You are on page 1of 10

Relationship-Based Competitive Advantage: The Role

of Relationship Marketing in Marketing Strategy


Robert M. Morgan
UNIVERSITY OF ALABAMA
Shelby Hunt
TEXAS TECH UNIVERSITY

Relationship marketing research to date has focused for the most part on overlook the sustainable competitive advantage that can be
two sets of issues. First, what are the benefits of relationship marketing created through long-term relationships.” Similarly, we sug-
adoption? Second, how are marketing relationships built and maintained? gest, academics have neglected the search for explanations as
Although these are important questions for researchers to address, we to how to create sustainable competitive advantages based
believe an understanding of the strategic impact of relationship marketing on relationships. Therefore, it is important that relationship
is equally important. We hold that relationship marketing should only be marketing scholars begin to theorize how competitive advan-
adopted when it offers, or contributes to, a firm’s competitive advantage—a tages can be built through marketing relationships.
competitive advantage that, it is hoped, proves sustainable. As a first step Although the strategy literature offers a variety of ap-
toward better understanding the strategic role of relationship marketing, proaches that might contribute to understanding RBCAs, re-
adopting a resource-based approach, we first clarify the role that resources source-based theory (Conner, 1991; Penrose, 1959; Wer-
gained through relationships may play in marketing relationships. Then nerfelt, 1984) is especially promising. In the creation of
we isolate and discuss the various kinds of resources that might be gained sustainable competitive advantages, resource-based theory
through relationships. Finally, we develop five propositions for assessing emphasizes the strategic importance of the firm’s own re-
the strategic worth of these resources in marketing relationships. J BUSN RES sources, which are defined as any entity, tangible or intangible,
1999. 46.281–290.  1999 Elsevier Science Inc. All rights reserved. that the firm has at its disposal to “enable it to produce
efficiently and/or effectively a market offering that has value
for some market segment or segments” (Hunt and Morgan,
1995, p. 6). Basic resources—variously categorized as finan-

P
roponents of relationship marketing encourage firms to cial, legal, physical, human, organizational, informational, and
seek partners for long-term marketing relationships; relational (Barney, 1991; Hofer and Schendel, 1978; Hunt
for example, focusing on customer retention rather and Morgan, 1995)—are combined to create higher-order
than customer capture (Kotler, 1991; Vavra, 1992). However, resources, or competencies, from which the firm can achieve
it is clear that enthusiasm for relationship marketing should a competitive advantage (Foss, 1993; Hunt and Morgan; Lang-
be tempered with concern for not only selecting appropriate lois and Robertson, 1995; Prahalad and Hamel, 1990; Teece
partners, but also for engaging in relationships only when it and Pisano, 1994). Building on resource-based theory, schol-
is expected that relationship marketing is consistent with the ars have examined the potential competitive advantage of
firm’s overall marketing strategy. In short, relationship mar- competencies built on a variety of foundational resources.
keting should be practiced when it offers, or contributes to, In marketing specifically, competitive advantages in services
a firm’s strategy for achieving a competitive advantage—a (Bharadwaj, Varadarajan, and Fahy, 1993) and market orienta-
sustainable competitive advantage. These relationship-based tion (Hunt and Morgan, 1995) have been examined.
competitive advantages (RBCAs) drive the success of relation- Problems arise, however, when the firm lacks a full comple-
ship marketing. Indeed, as Ganesan (1994) notes, “most firms ment of the basic resources necessary to create competencies
and, through them, marketplace positions of competitive ad-
vantage. As Levine and White (1961) have noted, resources
Address correspondence to Robert M. Morgan, Associate Professor of Mar- are often in scarce supply, creating the need for cooperative
keting, Department of Management and Marketing, Culverhouse College
of Commerce and Business Administration, University of Alabama, P. O. Box
interorganizational exchange. Thus, organizations must ac-
870225, Tuscaloosa, AL 35487-0225, USA. quire the resources through purchases in the marketplace

Journal of Business Research 46, 281–290 (1999)


 1999 Elsevier Science Inc. All rights reserved. ISSN 0148-2963/99/$–see front matter
655 Avenue of the Americas, New York, NY 10010 PII S0148-2963(98)00035-6
282 J Busn Res R. M. Morgan and S. Hunt
1999:46:281–290

