies.
Barnett, Greve, and Park (‘An Evolutionary
Model of Organizational Performance’) examine
this ‘competition leads to competence’ phenom-
enon in the context of retail banks in Illinois.
By drawing on evolutionary economics and
population ecology theory, Barnett et al. are
able to show that banks that were able to survive
difficult competitive conditions at some earlier
time in their history, on average, are able to
enjoy higher levels of performance in their
current competitive situation. They also suggest

that firms that build barriers against competition
may be forfeiting important opportunities to
develop competitively valuable competencies.
Rao (‘The Social Construction of Reputation:
Certification Contests, Legitimation, and the
Survival of Organizations in the American Auto-
mobile Industry: 1895-1912’) examines this same
‘competition leads to competence’ phenomenon
but in a very different context. Based on resource-
based arguments, Rao suggests that a firm’s
reputation can, as an intangible asset, be an
important source of competitive advantage. How-
ever, this observation fails to address the pro-
cesses through which some firms are able to
develop very positive (and valuable) reputations,
while others are not. Drawing on institutional
theory, evolutionary economics, and population
ecology, Rao asserts that a firm’s reputation is
a socially constructed phenomenon that evolves
over time. One particularly important determi-
nant of this evolutionary process is the ‘legitimacy
contest.’ Rao describes such legitimacy contests
in the U.S. autombile industry, and is able to
show how the winners of these contests were
able to obtain an important ‘head start’ in
building reputational advantages.
The last paper in this first group, by Levinthal
and Myatt (‘Co-evolution of Capabilities and
Industry: The Evolution of Mutual Fund
Processing’), examines the co-evolution of indus-
try and firm competencies. The particular industry
they study is the mutual fund processing industry.
For Levinthal and Myatt, the link between
competition and competencies is not one way.
While competition clearly has an important
impact on the development and evolution of
a firm’s competencies, the development and
extension of competencies within a firm can also
have an important impact on the evolution of
competition. As with the other authors in this
group of papers, Levinthal and Myatt rely on
evolutionary theory, both from economics and
organization theory, to develop and test their
arguments.
The second group of papers (Henderson
and Cockburn; Camerer and Knez; Zajac and
Westphal; and Collis) focuses less on how
competition can affect the development of a
firm’s competencies, and more on how bundles
of a firm’s competencies are related and linked
to each other. In particular, these papers focus,
first, on what a firm’s competencies are, and
Competitive Organizational Behavior 7
second, on how relationships among sets of
complementary competencies either expand or
contract the strategic options available to a firm.
In addition, the empirical papers in this group
demonstrate that it is possible to measure a
firm’s resources and capabilities, and thus to
empirically test the impact of these competencies
on a firm’s strategic options.
Henderson and Cockburn (‘Measuring Com-
petence: Exploring Firm Effects in Pharmaceu-
tical Research’) empirically examine a firm’s
competencies, and relationships among these
competencies, in the context of the pharmaceu-
tical industry. They study the drug development
process, and conclude that research productivity
in different pharmaceutical firms depends, to a
great extent, on differences in research strategy,
in firm and program-specific resources, and in
organizational capability. Firms with the ‘right’
set of complementary competencies will be able
to explore product development strategies that
are not available to firms without these bundles
of skills.
Pisano (‘Knowledge, Integration, and the
Locus of Learning: An Empirical Analysis of
Process Development’) also empirically evaluates
the relationship among sets of competencies in
pharmaceutical firms. However, rather than
studying the drug development process, he
studies the process through which firms begin to
manufacture new drugs. This process has many
stages, and Pisano finds that firms that are able
to link knowledge and learning from these
different stages are able to gain significant
competitive advantages. Like Henderson and
Cockburn, Pisano concludes that organizational
mechanisms for linking what would otherwise be
disparate parts of a firm form an important
complementary resource in pharmaceutical firms.
Camerer and Knez (‘Creating Expectational
Assets in the Laboratory: Coordination in the
“Weakest-Link” Games’) examine a very differ-
ent set of competencies in their research. These
authors examine the process of decision making
in coordination games, and suggest that some
forms of decision making will generate superior
outcomes. However, they also conclude that the
ability to take full advantage of these superior
decision-making processes depends, at least in
part, on broader organizational phenomena,
including the shared beliefs of individuals in a
firm. Again, this work emphasizes the impor-
8 J . B. Barney and E . J . Zajac
tance, not of just a single resource of capability,
but of bundles of complementary resources and
capabilities.
