1. Firm Resources and Sustained Competitive Advantage
Joshua Downs
9/20/2015
Firm Resources and Sustained Competitive Advantage
Jay barney
Journal of Management, 1991

2. Main Points
Argues for deeper analysis than extant discussion of environmentally derived advantage at industry level and critiques assumptions of homogeneity and mobility at firm level
Introduces VRIN Framework for determining whether idiosyncratic resources under firm control have the potential to facilitate sustainable value creating strategies over current and potential competitors
Competitive advantage only sustainable in presence of resource heterogeneity and immobility
Sustainable competitive advantage CANNOT BE PURCHASED ON OPEN MARKETS
Schumpeterian shocks influence transformation of attributes to resources & vice versa
Addresses issues of:
Social welfare with efficiency rents argument
Organization Theory and Behavior by discussing resource-based model as bridging agent

3. Competing Theories of Sustained Advantage
External Environmental Model
Opportunities and Threats
Porter’s Five Forces
Assumptions
Firms are identical in terms of the strategically relevant resources they control and strategies pursued
Internal firm assets are highly mobile
Objections to competitive advantage under these assumptions
First mover advantage requires superior knowledge regarding opportunities
Entry barriers requires heterogeneous strategies among incumbents and entrants

4. Key Concepts Firm Resources Competitive Advantage
All assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness (Daft, 1983)
Physical Capital Resources (Williamson, 1975)
Human Capital Resources (Becker, 1964)
Organizational Capital Resources (Tomer, 1987)
Differs from attributes that can constrain firm efficiency and effectiveness
Competitive Advantage
Value creating strategy not simultaneously being implemented by current or potential competitor
Sustained Competitive Advantage
Strategy that continues to create value after competitive efforts to duplicate have been exhausted
Not dependent on calendar time
Can be undone by Schumpeterian Shocks rendering resources into attributes

5. Sustained Competitive Advantage
To hold the potential to provide competitive advantage, firm resources must be
Valuable
Enable the firm to conceive of or implement strategies that improve efficiency and effectiveness
Exploit opportunities and neutralize threats in external environment
Rare
Number of firms possessing less than the number needed for perfect competition dynamics in an industry (Hirshleifer, 1980)
Non-rare exploited for competitive parity and economic survival
To hold the potential to provide sustained competitive advantage, resources must ALSO be
Inimitable
Dependent on unique historical conditions (Path Dependency), causal ambiguity for both firm and competitors, and social complexity beyond systematic influence
Non-substitutable
No common or imitable strategically equivalent resources

6. Examples Strategic Planning Information Processing Systems
Formal: Not rare, unlikely to be a source of sustained competitive advantage by itself
Can lead to recognition of potential of other possessed resource
Informal: Some firms actively constrain, thus likelier to be rarer
Socially complex, but could be substituted by formal planning in the right setting
Information Processing Systems
Computers/Machines: Generally mobile, unlikely to be a source of sustained competitive advantage
Deeply embedded systems: Manager-computer interface mirrors social complexity
Potential substitutes (Management teams) must include: Efficient information flow & processing as well as rarity &/or inimitability
Positive Reputations
Can be rare, difficult to duplicate historically, varying social complexity between firm & stakeholders
Contractual measures as substitutes?

7. Discussion
How could the sustained competitive advantage endowed by the three resource examples be undone by Schumpeterian Shocks?
Can you think of some examples of attributes transformed into resources?
Where does risk enter the discussion? Is risk tolerance a type of resource?
How can resources help determine the assignment of residual control rights?