(transactional exchange), the acquisition of firms having re- ‘seek to avoid being controlled’ in exchange relations and that
sources (vertical integration), creating or developing the re- an organization’s aversion to establishing interorganizational
sources internally, or through partnership with other organiza- connections will be proportional to the loss of autonomy
tions (relational exchange). Resource-based theory, therefore, anticipated to result from relationship formation.” Simply put,
can contribute to explaining the strategic nature of marketing resource-dependence theory holds that firms enter relation-
relationships. Specifically, firms engage in relationships when ships not only cautiously, but reluctantly, because they view
compatible partners are identified whose complementary re- relationships as liabilities and fear that participating in them
sources, when combined with their own resources, provide will result in a loss of power in their own decision making.
competitive advantages; that is, RBCAs. However, Oliver’s empirical test failed to support this funda-
There are numerous examples of marketing resource and mental tenet of resource-dependence theory.
contexts wherein sharing resources might provide organiza- Clearly, firms often enter relationships not reluctantly but
tions with competitive advantage. For example, the retail out- optimistically. They realize that, strategically, to be more com-
lets provided by a relationship partner, as in many interna- petitive, they must have access to valuable resources and that
tional alliances, may allow a firm to achieve geographical relationships often offer the best route to obtaining these
coverage of critical markets that would not be readily available resources. This strategic orientation toward resources, we argue,
outside of the relationship. Building relationship marketing differentiates the resource-based theory approach to under-
theory requires isolating the kinds of resources that can be standing relationships from TCA in economics and resource-
secured through marketing relationships, determining the po- dependence theory.
tential RBCAs, before assessing the sustainability of the individ- Treating resources strategically implies four managerial re-
ual RBCAs. Advantages are only sustainable to the extent that quirements. Resources must be: (1) efficiently acquired or
the resources that produce them cannot be purchased; that developed; (2) combined skillfully to create complex re-
is, they are immobile, and/or they cannot be easily imitated, sources; (3) deliberately applied to competitive situations; and
or substitutes cannot be found (Barney, 1991; Dierickx and (4) dutifully maintained and protected to ensure on-going
Cool, 1989). availability (Bharadwaj, Varadarajan, and Fahy, 1993; Day
This paper enhances our understanding of relationship- and Wensley, 1988; Hunt and Morgan, 1995). Understanding
based competitive advantages. Drawing on the expanding lit- each of these requirements is critical to furthering theory on
erature of relationship marketing, interorganizational relation- the strategic nature of marketing relationships.
ship, and resource-based theories, we first clarify the strategic
role of resources in marketing’s cooperative relationships—
Efficiently Acquiring or Developing Resources
relationships characterized by commitment and trust. We then
isolate and discuss the potential resources to be gained from That Enhance Efficiency
such relationships and their contribution to the efficiency and Hunt and Morgan (1995) hold that a comparative advantage
effectiveness of participating firms. Finally, we develop five in efficiency-enhancing resources is a major route to achieving
propositions for assessing the strategic worth of these re- a marketplace position of competitive advantage (see their
sources in marketing relationships. Figure 1). As Barney (1986) notes, the financial performance
of the firm depends upon the cost of implementing strategies
as well as the returns enjoyed from those strategies. Similarly,
Strategic Role of Resources in for resources to result in a truly comparative advantage, the
Marketing Relationships cost of acquiring them must be lower than the gains they
impart. As Peteraf (1993) argues, this typically implies that
Theoretical discussions of interorganizational relationships competition for the resource is limited at the outset; limited
and resources often focus on transaction cost analysis (TCA) because outcomes of employing the resource are uncertain,
or resource-dependence theory. For example, transaction cost bringing about ex ante limits to competition. Efficiency of
theory holds that idiosyncratic investments; that is, resources resource acquisition is often a motive for relationship forma-
whose value is relationship specific, necessarily risk opportu- tion. For example, Ford realized that by using a small network
nistic behavior (Williamson, 1975). Because TCA assumes of suppliers in on-going relationships, resources could be
universal opportunism, this negative view of the effects of acquired more efficiently than by purchasing components
sharing valuable resources has been criticized by organiza- through multiple, short-term transactions or producing in-
tional scholars as “guilt by axiom,” at worst, or misguided, at
house components (Taylor, 1994).
best (Donaldson, 1990; Ghoshal and Moran, 1996; Hill,
1990). Likewise, in resource-dependence theory, resources
are seen to provide their owners with power and control Combining Basic Resources to Create
(Achrol and Stern, 1988; Aldrich, 1979; Frazier, 1983a,b; Complex Resources
Pfeffer, 1981). As Oliver (1991, p. 943) notes, “resource de- Outside of the relationship literature, several authors propose
pendence theorists, in particular, propose that organizations that critical to the process of deploying resources is how the
Relationship-Based Competitive Advantage J Busn Res 283
1999:46:281–290

firm combines its assortment of crucial resources to achieve when attempting to establish competitive advantage through
superior capabilities. For example, Hofer and Schendel (1978, implementation and practice of Efficient Consumer Response
p. 25) contend that, in addition to the scope of its operations, programs (Fiorito, May, and Straughn, 1995).
a firm’s competitive advantages depend upon the levels and
patterns of deployment of its resources and skills. They label
Maintaining and Protecting Resources
these patterns of deployment “distinctive competencies.” Simi-
larly, Prahalad and Hamel (1990) point to core competencies, Dierickx and Cool (1989) liken resources and resource main-
the combination of resources, as the immediate precursor of tenance to a draining bath tub with flowing faucets. As a
competitive advantages. Fiol (1991, p. 191) notes that “com- resource is used, it must constantly be replaced with new
petency thus encompasses more than a firm’s stock of tangible flows to maintain the firm’s stock of the resource. If the re-
assets. It encompasses the cognitive processes by which the source stock is allowed to be exhausted before new flows of
stock is understood and translated into action.” Reed and the resource are introduced into the system, the organization
DeFillippi (1990, p. 89) review the conceptualization of “com- may find that insufficient levels of the resource exist to enjoy
petency” by several authors and conclude that two consistenc- the previously held advantage. Because the creation of resource
ies could be noted throughout: “(1) the source of a competency stocks is often time dependent, resource stocks must be main-
is always internal to the firm; (2) competency is produced by tained over time—not allowed to become exhausted before
the way a firm utilizes its internal skills and resources relative efforts to refresh the stocks are initiated. Therefore, organiza-
to the competition.” Reed and DeFillippi’s “internal thesis” is tions must continuously reinvest in the resources that it antici-
too narrow, we argue. pates will best serve its strategy (Peteraf, 1993). The implica-
It is certainly the case that simply accumulating valuable tion for resources gained through relationships is clear.
asset stocks is insufficient to ensure a competitive advantage. Because resource-sharing relationships—relationships charac-
Indeed, competitive advantages are realized only when the terized by commitment, trust, and cooperation—take time to
firm combines assortments of basic resources in such a way build (Morgan and Hunt, 1994), they must maintain timely
that they achieve a unique competency or capability that is access to the resources they offer.
valued in the marketplace. Furthermore, the value that this
capability provides puts the firm in a competitive positional
advantage. However, mountains of anecdotal evidence point Types of Resources Gained in
to the fact that these resources are not necessarily “internal
to the firm” as “internal” is traditionally conceived. Rather, Marketing Relationships
when firms have access to external resources through partner- What types of resources can be shared and exchanged in
ships, such resources can be combined with the firm’s internal relationships? Based on the works of Alderson (1957), Barney
resources to produce a competency that results in a competi- (1991), Day (1990), and Hofer and Schendel (1978), Hunt
tive advantage (Gummesson, 1994). and Morgan (1995) suggest that the resources of the firm can
be categorized as financial, legal, physical, human, organiza-
Positioning Resource Advantages in tional, relational, and informational. Building on that scheme,
Competitive Situations we specify further how such resources might be shared and
Hunt and Morgan (1995, p. 8) note, “Sustained, superior exchanged in marketing’s various interorganizational relation-
financial performance occurs only when a firm’s comparative ships. Our aim is to demonstrate the role of relationship
advantage in resources continues to yield a position of compet- marketing in furthering the strategic efforts of the firm; that
itive advantage despite the actions of competitors.” If the firm is, in providing the firm with superior, efficient access to a
enjoys a comparative advantage in resources over its competi- broad variety of needed resources.
tors, but its managers lack the ability to apply that advantage
toward a position of competitive advantage, resources are
wasted. The situation is further confounded by the fact that
Financial Resources
the value of a particular resource is often specific to a market Financial resources are the capitalization that the firm has at
segment (Hunt and Morgan, 1995). As Collis and Montgomery its disposal. It may exist as cash reserves or as cash available
(1995) note, unique capabilities that yield an advantage in through stock issues, loans, bonds, and other financial instru-
one product market may be of little use in another, despite ments (Hofer and Schendel, 1978). The need for financial
having the “rareness” characteristic identified by Barney resources of other firms is a common driver of many marketing
(1991). As with most resource issues, this task of competitive relationships, but it is clearly one of the main drivers of fran-
positioning becomes even more complex when the efforts of chising decisions. McDonald’s enjoys a clear advantage
multiple firms must be coordinated. For example, members through the financial strength of its over 9,000 outlets—whose
of supply chains in the food industry have repeatedly experi- prosperity is owed, in large part, to the brand equity of the
enced the frustrations that this level of coordination requires McDonald’s brand, an organizational resource.
284 J Busn Res R. M. Morgan and S. Hunt
1999:46:281–290

