What Makes a Resource Valuable? Identifying the Drivers of Firm-Idiosyncratic Resource Value

We fill a gap in the resource-based literature by identifying conditions and mechanisms that make a resource valuable to a firm ex ante-that is, before a decision on acquiring or building it is made. These conditions are (1) the firm's ex ante market position; (2) its ex ante resource base, which allows for complementarities; (3) its position in interorganizational networks, which gives it access to privileged information; and (4) the prior knowledge and experience of its managers, which allow superior judgment concerning the value-creating potential of the resource. These factors help explain why firms initially differ in how much value they attribute to a resource and, subsequently, why firms differ in their resource endowments. Our results also contribute to resource management theories by highlighting the role of managerial judgment in acquiring and accumulating resources and, thus, shaping firms' paths toward superior competitive positions. Furthermore, identifying firms' market positions and managerial judgment about demand-side value creation opportunities as resource value drivers highlights the importance of demand-side factors to strategic outcomes. We also discuss how our findings may open avenues for further studies and provide a basis for empirical tests of the resource-based view of strategic management.

[1]  Richard Makadok.  Toward a synthesis of the resource‐based and dynamic‐capability views of rent creation , 2001 .

[2]  C. Armstrong,et al.  A Review of Approaches to Empirical Research on the Resource-Based View of the Firm† , 2007 .

[3]  John C. Narver,et al.  Market Orientation and the Learning Organization , 1995 .

[4]  Richard L. Priem,et al.  Executives’ Perceptions of Uncertainty Sources: A Numerical Taxonomy and Underlying Dimensions , 2002 .

[5]  C. Shapiro,et al.  Network Externalities, Competition, and Compatibility , 1985 .

[6]  J. Barney,et al.  Discovery and Creation: Alternative Theories of Entrepreneurial Action , 2007 .

[7]  Dean A. Shepherd,et al.  Cognitive Processes of Opportunity Recognition: The Role of Structural Alignment , 2010, Organ. Sci..

[8]  Giovanni Gavetti,et al.  Capabilities, cognition, and inertia: evidence from digital imaging , 2000 .

[9]  M. McPherson,et al.  Birds of a Feather: Homophily in Social Networks , 2001 .

[10]  R. Burt.  The contingent value of social capital. , 1997 .

[11]  Mark J. Zbaracki,et al.  Pricing process as a capability: a resource-based perspective , 2003 .

[12]  S. Klepper.  Entry, Exit, Growth, and Innovation over the Product Life Cycle , 1996 .

[13]  S. Winter.  Understanding dynamic capabilities , 2003 .

[14]  Nicolai J. Foss,et al.  Resources and transaction costs: how property rights economics furthers the resource‐based view , 2005 .

[15]  J. Barney.  Strategic Factor Markets: Expectations, Luck, and Business Strategy , 1986 .

[16]  Kent D. Miller.  Risk and rationality in entrepreneurial processes , 2007 .

[17]  Constance E. Helfat,et al.  Product Sequencing: Co-Evolution of Knowledge, Capabilities and Products , 2000 .

[18]  M. Leiblein.  What Do Resource- and Capability-Based Theories Propose? , 2011 .

[19]  D. Teece.  Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance , 2007 .

[20]  Stephen L. Vargo,et al.  Service-dominant logic: continuing the evolution , 2008 .

[21]  Nicolai J. Foss,et al.  Entrepreneurship, Subjectivism, and the Resource-Based View: Towards a New Synthesis , 2006 .

[22]  M. Mizruchi.  What Do Interlocks Do? An Analysis, Critique, and Assessment of Research on Interlocking Directorates , 1996 .

[23]  R. Coff.  When Competitive Advantage Doesn't Lead to Performance: The Resource-Based View and Stakeholder Bargaining Power , 1999 .

[24]  Joseph T. Mahoney,et al.  Resources, Capabilities and Entrepreneurial Perceptions , 2007 .

