 For those that follow Dr. Jay Barney, one of the founders of the Resource-Based View (RBV) of strategic management, Jay just published a new article in the December 2018 issue of Strategic Management Journal. Jay’s view that a firm’s resources represent its greatest source of competitive advantage, and nearly three decades of subsequent research, is quite compelling. However, the new article points out a subtle discrepancy which must be reconciled. RBV requires uncertainty in the market for buyers of strategic resources if they are to profit from them. Otherwise, the potential profits are competed away by sellers who know just how valuable they really are. On the other hand, RBV requires certainty in the market for sellers of strategic resources, as their returns are fixed (via contract) and not residual claims on the firm.
Okay, I know this sounds like gobbledygook. But basically there's a flaw in RBV’s explanation of profit generation versus profit appropriation. You can’t have the uncertainty and certainty too. That’s actually a pretty big deal for a major theory like RBV. Fortunately, Jay shows us a way out. His article “Why resource-based theory’s model of profit appropriation must incorporate a stakeholder perspective” argues that non-shareholder stakeholders (such as suppliers and employees) who supply strategic resources may have residual rights of control which influence how downstream profits are allocated. While not owners of the firm’s profit, they may still benefit from the uncertainty which led to it. In other words, RBV must incorporate a broader multi-stakeholder perspective. Thanks for the clarification Jay! |