Legal Resources spond rapidly to changes in the environment. In a relationship


Legal resources are those assets the firm uniquely possesses marketing context, comarketing relationships might arise be-
because of governmental statute or a legally binding agreement cause one partner wants the other’s expertise at new product
between the firm and another party (Alderson, 1965). In- development or production processes superior to their’s (Buck-
cluded among the firm’s legal resources would be contracts, lin and Sengupta, 1993; Matthyssens and Van den Bulte, 1994).
exclusionary licenses, and entitlements. In marketing, licenses In retailing, a manufacturer’s unique resources, such as high
to rare and unique assets, such as innovative products, are demand, innovative products, brand loyalty, or quality in prod-
resources derived from relationships. In such a partnership, uct design, lead to retailers’ advances at establishing exclusive
licensing allows one firm to gain initial access to a foreign relationships to obtain those resources (Ganesan, 1994).
market that would otherwise be difficult to penetrate (Cateora,
1993). In return, the foreign partner receives a valuable addi- Relational Resources
tion to its product line which improves its performance. Relational resources consist of the relationships: (1) between
various constituencies within the organization; and (2) be-
Physical Resources tween the organization and its various external partners. For
Physical resources are the tangible assets, other than labor example, in the U.S. automobile industry, manufacturers real-
and cash, that are used by the firm to produce and market ize the value of the relationships their dealers have with con-
goods and services. Physical resources include raw materials sumers. Dealers’ relational resources translate into information
reserves, machinery, land, and production, storage, distribu- resources that manufacturers hope to acquire (Brandweek,
tion, service, and retailing facilities (Alderson, 1957; Barney, 1995). In return, some automobile dealers benefit from the
1991; Day, 1994; Hofer and Schendel, 1978). In marketing, relationships their manufacturers have with their employees;
physical resources help drive manufacturers’ distribution deci- for example, Saturn (Aaker, 1994). More commonly, market-
sions, where retailers’ geographical coverage and infrastructure ers contemplating entry into unfamiliar markets seek relation-
are key. ships with others who are more experienced in those markets.
Drawing on these partners’ existing relationships with con-
Human Resources sumers enhances success in new market entry (Varadarajan and
Human resources encompass the skills, knowledge, and vision Cunningham, 1995). These relationships—including retailers
of the firm’s employees (Barney, 1991; Day, 1994; Hofer and with consumers, wholesalers with retailers, and manufacturers
Schendel, 1978). The selling skills, responsiveness, and with employees—offer unique, value-adding resources to the
breadth of coverage of the sales force, and the ability of market- fortunate firms whose partners secure them (Quinn, 1992;
ers to manage their markets can be extremely important among Powell, 1990; Sethuraman, Anderson, and Narus, 1988).
manufacturers, wholesalers, and retailers in their relationships
with one another. These characteristics drive which manufac- Informational Resources
turers’ products are stocked, what trade allowances are offered, Although the knowledge held by individuals is a part of human
and which retailers will be given the opportunity to carry resources, the collective knowledge of the organization and
products in heavy demand. the processes developed for inducing organizational learning
comprise much of a firm’s informational resources (Child,
Organizational Resources 1987; Doz and Prahalad, 1991; Drucker, 1993; Sheth and
Organizational resources are the assets the firm possesses that Parvatiyar, 1995). The importance of this last category to the
arise from the organization itself, chief among these are the success of the organization is felt no more powerfully than it
corporate culture and climate, the organization’s structure, is in marketing, where the on-going collection of information
valued brand names, and the administrative history of the and knowledge of markets (customers and competitors) is
firm. Culture is important, because it affects decision making, crucial (Slater and Narver, 1995). Efficient consumer re-
learning (Fiol and Lyles, 1985), and social behavior within sponse, electronic data interchange, just-in-time distribution,
the organization. Other organizational resources include the and category management depend upon a devotion by market-
organizational “routines” (Nelson and Winter, 1982) and sys- ers to building this resource and building partnerships with
tematic processes that the firm acquires or develops that are others so to do.
applied to the various functions of the firm, such as extraction By combining their resources with those gained and shared
or acquisition of raw materials, production of goods and ser- in marketing relationships, organizations can build compara-
vices, strategic planning, or acquiring, storing, and communi- tive advantages that, when used properly, result in market-
cating information (Collis and Montgomery, 1995). Teece and place positions of competitive advantages for the firm. To the
Pisano (1994) call attention to organizational competencies extent that these advantages are sustainable, the organization
that enable organizational metamorphosis—the ability to re- can enjoy tremendous gains by means of relationships.
Relationship-Based Competitive Advantage J Busn Res 285
1999:46:281–290