Zajac and Westphal (‘Costs and Benefits of
Managerial Incentives and Monitoring in Large
Corporations: When Is More not Better?’)
focus on yet another set of complementary
competencies, by examining the strategic impli-
cations of various forms of corporate governance.
Their argument suggests that, in general, it
is not possible to describe some forms of
compensation and board structure as ‘superior’
to others. Rather, they propose that configuring
a governance system involves a series of important
trade-offs. In particular, their findings suggest
that the pursuit of more risky or more complex
firm strategies affects the desirability of specific
governance decisions. In this sense, governance
is a complement of strategy, and these links
need to be considered when firms make their
governancektrategy decisions.
Finally, Collis (‘How Valuable Are Organiza-
tional Capabilities?’) sounds a cautionary note
in our unbridled effort to develop ‘the’ theory
of strategy based on a firm’s resources, capabili-
ties, or competencies. Collis recognizes that it is
always possible to shift the analysis of competition
to ever more abstract levels. Where some would
argue that competitive advantage should be
analyzed in terms of a firm’s position in an
industry, others can argue that competitive
advantage should be analyzed in terms of the
resources a firm possesses that enabled it to
obtain that position. While some would argue
that competitive advantage should be analyzed
in terms of a firm’s resources, others can argue
that competitive advantage should be analyzed
in terms of the resources a firm possesses that
enabled it to obtain its resources, and so forth.
Collis discusses this ‘infinite regress’ problem,
and its implications for future research.
The final group of papers (Ginsberg; Barney
and Hansen) takes the development and existence
of competencies as given, and assumes that at
least some firms possess appropriate bundles of
competencies, and then examines the competitive
implications of these competencies. In other
words, these papers reverse the objective of
the first group of papers, to examine how
competencies affect competition, rather than
how competition affects competencies. While an
implicit part of the argument in several papers,
the impact of competencies on competition is
the primary topic for the papers in this group.
Ginsberg (‘Minding the Competition: From
Mapping to Mastery‘) begins this process by
developing a sociocognitive approach to analyzing
a firm’s capabilities. He does this by examining
the sociocognitive underpinnings of cost leader-
ship and product differentiation strategies, and
then by showing how these sociocognitive attri-
butes of individuals and groups in firms have an
important impact on the ability of firms to
conceive of, choose, and implement strategies.
Barney and Hansen (‘Trustworthiness as a
Source of Competitive Advantage’) also examine
the competitive implications of a firm’s resources
and capabilities. The particular competence they
examine-trustworthiness-is not as micro as
Ginsberg’s sociocognitive approach, but still has
important behavioral and social components.
Barney and Hansen describe three types of
trust in economic exchanges, and examine the
conditions under which they can, and cannot, be
sources of sustained competitive advantage.
CONCLUSIONS
As wide ranging as the papers in this special
issue are, no single set of papers could ever hope
to address all the theoretical and empirical
issues associated with the study of competitive
organizational behavior. Rather, in gathering
these papers together in one location, our
objectives have been more modest. First, we
hope that these papers point both to the
liabilities of separating strategy formulation and
implementation research, and to the potential
associated with bringing these ways of thinking
about strategy problems together. Second, we
hope that these papers demonstrate that such
integrative work can be done, both theoretically
and empirically. Finally, we hope that these
papers demonstrate the importance of at least
three research questions in competitive organiza-
tional behavior: (1) how does competition affect
the development and evolution of firm com-
petencies; (2) once defined, how are sets of
competencies in a firm related to each other;
and (3) what are the competitive implications of
a firm’s competencies? While these questions are
far from being answered, an important start has
been made.

ACKNOWLEDGEMENTS
We have been assisted in our editing of this
special issue by several colleagues, in strategic
management, organization theory, and organiza-
tional behavior, who took the time to attend a
prepublication conference held at the Kellogg
Graduate School of Management at Northwestern
University, where early versions of all the papers
were presented. Comments at that conference
significantly contributed to the development of
the papers. Moreover, several of these individuals
also agreed to read more developed drafts of the
papers. We appreciate the assistance of those
individuals.
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