FIRMRESOURCESANDSUSTAINEDCOMPETITIVEADVANTAGE,

BARNEY,JAYB, JOURNALOFMANAGEMENT, 1991

DATE: 10/27/2015

ITM 501 - INNOVATION MANAGEMENT (2014)

ID: 20155636

NAME: RIRI KUSUMARANI

ONE SENTENCE SUMMARY

The proposed framework can be used to analyze resources

potential as source for sustained competitive advantage of a firm
when firm resources are heterogeneous and immobile

ITM 501 - INNOVATION MANAGEMENT

12/27/16

1960S FRAMEWORK
SWOT Analysis
Show How Firms Sustain their competitive advantages by
implementing strategies
Exploiting Strengths
Responding to Opportunities
Neutralizing Threats
Avoiding Weaknesses
Porters Five Forces Model
Attributes of an attractive industry and suggests greater
opportunities with less threats

ASSUMPTION IN PROPOSED FRAMEWORK

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

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

CONCEPT IN THIS PAPER : FIRM RESOURCES

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

Three Categories in this paper:

Physical capital. Ex: technologies, infrastructures, location, access to

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

relations among group

These resources can act as barriers or enabler of a firms ability to implement valuable
strategies for sustaining competitive advantage.
Even so, this paper focus only on the function as enabler of firms sustainable competitive
advantage

CONCEPT IN THIS PAPER : COMPETITIVE ADVANTAGE & SUSTAINED COMPETITIVE

ADV.
Competitive Advantage

Firm is implementing a value creating strategy not simultaneously being implemented by

other firms
Sustained Competitive Advantage

Firm is implementing a value creating strategy not simultaneously being implemented by

other firms and
when other firms are unable to duplicate the benefits of the strategy
Does not mean it will last forever. But will not be competed away
through the duplication efforts.
The inability of existing and potential firms to duplicate strategy
Schumpeterian Shocks : A firm enjoying a sustained competitive adv. may
experience major shifts in the structure of competition.

RESOURCE HETEROGENEITY AND IMMOBILITY

The search for sources of sustained competitive advantage must focus on firms resource

heterogeneity and immobility

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

these firms to enjoy sustained competitive advantage.

In order to be a first-mover advantage, firms in an industry must be heterogeneous in terms of the

resources they control

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

are heterogeneous and immobile.

ATTRIBUTES OF RESOURCES AS SOURCE FOR SUSTAINED COMPETITIVE ADVANTAGE

Valuable

RARENESS

Enable firms to implement strategies for increasing effectiveness and efficiency

Exploit opportunities , Neutralizing threats

If a resources is valuable but easy to obtain, it can not be used as source of

competitive advantage

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

If number of firms possess a valuable of resources is less than the number of firms
needed to generate perfect competition industry : Its a source!

ATTRIBUTES OF RESOURCES AS SOURCE FOR SUSTAINED COMPETITIVE ADVANTAGE

(2)

Imitability

SUBSTITUABILITY

Valuable & rareness resources must be difficult to imitate in order to be considered

as source for sustained competitive advantage.

Imperfectly imitable because:

Dependent upon unique historical conditions

The link between firms sus. competitive adv.

and resources is casually ambiguous

Resource generating firms advantage is

socially complex

Physical Technology resources is not included in this attributes

Resources must be no strategically equivalent valuable resources that are

themselves either not rare or imitable.

PROPOSED FRAMEWORK

Examples on applying this framework are given in the paper :

Strategic Planning
Information processing systems
Positive reputations

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

Value & Rareness

IMITABILITY & SUBSTITUABLE

imitable :

Enable to recognize opportunities & threats

Through documentation in public sources

Enable to recognize & exploit firms

Other firms can learn to do the same

resources

strategy

not Rare:

Thoroughly described & documented

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

processs will likely to gain S.C.A

Rare:
Firms try to prevent processes from unfolding

substitutable:

Formal

Valuable :

Through strategic informal planning

Imperfectly imitable
Processes are socially complex

substitutable
Substitutable through formal planning?

informal

INFORMATION PROCESSING SYSTEMS AS RESOURCE FOR S.C.A

Value & Rareness

IMITABILITY & SUBSTITUABLE

Valuable :

Enable to recognize opportunities & threats

imitable :

Because machines can be purchased, then

they are highly imitable

Enable to recognize & exploit firms

resources

The presence of highly experienced

not Rare:

Machines are available to purchase across

markets
If embedded through formal-informal

management decision making process,

then it can be considered as rare

management team makes IPS as source of

S.C.A

Through strategic informal planning

substitutable:

POSITIVE REPUTATION AS RESOURCE FOR S.C.A

Value & Rareness

IMITABILITY & SUBSTITUABLE

Valuable :

Positive reputation among customers and

suppliers

reputations

imitable :

Difficult to duplicate because of historical

setting

If only a few firms have positive

Rare:

Known as Socially complex relation

substitutable:

Substitute with Guarantee and reassurance?

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

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

Organization Theory Behavior and S.C.A

Proposed framework suggests research in organizational theory and behavior can act as a rich source

to find resources that are valuable, rare, non-imitable and no substitute.

It anticipates a more intimate integration of the organizational and the economic as a way to study

S.C.A

Firm Endowments and S.C.A

Assumption that managers are limited by their ability to manipulate all the attributes and

characteristic of their firms

However this make firms resources imperfectly imitable

LIMITATION & COMMENT ON PAPER

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

resource must be Heterogeneous and immobile. Question raised : what about

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

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