Table 1. Requirements of Resources to Provide Sustainable Advantage


Critical Requirement Explanation Authors

Efficiency/effectiveness The resources must continue to contribute to the firm’s ability to ef- Hunt and Morgan (1995)
ficiently/effectively produce valued market offerings for some mar-
ket segment(s)
Heterogeneity Central to the resource-based view, heterogeneity acknowledges that Barney (1991), Hunt and
firms differ significantly in the resources that are at their dis- Morgan (1995),
posal; this heterogeneity arises from limited availability of these Peteraf (1993)
assets: although some are abundant, others are relatively rare
Imperfectly imitable Resources should be difficult for competitors to imitate; this charac- Alderson (1965, p. 205),
teristic typically arises from the nature of the process required to Barney (1991),
create the assets Dierickx and Cool
(1989), Peteraf (1993)
Imperfect substitutability It should be difficult to find replacements for resources Barney (1991),
Dierickx and Cool
(1989), Peteraf (1993)
Imperfect mobility Critical strategic assets must have limited tradeability among com- Collis (1991), Dierickx
petitors in the marketplace and Cool (1989),
Peteraf (1993)

Sustainability of Relationship-Based resource-based view. Unlike traditional industrial organiza-


tion economics, which assumes that all firms have access to
Competitive Advantages: Critical the same resources (Collis, 1991; Hunt and Morgan, 1995),
Requirements of Resources the resource-based view recognizes that this is not the case.
Because resources are only available in limited supply, advan-
Because firms have a multitude of resources, obtaining a com-
tages accrue to firms able to acquire them (Peteraf). Studying
plete inventory is likely to be difficult for those responsible
relationship marketing, Morgan and Hunt (1994) found that
for developing strategy. Nevertheless, as the resource-based
the benefits and termination costs that firms attribute to spe-
approach to analyzing sustainable competitive advantage has
cific relationships led to cooperation, commitment, and other
progressed, theory has focused on developing a framework
for determining those that are crucial to achieving a sustainable positive outcomes. We maintain that an appreciation of these
competitive advantage (Barney, 1991; Dierickx and Cool, benefits and termination costs arise from the firm’s assessment
1989; Hunt and Morgan, 1995; Peteraf, 1993). Although no that the resources it gains from particular relationships are
consensus has been reached as to which of these frameworks either unique, or, at the minimum, would be difficult to find
is most appropriate, a synthesis of their various components elsewhere. Therefore, RBCAs should be highly sustainable and
shows several common features. Such a synthesis is shown valuable when built on resources that: (1) are unique; (2)
in Table 1. gained through relationships with partners who are unique in
owning them; or (3) are unique in combination with partners’
Efficiency/Effectiveness resources.
Resources should not only be acquired at an efficiency-enabling
price (Peteraf, 1993), resources must continue to contribute to Imperfectly Imitable
the firm’s ability to efficiently/effectively produce valued market To have continued value, competitive advantages must be
offerings for some market segment(s). As Hunt and Morgan sustainable. Sustainability becomes problematic when the re-
(1995) note in the case of IBM and their reputation for life- sources that are used to create them are easily subject to
long employment, resources that once afforded the firm efficient imitation or substitution by competitors. Factors that limit
and/or effective performance often may become a strategic hin- imitation and substitution include: (1) causal ambiguity; (2)
drance or, even a “contraresource.” IBM found that their policy producer learning; (3) buyer costs switching; (4) reputation;
of job security—which fostered employee loyalty and resulted (5) buyer search costs; (6) channel crowding; (7) economies
in strong, productive relationships—over time was transformed of scale; (8) unique historic conditions; (9) social complexity;
an expected entitlement (Hays, 1994). (10) time compression diseconomies; (11) asset mass efficien-
cies; (12) interconnectedness of asset stocks; and (13) asset
Heterogeneity erosion. Certainly, we can easily see how many of these condi-
Identified by Peteraf (1993, p. 186) as “the sine-qua-non tions—especially economies of scale, social complexity, and
of competitive advantage,” heterogeneity is the heart of the time compression diseconomies—might apply to resources
286 J Busn Res R. M. Morgan and S. Hunt
1999:46:281–290

