© 2002 by Prentice Hall 2-1

Resource-Based Theory

Buy (or acquire) resources and skills

cheaply

Transform (the resource or skill)

into a product or service

Deploy and implement (the strategy)

Sell dearly (for more than you paid)

© 2002 by Prentice Hall 2-2

Sustainable Competitive Advantage

Competitive advantage created when firms possess and employ resources that are:

Valuable– Allowing exploitation of environmental opportunities

Rare– Not enough for all competitors

Hard to copy– Competitors cannot easily duplicate them

Non-substitutable

© 2002 by Prentice Hall 2-3

Resource Attributes and Competitive Advantage

Valuable resources

Exploits opportunitiesNeutralizes threats

Not suited to theenvironment - Common

Creates Competitive Resource No Competitive Advantage Dimension Advantage

© 2002 by Prentice Hall 2-4

Resource Attributes and Competitive Advantage

Valuable resources

Exploits opportunitiesNeutralizes threats

Not suited to theenvironment - Common

Rare resources

UniqueCostly to procure

Readily availableInexpensive

Creates Competitive Resource No Competitive Advantage Dimension Advantage

© 2002 by Prentice Hall 2-5

Resource Attributes and Competitive Advantage

Valuable resources

Exploits opportunitiesNeutralizes threats

Not suited to theenvironment - Common

Rare resources

UniqueCostly to procure

Readily availableInexpensive

Imitable resources

Unique historyCausally ambiguous

Socially complex

Ordinary historyCausality knownSocially simple

Creates Competitive Resource No Competitive Advantage Dimension Advantage

© 2002 by Prentice Hall 2-6

Resource Attributes and Competitive Advantage

Valuable resources

Exploits opportunitiesNeutralizes threats

Not suited to theenvironment - Common

Rare resources

UniqueCostly to procure

Readily availableInexpensive

Imitable resources

Unique historyCausally ambiguous

Socially complex

Ordinary historyCausality knownSocially simple

Substitutable resources

Not possible through:Similar modesDifferent modes

Creates Competitive Resource No Competitive Advantage Dimension Advantage

Not possible:Similar modesDifferent modes

© 2002 by Prentice Hall 2-7

Profit Factors - 6 Strategic Resources

Resources Valuable Rare Hard-to-Copy Nonsubstitutable

Physical yes sometimes not usually sometimes

Reputational yes yes yes yes

Organizational yes yes yes yes

Financial yes sometimes no no

Intellectual yes yes usually sometimes

Technological yes sometimes sometimes sometimes

© 2002 by Prentice Hall 2-8

Reputational Resources

The quality of management

The use of corporate assets

The firm’s financial soundness

The firm’s value as a financial investment

The quality of products and services

Innovativeness

The ability to attract, develop, and retain top people

The extent of community and environmental responsibility

© 2002 by Prentice Hall 2-9

Competitive Advantage & Business Environment

Factor High Tech Service

Reputation for quality38% 44%

Customer service / product support 34% 35%

Name recognition / profile 12% 37%

Good management 25% 38%

Low cost production 25% 13%

Financial resources 16% 23%

Customer orientation / market research 19% 23%

Product line depth 16% 22%

Technical superiority 44% 6%

Base of satisfied customers 28% 19%

Product innovation 22% 18%

© 2002 by Prentice Hall 2-10

A Psychological Approach

Personality characteristics: The need for achievement

Problem solving orientation Goal setting Self-reliant Crave feedback Moderate risk propensity

Locus of control “Externals” (fate, chance and luck dictate results) “Internals” (personal effort dictates results)

Risk-taking propensity Not consistent among entrepreneurs

© 2002 by Prentice Hall 2-11

The Supply of Entrepreneurship

Negative Displacement

Entrepreneurship

Impetus for Entrepreneurship

Between Things

Positive Pull

Positive Push

Perceptions of Desirability

Situational Characteristics

Entrepreneurial Event

Perceptions of Feasibility

© 2002 by Prentice Hall 2-12

The Supply of Entrepreneurship

Negative Displacement Immigrant status Fired Angered, bored Middle-aged Divorced

Entrepreneurship

Impetus for Entrepreneurship

Between Things Army School Prison

© 2002 by Prentice Hall 2-13

The Supply of Entrepreneurship

Positive Pull From partner From mentor From investor From customer

EntrepreneurshipImpetus for Entrepreneurship

Positive Push Strong father Career Education Experience

© 2002 by Prentice Hall 2-14

The Supply of Entrepreneurship

Perceptions of Desirability Culture Family Colleagues Mentors Peers

Entrepreneurship

Situational Characteristics

Perceptions of Feasibility Support Demonstration Models Mentors Partners

Entrepreneurial Event Initiative taking Consolidation of resources Management of organization Relative autonomy Risk bearing

© 2002 by Prentice Hall 2-15

The Entrepreneur as a Human Resource:Sociological Approach

Entrepreneurial inclinations propelled by: Negative displacement (losing a job, etc.)

Being between things (transition from school to career, etc.)

Positive pull (example made by parent, mentor, etc.)

Positive push (a job, education, etc.)

… and activated by situations which positively affect: Perceptions of desirability (message from culture, peers, etc.

Perceptions of feasibility (demonstration, etc.)

… and culminate in an entrepreneurial event