[25]  C. Hill,et al.  The Performance of Incumbent firms in the Face of Radical Technological Innovation , 2003 .

[26]  M. Rouse,et al.  Rethinking research methods for the resource‐based perspective: isolating sources of sustainable competitive advantage , 1999 .

[27]  G. Day.  The Capabilities of Market-Driven Organizations , 1994 .

[28]  J. Barney,et al.  Entrepreneurship and Epistemology: The Philosophical Underpinnings of the Study of Entrepreneurial Opportunities , 2010 .

[29]  Peter G. Klein.  Opportunity Discovery, Entrepreneurial Action, and Economic Organization , 2008 .

[30]  Constance E. Helfat,et al.  Dynamic capabilities : understanding strategic change in organizations , 2007 .

[31]  Olivier Chatain,et al.  Value Creation, Competition and Performance in Buyer-Supplier Relationships , 2011 .

[32]  Alexander Ljungqvist,et al.  Whom You Know Matters: Venture Capital Networks and Investment Performance , 2007 .

[33]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[34]  Joseph T. Mahoney,et al.  Penrose’s Resource-Based Approach: The Process and Product of Research Creativity , 2002 .

[35]  Evan Rawley,et al.  Diversification, Coordination Costs and Organizational Rigidity: Evidence from Microdata , 2010 .

[36]  W. P. Barnett,et al.  The red queen in organizational evolution , 2007 .

[37]  Margaret A. Peteraf,et al.  Invited Editorial: Building a Bridge Between Resource Acquisition and Resource Accumulation , 2011 .

[38]  S. Shane.  A General Theory of Entrepreneurship , 2003 .

[39]  Michael Song,et al.  Marketing and technology resource complementarity : An analysis of their Interaction Effect in two environmental contexts , 2005 .

[40]  Ron Adner,et al.  Disruptive Technologies and the Emergence of Competition , 2003 .

[41]  Adam Brandenburger,et al.  Value-based Business Strategy , 2005 .

[42]  Steven B. Andrews,et al.  Structural Holes: The Social Structure of Competition , 1995, The SAGE Encyclopedia of Research Design.

[43]  Adam Brandenburger,et al.  Biform Games , 2007, Manag. Sci..

[44]  E. L. Cox,et al.  Guest editors\' introduction to the special issue: why is there a resource-based view? Toward a theory of competitive heterogeneity , 2003 .

[45]  M. Tushman,et al.  Technological Discontinuities and Organizational Environments , 1986 .

[46]  Michael E. Raynor,et al.  How long must a firm be great to rule out chance? Benchmarking sustained superior performance without being fooled by randomness , 2012 .

[47]  R. Reed,et al.  Causal Ambiguity, Barriers to Imitation, and Sustainable Competitive Advantage , 1990 .

[48]  F. Knight.  The economic nature of the firm: From Risk, Uncertainty, and Profit , 2009 .

[49]  E. Penrose.  The theory of the growth of the firm twenty-five years after , 1960 .

[50]  V. Ambrosini,et al.  Value Creation Versus Value Capture: Towards a Coherent Definition of Value in Strategy , 2000 .

[51]  J. E. Butler,et al.  Tautology in the resource-based view and the implications of externally determined resource value: f , 2001 .

[52]  D. Leonard-Barton.  CORE CAPABILITIES AND CORE RIGIDITIES: A PARADOX IN MANAGING NEW PRODUCT DEVELOPMENT , 1992 .

[53]  Jay B. Barney,et al.  Strategic Factor Market Intelligence: An Application of Information Economics to Strategy Formulation and Competitor Intelligence , 2001, Manag. Sci..

[54]  Israel M. Kirzner.  Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach , 1997 .

[55]  Daniel C. Snow,et al.  'Old' Technology Responses to 'New' Technology Threats: Demand Heterogeneity and Graceful Technology Retreats , 2009 .

[56]  A. King,et al.  Competencies and firm performance: examining the causal ambiguity paradox , 2001 .

[57]  Kim B. Clark,et al.  Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of , 1990 .