gained in marketing relationships. However, causal ambiguity those that are the least mobile, such as dealer loyalty, trust,
is especially pertinent. reputation, and R&D capability. Collis (1991) and Peteraf
Causal ambiguity results when it is unclear how a firm’s (1993) see immobility as the most valuable characteristic,
competitive advantage was achieved. Typically, causal ambi- because of the time and cost required to accumulate such
guity is used to refer to this lack of clarity on the part of resources. Competitive advantages gained through relation-
competitors, but as Reed and DeFillippi (1990) note, causal ships with other organizations are especially immobile, be-
ambiguity may be so extreme in some cases that even the firm cause the resources involved are often either: (1) idiosyncratic,
that possesses the competitive advantage may be unaware offering little or no value outside of the relationship in ques-
of its source. Arguably, competitive advantages arising from tion; or (2) co-specialized resources—combinations of re-
competencies that are causally ambiguous are the most secure, sources that are co-dependent (Peteraf).
inimitable advantages that a firm can possess. Organizational
learning is an example of a causally ambiguous, highly valuable
competitive advantage. Strategists often argue that economies Propositions for Evaluating
of scope and the organizational learning that accompanies
participation in a broad scope of businesses stimulates organi-
Shared Resources
zational learning. Similarly, we argue, such learning benefits Once we have established a valid, rigorous classificational
accrue to firms that are involved in true relationships with scheme of firm resources and a framework for analyzing those
others. resources, we can postulate which resources in general offer
Causal ambiguity derives in large part from complexity. firms the best opportunity for achieving sustainable competi-
Observing the complexities of relationships Gummesson tive advantage. Therefore, our discussion now turns to an
(1994) notes, “a network business requires continuous cre- analysis of the scheme using the framework developed above.
ation, transformation, and maintenance of networks.” Contin- Table 2 offers examples of relationship marketing situations
uing with the notion of network, rather than simple, dyadic in which RBCAs might arise from particular categories of
relationships, Anderson, Håkakansson, and Johanson (1994) resources, alone or in combination with other basic resources.
demonstrate that often it is not the firm’s own resources, but In addition, the table provides a summary of our evaluation,
those of its network partners, that make it an attractive partner. forming the basis for the propositions listed below. It is impor-
As our conceptualization of relationships moves from dyads tant to realize that it is uncommon for RBCAs, as with competi-
to networks, tracing the transfer of resources between partners tive advantages in general, to arise from a single resource.
becomes extremely difficult, if not impossible. In relation-
Rather, RBCAs most often are created by bundling many differ-
ships, business experiences are shared, friendly suggestions
ent types of resources across relationships—as the combina-
are made, and it is unlikely that outside observers or partici-
tions become more complicated, the ability of competitors to
pants will be able to trace or replicate this process outside of
purchase, imitate, invent around, or substitute for those
the specific relationship; that is, the process is laden with
RBCAs diminishes.
causal ambiguity.

Imperfect Substitutability Financial Resources


To remain sources of sustainable competitive advantage, re- Financial resources are difficult to duplicate only to the degree
sources also must not be subject to substitution by other that it is rare for competitors to have significant access to
resources. As Barney (1991) notes, such substitutes may be funds. Financial resources can be imitated by competitors
similar or dissimilar. For example, in the early 1980s, the healthy enough to acquire debt or equity. For many uses of
distribution channels for personal computers were effectively capital, competitors can substitute other means to the ends
locked up by such large, established manufacturers as IBM, that financial resources would provide, thorough out-sourcing
Tandy, and Compaq. Michael Dell, founder of PC’s Limited or leasing. Financial resources are mobile, because they can
(later known as Dell Computer), who had been unsuccessful be obtained in the marketplace by trading other resources.
at gaining access to traditional retail outlets, developed a mail This reasoning holds in relationships also. Hagedoorn (1993)
order channel for selling his merchandise; thereby, substitut- found that among strategic alliances in high technology indus-
ing one resource for another. When the source of these re- tries, financial resources were the least common motivation
sources is (are) relationship(s), substitution becomes unlikely for alliance formation. In the case of franchising, it is unlikely
as the size and complexity of the resource combinations in- that a competitor, with a similarly valuable business concept,
creases. would be unable to secure the financial support of franchisees
as well. Therefore, we posit that relationships formed to ac-
Imperfect Mobility quire financial resources are unlikely to result in a sustainable
As Dierickx and Cool (1989) note, strategic resources must competitive advantage, because of financial resources’ lack of
be nontradeable. Perhaps the most valuable resources are heterogeneity.
Relationship-Based Competitive Advantage J Busn Res 287
1999:46:281–290

Table 2. Evaluation of Resources Potentially Gained in Cooperative Relationships


Resource Examples of Relationship Marketing Applications Resource Evaluation Under Critical Requirements

Financial Franchising Limited potential as source of RBCA because of wide


availability
Legal Licensing complementary products Limited potential as source of RBCA because of imitabil-
ity, substitutability, and limited longevity
Physical Distribution decisions; use of manufacturer’s excess Limited potential as source of RBCA because of superior-
capacity for private label goods ity of substitute competencies based on combinations
of more complex resources
Human Merchandise selection; distribution decisions Moderate potential as source of RBCA—sustainability is
limited by mobility
Organizational High-quality customer service driving choices of High potential as source of RBCA because of the ambig-
partners for foreign market entry uity and time dependence of their creation
Relational Retailers’ relationships with ultimate customers High potential as source of RBCA resulting from time
driving manufacturers’ choice of retailers for dependence of their creation, coupled with perceived
their products ambiguity
Informational Foreign market entry partnering decisions; manufac- High potential as a source of RBCA because of the complex-
turers’ relationships with Electronic Data Inter- ity of the resource mix required to build unique stocks
change (EDI) and Efficient Consumer Response and flows of information
(ECR) partnering retailers and wholesalers

