Resource-Based View (RBV)
The RBV has been recognised for more than two decades and has become into one of the most persuasive and significant theoretical bases (Eisenhardt & Martin 2000; Kraaijenbrink, Spender & Groen 2010). The RBV has essentially influenced academic study in the area of innovation. This theory has also obtained exceptionally good attention in various fields such as strategic management, intellectual capital and economics (Galbreath 2005). Edith Penrose (1959), was the one who recognised the significance of resources towards organisation’s competitive positions in the market. He claimed that organisation development depends on the dynamic opportunities that generated from a proper management and exploitation of resources that owned by the organisations by means of the administrative framework that been developed and implanted in the oraganisation.
The main growth of the RBV took place between 1984 and the middle of 1990s which was after the initial article written by Wernerfelt in 1984, as an effort to bring forward the RBV theory (Kraaijenbrink, Spender ; Groen 2010; Newbert 2007). Afterward, many scholars (e.g., Barney 1991; Dierickx ; Cool 1989; Prahalad ; Hamel 1990; Priem ; Butler 2001) made notable contributions to the development of the RBV theoretical. After the publication of an article by Barney’s (1991) which related to the formalisation of the resource-based literature into a comprehensive and clear theoretical framework, the RBV began to broadly used by management and researcher (Newbert 2007).
The RBV theory clarifies the internal situations where competitive advantage for organisations is achieved and how to ensure that the advantages can be sustained over time based on resources and skills that possessed by the organisation (Barney 1991; Peteraf 1993; Wernerfelt 1984). This viewpoint is actually focuses on the organisation resources that been acquired from within (Eisenhardt & Martin 2000). The main idea of the RBV is that the organisations which is owned and manage resources that have the features of valuable, rare and exceptional would gain competitive advantage and improved in performance. Furthermore, resources that are inimitable and non-substitutable also vital for the organisations to achieve sustainable performance and competitive advantage over time (Barney 1991). These behaviors are also known as VRIN quality of the organisation (Eisenhardt & Martin 2000), which become important drivers of performance development and competitive advantage (Barney 1986).
Barney (1991), defines company resources as “all assets, capabilities, organisational 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.” These resources are further categorised into physical capital, human capital and organisational capital resources. According to Barney (1991), company that attained competitive advantage execute strategies that are not being practiced by their existing or potential competitors.
Even though the theory of RBV has been applied in various studies, it has also been criticised in many areas by some other researcher (Eisenhardt & Martin 2000; Wang & Ahmed 2007). One of the essential criticisms is that the nature of RBV is static and insufficient to clarify competitive advantage of company in a dynamic atmosphere (e.g, Priem & Butler 2001). The RBV has also been critiqued for its incapability to explain the process on how resources are developed and organised in demonstrating competitive advantage (Priem & Butler 2001). All those main critiques are been scrutinised, assessed and discussed further in literature, which been categorised into eight critical aspects; (1) the RBV has no managerial implications, (2) the RBV implies infinite regress, (3) the RBV’s applicability is too limited, (4) SCA is not achievable, (5) the RBV is not a theory of the firm, (6) VRIN and organisation of firm is neither necessary nor sufficient for SCA, (7) the value of a resource is too indeterminate to provide for useful theory, and (8) the definition of resource is unworkable (Kraaijenbrink, Spender ; Groen 2010). There is also an argument that in dynamic markets, sustained competitive advantage is unlikely to be accomplished (D’Aveni 1994 & Martin 2000). In order to perceive the progress of RBV, it was suggested that well-defined definitions and descriptions of resources and capabilities are needed (Kraaijenbrink, Spender & Groen 2010).
As we can see, both the ideas of resources and capabilities are exclusive and distinctive from each other. Resources are considered as inputs to the organisation. Resources can be classified into three main category that are tangible, intangible and personnel-based resources (Grant 1991). Tangible resources are refer to financial resources and physical assets that are clear, easily measured and manageable for example plant, building, machinery and equipment. Intangible resources refer to assets that are not physical in nature, and cannot be seen and touch directly which include company reputation, perception, value and intellectual property. Usually intangible assets is very hard to evaluate. Whereas, personnel-based resources are including technological know-how and knowledge assets. Other than that, it is clear that tangible resources can be acquired through both internal and external transactions, whereas intangible resources gradually growth within companies from time to time (Bakar & Ahmad 2010b). Intangible assets are appeared to be more lasting in gaining competitive advantage (Peteraf 1993) as the assets are very complex for other competitors to imitate (Galbreath, 2005). Company capabilities normaly include several processes in the operation which are much differ from the resources or assets (Amit & Schoemaker 1993). Capabilities are the company’s capability to bring together, integrate, organise and manage the resources (Amit ; Schoemaker, 1993). Without a appropriate exploitation of all the resources owned by a company, they could not play a part and contribute to gain competitive advantages (Grant, 1996).
The attention on progression and process for resource development and management has led to the emergence of the VRIO framework where a new feature been added on RBV theory which is organising by Barney in 1997 (Newbert, 2007). In order for companies to gain constant competitive advantage and performance, other than possessing resources with VRIN elements, right and accurate organisation of the companies to absorb and apply the resources is required. Resources that are effectively deployed through well-implemented strategy could grant competitive advantage and greater performance to the company (Collis ; Montgomery 1994).
KNOWLEDGE BASED VIEW
The economic transformation of material-based production to information-based production created a reassessment of companies and their workers. Increasingly we find knowledge workers at the core of organisation functions (e.g., concept and technology designers, as well as finance and management people). Other individuals are considered to be in the company’s edge, as a consequence their responsibilities change permanently and they are defined by the tasks they perform at the moment. This way, a new differentiation in labour arises (Child and McGrath, 2001).