[58]  Margaret A. Peteraf.  The cornerstones of competitive advantage: A resource‐based view , 1993 .

[59]  Paul Milgrom,et al.  Complementarities and fit strategy, structure, and organizational change in manufacturing , 1995 .

[60]  Sali Li,et al.  Insights and New Directions from Demand-Side Approaches to Technology Innovation, Entrepreneurship, and Strategic Management Research , 2012 .

[61]  B. Wernerfelt,et al.  Technical change, competition and vertical integration , 1986 .

[62]  Erwin Danneels.  Trying to become a different type of company: dynamic capability at Smith Corona , 2011 .

[63]  S. Lippman,et al.  Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition , 1982 .

[64]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[65]  F. Hayek.  The economic nature of the firm: The use of knowledge in society , 1945 .

[66]  K. Eisenhardt,et al.  Constructing Markets and Shaping Boundaries: Entrepreneurial Power in Nascent Fields , 2009 .

[67]  James D. Westphal,et al.  GETTING THEM TO THINK OUTSIDE THE CIRCLE: CORPORATE GOVERNANCE, CEOS' EXTERNAL ADVICE NETWORKS, AND FIRM PERFORMANCE , 2008 .

[68]  Jeffery S. McMullen,et al.  Entrepreneurial Action And The Role Of Uncertainty In The Theory Of The Entrepreneur , 2006 .

[69]  Brian L. Connelly,et al.  Making the Most of What You've Got: Managerial Ability as a Source of Resource Value Creation , 2008 .

[70]  Carlo Salvato,et al.  Capabilities Unveiled: The Role of Ordinary Activities in the Evolution of Product Development Processes , 2009, Organ. Sci..

[71]  Karel Cool,et al.  Asset stock accumulation and sustainability of competitive advantage , 1989 .

[72]  I. Cockburn,et al.  Untangling the origins of competitive advantage , 2011 .

[73]  Richard L. Priem,et al.  Is the Resource-Based “View” a Useful Perspective for Strategic Management Research? , 2001 .

[74]  S. Lippman,et al.  The payments perspective: micro‐foundations of resource analysis , 2003 .

[75]  R. Daft,et al.  Toward a Model of Organizations as Interpretation Systems , 1984 .

[76]  Jeffery S. McMullen,et al.  The Formation of Opportunity Beliefs: Overcoming Ignorance and Reducing Doubt , 2007 .

[77]  Richard L. Priem,et al.  Achieving Demand-Side Synergy from Strategic Diversification: How Combining Mundane Assets Can Leverage Consumer Utilities , 2012, Organ. Sci..

[78]  Ken G. Smith,et al.  Value Creation and Value Capture: A Multilevel Perspective , 2007 .

[79]  C. Gilbert.  Unbundling the Structure of Inertia: Resource Versus Routine Rigidity , 2005 .

[80]  R. Roll,et al.  The Hubris Hypothesis of Corporate Takeovers , 1986 .

[81]  N. Venkatraman,et al.  Knowledge relatedness and the performance of multibusiness firms , 2005 .

[82]  Stephen L. Vargo,et al.  Evolving to a New Dominant Logic for Marketing , 2004 .

[83]  J. Spender,et al.  The Resource-Based View: A Review and Assessment of Its Critiques , 2009 .

[84]  J. Porac,et al.  Sociocognitive Dynamics in a Product Market , 1999 .

[85]  Birger Wernerfelt,et al.  Invited Editorial: The Use of Resources in Resource Acquisition , 2011 .

[86]  Ron Adner,et al.  A demand‐based perspective on sustainable competitive advantage , 2006 .

[87]  Robert A. Baron,et al.  Opportunity Recognition as the Detection of Meaningful Patterns: Evidence from Comparisons of Novice and Experienced Entrepreneurs , 2006, Manag. Sci..

[88]  S. Ghoshal,et al.  Social Capital and Value Creation: The Role of Intrafirm Networks , 1998 .