Legal Resources both partners—that are limited only to financial, legal,


The sustainability of advantages derived from contracts and and physical resources, will generally be unsustainable
licenses is limited to: (1) the amount of time the contract or and will offer little potential for RBCAs.
licence allows for; or (2) the amount of time required before P2: In interfirm relationships, comparative advantages cre-
the contract or the licensed assets can be “invented around.” ated from combinations of resources of both partners
The most common legal resource gained in marketing relation- that include financial, legal, and physical resources,
ships is a license to a valuable product. However, such rela- will be more sustainable and offer greater potential
tionships are commonly initiated with a finite relationship for RBCAs when they include human, organizational,
duration in mind, by definition lending limited sustainability relational, and informational resources.
to the competitive advantage gained. Moreover, licensing is
only one of many ways that firms can enter new markets, Human Resources
lending to the potential for substitutes. Finally, it is uncom-
The focus of much research concerning the resource-based
mon that others could not imitate such a resource. Therefore,
view within the management area is the value of managerial
we posit that relationships formed to gain legal resources will
skills in creating a sustainable competitive advantage (Castan-
not enjoy sustainable RBCAs.
ias and Helfat, 1991). Managerial skills are valuable, because
Physical Resources they can be substituted for so many other resources. However,
as with scientists, engineers, and technicians, managers and
Land, factories, and other physical resources acquired through
sales personnel can be bought away from the firm. The breadth
relationships are also rarely the basis for sustainable competi-
of coverage of a sales force, whose services are enjoyed by
tive advantages. Although geographic location can be a distinct
relationship partners, is unsustainable to the extent that a
advantage in specific markets, given the lack of geographic
competitor may have the financial resources to develop their
barriers to other markets, alternative locations of equal value
own sales force and hire away sales manager. We propose
are quite common. Moreover, through such means as elec-
that RBCAs gained through a partner’s human resources are
tronic commerce and direct marketing, spatial advantages that
moderately sustainable.
derive from locations of outlets are rapidly becoming dimin-
ished; a complex combination of organizational and informa- P3: In interfirm relationships, comparative advantages—
tional resources (e.g., a direct distribution system) is substi- created singly or from combinations of resources of
tuted for a simpler physical resource (e.g., an established retail both partners—that are limited to human resources
network). Therefore, we maintain that relationships initiated only, will generally be moderately sustainable and offer
to gain physical resources will not commonly result in sustain- moderate potential for RBCAs.
able RBCAs.
P4: In interfirm relationships, comparative advantages cre-
P1: In interfirm relationships, comparative advantages— ated from combinations of resources of both partners
created singly or from combinations of resources of that include human resources, will be more sustainable
288 J Busn Res R. M. Morgan and S. Hunt
1999:46:281–290

and offer greater potential for RBCAs when they in- both partners—that arise from organizational, rela-
clude organizational, relational, and informational re- tional, or informational resources, will be highly sus-
sources. tainable and will offer the highest potential for RBCAs.

Organizational Resources
Conclusions
Proprietary technologies, often gained through organizational
learning, are typically more sustainable than financial, legal, Unfortunately, research into the strategic implications of rela-
and physical resources because of the ambiguity and time tionship marketing has been largely neglected; therefore, little
dependence associated with their development. For example, direction can be offered to managers concerned with the long-
new product development or strategic planning superiority term, strategic impact of their firms’ adoption of relationship
may arise from a host of factors, all of which are not apparent marketing. Although strategy research in relationship market-
to the holder of the superior resource, not to mention outside ing is greatly needed, initial efforts in relationship marketing
observers. We hold that RBCAs gained through the organiza- strategy, as with any scientific endeavor, must include identi-
tional resources of partners—including organizational culture fying and classifying the subject matter, establishing frame-
and routines, valuable brands, and quality control systems— works, and developing basic research propositions (Hunt,
are highly sustainable, because they are often imperfectly imi- 1991). Attempting to initiate those efforts, we adopt Hunt
table, imperfectly substitutable, and highly immobile. and Morgan’s (1995) classification scheme of firm resources,
we draw upon literature from resource-based theory to estab-
Relational Resources lish a framework for analyzing combinations of those re-
Hagedoorn (1993) found that potential partners’ access to sources, and we develop an initial set of research propositions
markets was the single most common motivation for strategic for relationship marketing strategy.
alliances in high technology sectors of business. Firms having We began our discussion by warning that relationship mar-
long-standing relationships with customers—especially rela- keting should be adopted only when it offers, or contributes
tionships characterized by trust, commitment, and loyalty—in to, a firm’s competitive advantage. As a word of caution,
attractive markets become very desirable relationship partners therefore, it is important to mention two potential paths to
because of this resource they hold. Access to customers gained relationship marketing misadventures. First, managers are
through marketing relationships can be largely sustainable cautioned to avoid allowing relationship-based resources from
when the firm holding the relationships with those customers becoming a “strategic hindrance” (Barney, 1991). This in-
has built the relationships on trust and commitment, or loy- cludes situations where resources acquired through relation-
alty. As Dierickx and Cool (1989) note, intangible relationship ships become a strategic hindrance by leading the firm to make
assets, such as trust, are valuable, advantage-sustaining re- poor decisions regarding investments or courses of action.
sources, because they are cultivated only over long periods For example, enjoying access to markets gained through a
of time and cannot be stolen away. Day and Wensley (1988), relationship partner may lull an organization into compla-
in fact, proposed that loyalty may be the best measure of cency and prevent the firm from searching out new markets
competitive advantage in marketing contexts. We maintain for its products on its own. When the long-term costs of
that RBCAs gained through partners’ relationship resources existing relationships, and the resources shared in those rela-
will be highly sustainable. tionships, outweigh the long-term benefits, we argue that
relationship marketing theory urges managers to assess how
Informational Resources the relationship can be salvaged. When salvaging the relation-
ship is not in the long-term best interest of all parties, efforts
A firm’s inventory of informational resources is based largely
must be taken to dissolve the relationship in such a way that
on its ability to learn. As the foundation of informational
minimizes harm to all partners.
resources, organizational learning, then, imparts strong sus-
Second, despite the resource benefits that can be derived
tainability to these assets. In fact, many observers suggest that
from relationship marketing, managers should avoid allowing
organizational learning may be the only competitive advantage
exchanges to become nonreciprocal, resulting in an assymetri-
open to a firm in the future (McKee, 1992). Information is
cal dependence upon the relationship for resources (Anderson
highly perishable, but the systems that organizations develop
and Weitz, 1989). Ganesan (1994) argues that assymetrical
to gather, disseminate, and apply information—all complex,
dependence allows the more powerful party to take advantage
difficult to imitate informational resources—perpetuate the
of the dependent partner. Alternatively, D’Souza, Morgan, and
possession of valuable information and knowledge. We posit
Zhao, (1997), in a study of joint ventures, found that the
that RBCAs built on partners’ informational resources will be
unreciprocal contribution of resources—the source of assyme-
highly sustainable.
trical dependence—leads to relationship failure through erosion
P5: In interfirm relationships, comparative advantages— of relationship commitment among the more resource-endowed
created singly or from combinations of resources of partners. When relationships fail, both partners will lose.
Relationship-Based Competitive Advantage J Busn Res 289
1999:46:281–290