Most of companies consider that to act with efficacy in today’s economy, it is crucial for them to become a knowledge-based organisation. But only a few understand what that means, and how to make the changes necessary to achieve it. Perhaps the most common mistake made by companies is considering that the higher the knowledge content of their products and services, the closer they are to being a true knowledge-based organisation. But then products and services are only the perceptible and tangible reality they present to their clients – the tip of the iceberg. As in real icebergs, the major truth that allows the company to produce is located below the surface of the water, hidden in the intangible assets of the organisation, and it entails the knowledge of what the company does, how it is done, and why it is done that way (Zack, 2003).
The KBV of the company is consistent with the approach which states that organisations are cultural artefacts (Balogun and Jenkins, 2003). As such, they learn through activities and adjust over time. Organisational learning allows the firm to attain, to change and to preserve its organisational capabilities (Cook and Yanow, 1995). Culture is most frequently defined after Schein (1985; Balogun and Jenkins, 2003), as a set of norms and beliefs held in common and shared by members of an organisation, or as shared beliefs and knowledge by Nonaka and Takeuchi (1995). Organisational culture is, in each moment, the stock of knowledge, coded or not, integrated in outlines and guidelines of action to be taken before certain situations (Bontis et al., 2002). Organisational routines often make knowledge become tacit and embedded (Balogun and Jenkins, 2003). A routine consists of behaviour that is learned, highly patterned, repeated and instituted, even if only partly, in tacit knowledge (Winter, 2003).
Following Nonaka (1991) the only true long-term competitive advantage is knowledge and therefore we have conceptualised the knowledge-based organisation (Blackler, 2002) and the knowledge-based advantage (McEvily and Chakravarthy, 2002). These authors accept that non-observable factors have an impact on company performance. Those factors, as management capabilities and competences, technical knowledge or tacit organisational practices, may turn out to be the main factors of company performance (Dess et al., 1995).
The strategic management literature nowadays generally equates competitive advantage in a way that it associates firm performance variation to intangible aspects (Rouse and Daellenbach, 2002). Apart from natural resource dominations, intangible resources present a greater probability to produce competitive advantage, as they are generally infrequent, socially complex, and hardly copied (Hitt et al., 2001). In the same sense, it is proper to point out that there is a knowledge management literature that associates greater knowledge bases, resulting from organisational learning, to superior firm performances (Senge, 1990; Garvin, 1998; Bontis et al., 2002), as well as presenting differences in knowledge records as the foundation of competitive advantage (Miller, 2002). A greater knowledge base can be associated with advanced strategic flexibility and quicker response to environment changes (Grant, 1996b; Volberda, 1996; Umemoto, 2002).
Through the use of dynamic capabilities, organisations can integrate, build and reconfigure their internal and external capacities to aspect fast changing environments (Teece et al., 1997). Organisational capabilities emerge over time through a process of organisational learning (Levitt and March, 1988; Szulanski, 2003). The learning organisation is a company that purports to having reputable organisational learning capabilities. Organisational learning capabilities are considered to be the most strategically important ones to create and sustain competitive advantage (DeNisi et al., 2003). Superior talent is recognised to be the main creator of sustained competitive advantage in high performance companies (Hiltrop, 1999) and the capacity to learn quicker than other competitors is considered the only sustained competitive advantage (Geus, 1988). This dynamic capability builds up over time a historical or path dependency (Collis, 1991; Winter, 1987; Lei et al., 1996), creating causal uncertainty (i.e., creating barriers to imitability and making it very difficult for other company to recreate the exclusive historical evolution where each organisation develops).
Capabilities and capacities lead to superior sustained performances since they are specific to each organisation (i.e., they are temporarily immovable and exclusive to that company), valuable to clients, non-substitutable and hard to duplicate (Rugman and Verbeke, 2002; Blackler, 2002). The replication of organisational practices, for example, is a very difficult and expensive process because replication itself is an organisational capability only developed through execution (Winter and Szulanski, 2002). The tacit, specific and complex knowledge that the organisation develops through replication generates long lasting advantages (McEvily and Chakravarthy, 2002). The company absorbs internal and external knowledge, combines them with pre-acquired knowledge, and creates new intellectual capital (Cohen and Levinthal, 1990). Or, the organisation may expand its knowledge base through the new application of pre-existing knowledge in the company (Szulanski, 2003; Gratton and Ghoshal, 2003). Even external, explicit knowledge, involving high acquisition costs to the company and available to competitors simultaneously, combined with exclusive internal knowledge may result in new and exclusive knowledge advantages (Zack, 2002). Knowledge intensive firms abandon formal structures and achieve coordination through social rewards and internal normative systems, instead of hierarchical control. Structure is a relevant factor to these organisations because when intensive knowledge firms grow they become more bureaucratic (Starbuck, 1992). Structure and control are the most addressed subjects by researchers analysing the ‘productive process’ that transforms knowledge into services (Rylander and Peppard, 2004). The dilemma between autonomy and control is frequently approached in the literature. Some arguments defend that the resolution of such dilemmas is better achieved through the application of cultural and normative processes, than through the utilisation of formal hierarchy and structure (Rylander and Peppard, 2004).
According to Sveiby (2001), knowledge-based strategic formulation is still limited by people’s capability. Human experience might still be the limiting factor of a firm’s success (von Krogh and Grand, 2002). In this ‘new economy’ (Grant, 2002), organisations become virtual, geographically dispersed, and highly dependent on computer-mediated communication. Firms negotiate almost exclusively in cyberspace and give extreme emphasis to learning and knowledge-based work (Markham, 1998). Organisations operate in a network independently from their geographic location, based upon the use of communication technologies (Blackler, 2002; Chauhan and Bontis, 2004).