[89]  Scott L. Newbert.  Empirical research on the resource‐based view of the firm: an assessment and suggestions for future research , 2007 .

[90]  J. Morecroft,et al.  Managerial decision making and firm performance under a resource-based paradigm , 2010 .

[91]  Joseph T. Mahoney,et al.  The management of resources and the resource of management , 1995 .

[92]  Wenpin Tsai,et al.  Social comparison among competing firms , 2012 .

[93]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[94]  Carl P. Zeithaml,et al.  Measuring organizational knowledge: a conceptual and methodological framework , 2003 .

[95]  J. Adetunji Adegbesan,et al.  On the Origins of Competitive Advantage: Strategic Factor Markets and Heterogeneous Resource Complementarity , 2009 .

[96]  T. C. Powell.  Competitive advantage: logical and philosophical considerations , 2001 .

[97]  P. R. Nayyar.  Performance effects of information asymmetry and economies of scope in diversified service firms. , 1993, Academy of Management journal. Academy of Management.

[98]  A. Kumaraswamy,et al.  INSTITUTIONAL ENTREPRENEURSHIP IN THE SPONSORSHIP OF COMMON TECHNOLOGICAL STANDARDS: THE CASE OF SUN MICROSYSTEMS AND JAVA * , 2002 .

[99]  S. Shane,et al.  The Promise of Entrepreneurship as a Field of Research , 2000 .

[100]  T. Baker,et al.  Creating Something from Nothing: Resource Construction through Entrepreneurial Bricolage , 2005 .

[101]  R. Rumelt.  Theory, Strategy, and Entrepreneurship , 2005 .

[102]  David G. Sirmon,et al.  Managing Firm Resources in Dynamic Environments to Create Value: Looking Inside the Black Box , 2007 .

[103]  S. Shane.  Prior Knowledge and the Discovery of Entrepreneurial Opportunities , 2000 .

[104]  H. Chesbrough,et al.  Making sense of corporate venture capital. , 2002, Harvard business review.

[105]  Mark S. Granovetter.  The Strength of Weak Ties , 1973, American Journal of Sociology.

[106]  A. King.  Disentangling Interfirm and Intrafirm Causal Ambiguity: A Conceptual Model of Causal Ambiguity and Sustainable Competitive Advantage , 2007 .

[107]  P. Klemperer.  Markets with consumer switching costs , 1986 .

[108]  Richard Makadok,et al.  Doing the right thing and knowing the right thing to do: why the whole is greater than the sum of the parts , 2003 .

[109]  B. Uzzi,et al.  The Sources and Consequences of Embeddedness for the Economic Performance of Organizations: The Network Effect , 1996 .

[110]  Clayton M. Christensen,et al.  Technological Discontinuties, Organizational Capabilities, and Strategic Commitments , 1994, Industrial and Corporate Change.

[111]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[112]  George A. Akerlof.  The Market for “Lemons”: Quality Uncertainty and the Market Mechanism , 1970 .

[113]  Augustine A. Lado,et al.  Paradox And Theorizing Within The Resource-Based View , 2006 .

[114]  Thomas J. Cottrell,et al.  Product Variety and Firm Survival in the Microcomputer Software Industry , 2004 .

[115]  S. Hunt,et al.  The Comparative Advantage Theory of Competition , 1995 .

[116]  R. Ramírez.  Value co-production: intellectual origins and implications for practice and research , 1999 .

[117]  D. Teece,et al.  DYNAMIC CAPABILITIES AND STRATEGIC MANAGEMENT , 1997 .

[118]  Richard L. Priem.  A Consumer Perspective on Value Creation , 2007 .

[119]  Daniel A. Levinthal,et al.  Crossing an Apparent Chasm: Bridging Mindful and Less-Mindful Perspectives on Organizational Learning , 2006, Organ. Sci..

[120]  Ezra W. Zuckerman,et al.  The Categorical Imperative: Securities Analysts and the Illegitimacy Discount , 1999, American Journal of Sociology.