Relationship marketing is becoming increasingly important Conner, Kathleen R.: A Historical Comparison of Resource-Based
to the overall marketing strategy of many firms. Crucial to Theory and Five Schools of Thought within Industrial Organiza-
tion Economics: Do We Have a New Theory of the Firm? Journal
understanding this role is to recognize: (1) the resources of Management 17 (1991): 121–154.
needed from the gained through marketing relationships; (2)
Day, George S.: Market-Driven Strategy, Free Press, New York. 1990.
the suitability of various partners from economic, strategic,
Day, George S.: The Capabilities of Market-Driven Organizations.
and social perspectives; and (3) the sustainability of advan- Journal of Marketing 58 (October 1994): 37–52.
tages that arise when relationship marketing strategies, based
Day, George S., and Wensley, Robin: Assessing Advantage: A Frame-
on specific resources, are pursued. The bulk of current re- work for Diagnosing Competitive Superiority. Journal of Marketing
search in relationship marketing focuses on portions of this 52 (April 1988): 1–20.
second component. It is hoped that this paper will call atten- Dierickx, Ingemar, and Cool, Karel: Asset Stock Accumulation and
tion to those issues that remain, so that a better understanding Sustainability of Competitive Advantages. Management Science 35
of the role of relationship marketing in the firm’s marketing (December 1989): 1504–1511.
strategy might be gained. Donaldson, Lex: The Ethereal Hand: Organization Economics and
Management Theory. Academy of Management Journal 15 (1990):
References 369–381.
Aaker, David A.: Building a Brand: The Saturn Story. California Doz, Yves L., and Prahalad, C.K.: Managing Dmncs: a Search for a
Management Review (Winter 1994): 114–133. New Paradigm. Strategic Management Journal 12 (1991): 145–164.
Achrol, Ravi, and Stern, Louis W.: Environmental Determinants of Drucker, Peter F.: Post-Capitalist Society, HarperCollins, New York.
Decision-Making Uncertainty in Marketing Channels. Journal of 1993.
Marketing Research 25 (February 1988): 36–50. D’Souza, Giles, Morgan, Robert M., and Zhao, Liming: Investigating
Alderson, Wroe: Marketing Behavior and Executive Action: A Function- the Effects of Social Factors on the Decision to Continue or
alist Approach to Marketing Theory, Richard D. Irwin, Inc., Home- Terminate On-Going Joint Ventures. Working paper, University
wood, IL. 1957. of Alabama. Tuscaloosa, AL. (1997).
Alderson, Wroe: Dynamic Marketing Behavior: A Functionalist Theory Fiol, C. Marlene, and Lyles, Marjorie A.: Organizational Learning.
of Marketing, Richard D. Irwin, Inc., Homewood, IL. 1965. Academy of Management Review 10 (1985): 803–813.
Aldrich, Howard E.: Organizations and Environments, Prentice Hall, Fiol, C., Marlene: Managing Culture as a Competitive Advantage:
Englewood Cliffs, NJ. 1979. An Identity-Based View of Sustainable Competitive Advantage.
Anderson, Erin, and Weitz, Barton A.: Determinants of Continuity Journal of Management 17 (1991): 191–211.
in Conventional Industrial Channel Dyads. Marketing Science 8 Fiorito, Susan S., May, Eleanor G., and Straughn, Katherine: Quick
(Fall 1989): 310–323. Response in Retailing: Components and Implementation. Interna-
Anderson, James C., Håkansson, Håkan, and Johanson, Jan: Dyadic tional Journal of Retail and Distribution Management 23 (1995):
Business Relationships Within a Business Network Context. Jour- 12–21.
nal of Marketing 58 (October 1994): 1–15. Foss, Nicolai J.: Theories of the Firm: Contractual and Competence
Barney, Jay: Strategic Factor Markets: Expectations, Luck, and Busi- Perspectives. Journal of Evolutionary Economics 3 (1993): 127–144.
ness Strategy. Management Science 42 (1986): 1231–1241. Frazier, Gary L.: Interorganizational Exchange Behavior in Marketing
Barney, Jay: Firm Resources and Sustained Competitive Advantage. Channels: A Broadened Perspective. Journal of Marketing 47 (Fall
Journal of Management 17 (1991): 99–120. 1983a): 68–78.
Bharadwaj, Sundar G., Varadarajan, P. Rajan, and Fahy, John: Sus- Frazier, Gary L.: On the Measurement of Interfirm Power in Channels
tainable Competitive Advantage in Service Industries: A Concep- of Distribution. Journal of Marketing Research 20 (May 1983b):
tual Model and Research Propositions. Journal of Marketing 57 158–266.
(October 1993): 83–99. Ganesan, Shankar: Determinants of Long-Term Orientation in Buyer-
Brandweek, Maintaining Momentum. (January 2, 1995): 21–26. Seller Relationships. Journal of Marketing 58 (April 1994): 1–19.
Bucklin, Louis P., and Sengupta, Sanjit: Organizing Successful Co- Ghoshal, Sumantra, and Moran, Peter: Bad for Practice: A Critique
Marketing Alliances. Journal of Marketing 57 (April 1993): 32–46. of the Transaction Cost Theory. Academy of Management Review
Castanias, Richard P., and Helfat, Constance E.: Managerial Resources 21 (1996): 13–47.
and Rents. Journal of Management 17 (1991): 155–171. Gummesson, Evert: Is Relationship Marketing Operational? Paper
Cateora, Philip R.: International Marketing, 8th ed., Richard D. Irwin, presented at the 23rd EMAC Conference, Marketing: Its Dynamics
Inc., Burr Ridge, IL. 1993. and Challenges, Maastricht, The Netherlands. May 17–20 1994.
Child, John: Information Technology, Organization, and the Re- Hagedoorn, John: Understanding the Rationale of Strategic Technol-
sponse to Strategic Challenges. California Management Review 30 ogy Partnering: Interorganizational Modes of Cooperation and
(1987): 33–50. Sectoral Differences. Strategic Management Journal 14, (1993):
Collis, David J.: A Resource-Based Analysis of Global Competition: 371–385.
The Case of the Bearings Industry. Strategic Management Journal Hays, L.: Blue Period: Gerstner is Struggling as He Tries To Change
12 (1991): 49–68. Ingrained IBM Culture. Wall Street Journal (May 13, 1994): A5.
Collis, David J, and Montgomery, Cynthia A.: Competing on Re- Hill, C.W.L.: Cooperation, Opportunism, and the Invisible Hand:
sources: Strategy in the 1990s. Harvard Business Review (July– Implications for Transaction Cost Theory. Academy of Management
August 1995): 118–128. Review 15 (1990): 500–513.
290 J Busn Res R. M. Morgan and S. Hunt
1999:46:281–290

