Resource Based View

Introduction

In the past twenty years the field of strategy has changed substantially in which more organizations studied how to analyze their competitive environment. According to Grant (2005) developing competitive and corporate advantages, defining the position of the firms, and understanding the threats to sustaining advantage in the face of challenging competitive threats have become achievable because of this evolution in the field of strategy. Furthermore, different approaches including industrial organization (I/O) and resource-based view (RBV) have assisted practitioners to comprehend the dynamic of competition and at the same time develop recommendations on how firms should define their corporate and competitive strategies (Collis & Montgomery, 1995). Both approaches are actually affecting the firm's performance over time. In this paper, it aims to ignite further research and debate with regards to these two views as means of explain firm performance. Specifically, it will discuss the differences and also the similarities between the two views. Another thing is that conceptual framework explaining competitive advantage and performance also developed that incorporates the resourced-based view and industrial organization approach to competitive environment.

Differences Between Resource-based view and Industrial Organization Approach

Barney (1991) implies internal capability of the organization in creating strategy to achieve a sustainable competitive advantage in its market and industries is all RBV about. Firm's internal capability will determine the strategic choices in competing in its external environment. Furthermore, the differences in firm's performance are mainly due to the unique resources and its capability in combining and using those resources. From these differences in resources and capabilities, the firm has the basis of competitive advantage to other firms (Priem & Butler, 2001). The capabilities will become stronger and tougher for rival to comprehend and imitate through continued use of these unique resources (Collis & Montgomery, 1995). However, Firms do not use their all resources and capabilities in order to be the basis for competitive advantage. This is because they are valuable, rare, costly to imitate and non-substitutable.