Resource-Based View (rbv)

Individual assignment

Resource-Based View (RBV)

The Resource-Based View (RBV) is a model of competitive advantage that suggests that a firm can achieve a sustainable competitive advantage (SCA) by acquiring and controlling certain resources and capabilities at the firm’s disposal. These resources are referred to as VRIN: Valuable, Rare, Inimitable and Non-substitutable. Companies also need to have a structured organisation (O) in place than can absorb and apply such resources. Therefore, the RBV focuses on the internal capabilities of a company in formulating strategy to achieve SCA in its markets and industries.

The RBV is considered as one of the substantial theories in strategic management due to its significance across all types of organizations. Resources can be divided into tangible and intangible resources, with both being equally important for the proper functioning of the organization. Therefore, the RBV formulates the blueprint for the proper use of utilisation of resources for every capability of the firm.

The RBV can be very useful for organizations to identify the basis by which their resources and capabilities serve as sources of competitive advantage. It can hence generate higher sales, lower costs and higher margins and maintain a position of advantage over competitors. Furthermore, the RBV also helps managers of firms to acknowledge why competences can be considered as a company’s most significant asset and understand how these assets can be used to improve the performance of the business.

However, despite its simplicity and apparent validity, the RBV has been subject to extensive criticism by many authors. Many critiques offer ways of improvement for the RBV to better reflect the reality and challenges that organizations must face.

Among these critiques, we can cite the lack of managerial implications of the RBV. Authors have regarded the view as lacking “operational validity”. Indeed, the RBV is often seen as a quite theoretical framework and does not offers ways to apply the view to the day-to-day activities of an organization. A related limitation is the assumption that managers exert total control over their organizations which is very rarely the case.

Another limitation of the RBV is the lack of applicability of the view across all industries and companies. Indeed, some authors argue that the RBV is only relevant for large companies with significant market power or that the uniqueness of the resources removes its potential for generalization. Moreover, the RBV is only applicable if the rules in an industry are relatively constant. It becomes much less relevant in highly unpredictable markets subject to disruptions by new technologies which might significantly alter the value of resources. For this reason, companies operating in the technology sector for instance should not always rely on the RBV to gain a competitive advantage.

Furthermore, the RBV is not always relevant as the SCA might not be achievable for organizations. As the skills and resources in companies are constantly evolving, this logically leads to continuously changing temporary competitive advantages. Authors argue that the competitive advantage can seldom be sustainable for companies as they will be exposed to the appearance of substitute products and new competitors. For this reason, the RBV remains a quite useful strategic concept in the short run but companies must acknowledge that a SCA might not be achieved through a static set of core resources.