RBV (Resource-Based View) theory emphasizes establishing the competitive advantage of a firm. It focuses on the four (4) important characteristics of the resources that are required to be managed resources effectively to achieve the results that are desired by the firm, i.e. valuable, rare, inimitable, and non-substitutable (VRIN). In order to develop a competitive advantage or sustainable competitive advantage of the firm, the firm must have the capability to manage the resources in such a way to be in accordance with the VRIN attributes. The following figure will sum up the attributes of VRIN that formed the basis of RBV theory.
"Valuable", meaning that the resources ought to be valuable when it requires opportunities or neutralizes threats in a firm’s environment (Ambrosini & Thomas, 2016). The resources of the firm must be rare, whereby such resources existed must be limited and not being in a large number.
"Rare" resources must operate in scarcity, as a large number of resources can never be the source of sustainable competitive advantage (Rao, 2014). Resources must be “inimitable”, that is to say, that the other firms may face difficulty in copying or obtaining similar resources, as the competitors may feel it to be hard to copy due to the uniqueness and differential ability (Brahma & Chakraborty, 2011).
Lastly, resources must be "non-substitutable", whereby there will not be any similar substitutes for the resources that will deliver the exact same effect that defeats the competitive advantage of a firm (Andersén, 2010).
“Capabilities” is often discussed along with “resources”. However, such wordings cannot be equated to a similar meaning. Ambrosini & Thomas (2016) had pointed out that “resource” is understood as resource possession, whereas “capability” is resource utilization. Capabilities are the ways or methods of the firm in managing or appreciating the resources.
Discussion on RBV is related to the resources of the firm. Resources can be anything available. Resources is definitely can be defined broader than “physical assets” whereby in the context of RBV, resources are strategic and give rise to competitive advantage as it produces rents and cannot be easily acquired and reproduced by others (Greve, 2020). We believe that the resources of the firm are made up of financial capital, physical capital, social capital, and organizational capital (Idris et al., 2003).
RBV emphasizes the management of the different resources of the firm and focusing on the internal resources that are accessible to the firm, instead of dealing with the extrinsic factors or influences from the environment around the firm. RBV’s strategy is concentrating on the importance and advantages of managing the resources of the firm that equip the firm to increase the competitive advantage. RBV is not only applicable to a single part of the firm i.e. human resource management as described by some of the aforesaid scholars, but it can be adopted to different resources within the firm to achieve the results that the firm is looking for.
In short, RBV emphasizes the capability of the firm in resource management. To develop the competitive advantage of the firm, the firm ought to manage the resources effectively in accordance with the concept VRIN.
References:
(1) Ambrosini, V. & Thomas, L. (2016). The Resource-Based View of The Firm. In Jenkins, M., Ambrosini, V. & Collier, N. (Eds.), Advanced Strategic Management A Multi-Perspective Approach (3rd ed., pp. 178-198). London, UK: Palgrave.
(2) Andersén, J. (2010). Resource-based competitiveness: managerial implications of the resource-based view. Strategic Direction, 26(5), 3–5. https://doi.org/10.1108/02580541011035375
(3) Brahma, S., & Chakraborty, H. (2011). From Industry to Firm Resources: Resource-Based View of Competitive Advantage. The IUP Journal of Business Strategy, 2, 7–21.
(4) Greve, H. R. (2020). The Resource-Based View and Learning Theory: Overlaps, Differences, and a Shared Future. Journal of Management, XX(X), 1–14. https://doi.org/10.1177/0149206320967732
(5) Idris, F., Abdullah., M., Idris, M. A., & Hussain, N. (2003). Integrating Resource-based View and Stakeholder Theory in Developing the Malaysian Excellence Model: A Conceptual Framework. Singapore Management Review, 25(2), 91–109.
(6) Rao, P. (2014). A Resource-based View of the “ Best ” Companies in Mexico : A Multiple-case Design Approach.
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