*2: Examining the effects of resources & capabilities on competitive advantage and organizational growth within the field of strategic management.
*3: Knowledge is the most important intangible resource; Exploring the importance of knowledge for firm’s growth. The chronology of the theory of resource based view
2006
1992 Kogut & Zander
(OS)
The current premise that a firm must possess heterogeneous and immobile resources to achieve sustained competitive advantage forms the basis of the resource based theory of the firm. The theory of resource based view (RBV) was derived from the Penrose’s book “The theory of the growth of the firm” in 1959 and later expanded by others (Barney, 1991;
Wernerfelt, 1984). The RBV indicated that firms are essentially profit-orientated entities endowed with a variety of resources; therefore, it is an important task that firms have to manage and use resources effectively. Organizational resources are defined as a collection of tangible and intangible assets, which are administrated and controlled by the organization in order to perform effective and efficient strategies (Barney, 1991). Particularly, valuable resources are rare, heterogeneous, immobile, and non-substitutable. The resource constructs are conceptualized as assets (what the firm has?) and skills (what the firm does?). The skills belong to intangible capabilities that enable firm to develop successful strategies. Tangible assets consist of financial and physical assets and intangible assets are composed of intellectual property, organizational assets, and reputation assets (Galbreath, 2005). Resource portfolio shown in Figure 2.3 explains the relationship among resource constructs.
Figure 2.3 Resource portfolio (Source: Galbreath, 2005)
A RBV of the firm elaborated that different performance is explained by the characteristics of assets and capabilities of the firm (Wernerfelt, 1984; Barney, 1991). Wernerfelt (1984) concerned this theme under the circumstances where a resource leads to high profits over a long period of time. Barney (1991) proposed a resource based model to emphasize the intra-organizational analysis of strength and weakness when compared to other rivals in competitive environment. Grant (1991) claimed that organizational resources and capabilities as the foundation for strategic development are a critical business direction, which combines two concepts including resource as the basis for corporate profitability and capability as organizational routines. For attaining the profitable market, a firm depends on its ability to acquire and defend advantageous positions in underlying resources being important to production and distribution.
Based on the accumulation of resource and capability in the organization, scholars have proposed that sustainable competitive advantage is difficult to duplicate and imitate (Barney, 1991; Grant, 1991). Relevant research concluded that intra-organizational resources (e.g.
production technology, employee training, and relations among firm members) are important for achieving organizational competitiveness.
The research of knowledge-based view (KBV) has originated from the theory of RBV.
Scholars argue that firm exist because of unique and special knowledge resources of leading to firm advantage. In general, the RBV treats knowledge as a generic resource, not a special asset. The theory of RBV emphasizes that the intrinsic characteristics of resources and capabilities prevent imitation. However, most knowledge objects in a firm can be viewed as knowledge resources which will be able to create organizational value. With the coming of knowledge era, enterprise’s focus is not in tangible assets (e.g. land, labours), but in intangible
skills (e.g. knowledge, patterns).
Foss (1996) named a term “knowledge-based approaches to the theory of the firm” as an emerging aspect of an economic organization, and argued that the core role about the firm is an entity with the ability to learn and grow through a repository of distinct productive knowledge. For KBV approach, the firm capabilities viewed as the practices of knowledge-based organization are assumed to be at the core of sustainable competitive advantage and firm performance. Kogut and Zander (1992) believed that knowledge is regarded as the critical competitive resource, and the combinative capability is an important ability to synthesize and apply the existing and acquired knowledge resources to generate new business value. Grant (1996) argued that a firm’s role is to integrate the specialist knowledge resident in individuals into organizational goods and services; thus, knowledge coordination in intra-organization is necessary. The kernel of knowledge in firms is reflected in the emergence of the KBV being an essential theory in contemporary organizational research. More generally, the increasing emphasis on the importance of knowledge-based capabilities will be viewed as a characteristic to drive the development of knowledge organization.
Moreover, Grant (1997) indicated a set of characteristics to conceptualize the knowledge-based view of the firm: (1) knowledge is the most essential resource for generating organizational value; (2) knowledge comprises different types, explicit and tacit, varying in their transferability; (3) individuals are the actor of knowledge creation and the repositories of tacit knowledge; (4) knowledge is subject to economies of scale and scope, and explicit knowledge can be deployed at low marginal cost. Therefore, concerning KBV as a parallel stream of KM in practice, firms will form a knowledge-based organization by using knowledge capabilities to develop new products, provide new services, and create new customer relationship. KM is a recent development, and it extends the concept of resources and capabilities in the strategic management research. The theory of KBV regards knowledge as the most strategically significant resources of the firm because knowledge assets are so complex that they are difficult to imitate. Besides, a variety of knowledge resources and capabilities among firms are the primary determinants of sustained competitive advantage and superior corporate performance.
According to Haataja’s (2005) summarization, the RBV which recognize professional know-how as a critical resource should be more dynamically developed, and the KBV emphasizes the importance of tacit knowledge which is the source of innovativeness. The comparison between RBV and KBV from five dimensions is shown in Table 2.4.
Table 2.4 The Comparison between RBV and KBV
The resource-based view The knowledge-based view How to achieve
competitive advantage
Critical resource bundles
combined to a right strategy Knowledge sharing and knowledge creation
The service process Different service strategies Development of service innovations Knowledge Internal aspect - static Cyclical - dynamic Benefits of the model Development of internal
resources of the organization Intellectual capital, creativity Central development
objects from the perspective of KIS
Understand dynamic nature of resources, interaction of
Consequently, an organization can establish and sustain its competitive advantage depended on a wide spread of knowledge innovation within the firm. Knowledge is seemed to be important assets and KM should be considered as a solution to support knowledge sharing, creation, and innovation through the aspect of the KBV.