Question

The resource-based view of the firm:

Answer 1

The resource based view of the firm focuses on gaining competitive advantage with the help of available resources and capabilities. The uniqueness in resources and capabilities helps to form the firm’s strategy and to earn above average returns. Resources are the inputs for the firm’s production processes and it may include the skills of the employees, talented managers, patents, finances, equipments and capitals. The capability of the resources means the capacity of a resource to perform the tasks in an integrative manner. The capabilities that provide competitive advantage for the firm constitute the core competencies. The differences in firm’s performance over time are mainly due the unique combination of resources and the capabilities according to the resource based view of firms. Resources and certain capabilities are not highly mobile across firms and this leads to different combinations of resources and capabilities across the firms and provide competitive advantage. Capabilities cannot be easily imitated and it becomes stronger through continued usage. Many of the resources can be substituted or imitated over time; hence a firm cannot sustain the competitive advantage only based on resources. The resources and capabilities should be valuable, rare, costly to imitate and non substitutable to create competitive advantage.