Hofer, Charles W., and Schendel, Dan: Strategic Formulation: Analyti- Pfeffer, Jeffrey: Power in Organizations, Pitman Publishing, Marshfield,
cal Concepts, West Publishing, St. Paul, MN. 1978. MA. 1981.
Hunt, Shelby D.: Modern Marketing Theory: Critical Issues in the Philos- Powell, Walter W.: Neither Market nor Hierarchy: Network Forms
ophy of Marketing Science, Southwestern, Cincinnati, OH. 1991. of Organization, in Research in Organizational Behavior, Barry M
Staw, and L. L. Cummings (eds.), vol. 12, JAI Press, Greenwich,
Hunt, Shelby D., and Morgan, Robert M.: The Comparative Advan- CT. 1990.
tage Theory of Competition. Journal of Marketing 59 (April 1995):
Prahalad, C. K., and Hamel, Gary: The Core Competence of the
1–15.
Corporation. Harvard Business Review (May–June 990): 71–91.
Kotler, Philip: Paper Presented at the trustees meeting of the Market- Quinn, James Brian: Intelligent Enterprise, The Free Press, New York.
ing Science Institute, November 1990, Boston, referred to in 1992.
Marketing Science Institute Review (Spring 1991).
Reed, Richard, and DeFillippi, Robert J.: Causal Ambiguity, Barriers
Langlois, Richard N., and Robertson, P.L.: Firms, Markets, and Eco- to Imitation, and Sustainable Competitive Advantage. Academy
nomic Change: A Dynamic Theory of Business Institutions, Routledge, of Management Review 15 (1990): 88–102.
London. 1986. Sethuraman, Rajagopalan, Anderson, James C., and Narus, James A.:
Levine, S., and White, P. E.: Exchange as a Conceptual Framework Partnership Advantage and Its Determinants in Distributor and
for the Study of Interorganizational Relationships. Administrative Manufacturer Working Relationships. Journal of Business Research
Science Quarterly 5 (1961): 583–601. 17 (1988): 327–347.
Sheth, Jagdish N., and Parvatiyar, Atul: Relationship Marketing in
Matthyssens, Paul and Van den Bulte, Christophe: Getting Closer
Consumer Markets: Antecedents and Consequences. Journal of
and Nicer: Partnerships in the Supply Chain. Long-Range Planning the Academy of Marketing Science 23 (1995), 255–271.
27 (1994): 72–83.
Slater, Stanley F., and Narver, John C.: Market Orientation and
McKee, Daryl: An Organizational Learning Approach to Product the Learning Organization. Journal of Marketing 59 (July 1995):
Innovation. Journal of Product Innovation Management 9 (1992): 63–74.
232–245. Taylor, A.: The Auto Industry Meets the New Economy. Fortune
Morgan, Robert M., and Hunt, Shelby D.: The Commitment–Trust (September 5, 1994).
Theory of Relationship Marketing. Journal of Marketing 58 (July Teece, David, and Pisano, P.: The Dynamic Capabilities of Firms.
1994): 20–38. Industrial and Corporate Change 3 (1994): 537–556.
Nelson, Richard R., and Winter, Sidney: An Evolutionary Theory of Varadarajan, P. Rajan, and Cunninghma, M. H.: Strategic Alliances:
Economic Change, Belknap Press, Cambridge, MA. 1982. A Synthesis of Conceptual Foundations. Journal of the Academy
of Marketing Science 23 (1995): 282–296.
Oliver, Christine: Network Relations and Loss of Organizational Au-
tonomy. Human Relations 44 (1991): 943–961. Vavra, Terry G.: Aftermarketing: How to Keep Customers for Life
Through Relationship Marketing, Business One Irwin, Burr Ridge,
Penrose, Edith T.: The Theory of the Growth of the Firm, Wiley, New IL. 1992.
York. 1959. Wernerfelt, Berger: A Resource-Based View of the Firm. Strategic
Peteraf, Margaret A.: The Cornerstones of Competitive Advantage: Management Journal 5 (1984): 171–180.
A Resource-Based View. Strategic Management Journal 14, (1993): Williamson, Oliver E.: Markets and Hierarchies: Analysis and Antitrust
179–191. Implications, Free Press, New York. 1975.