Journal of Marketing Management, 2002,18, 221-227

Special Symposium on Shelby D. Hunt's "A General

Theory of Competition: Resources, Competences,
Productivity Economic Growth'' Part 1.
Bodo B. Schlegelmilch^ Comments
Let's start by shaping expectations: For experienced managers, Shelby D.
Hunt's (2000) General Theory of Competition neither offers new strategic tools
nor advocates new winning formulae. And for inspiring MBAs or business
students. Hunt's book neither reveals how to analyse company strategies nor
how to draw up strategic plans. Thus, all those unsuspecting readers, who
might have been looking for "a guide to...," a "how to...," or "a manual
to...," will be disappointed.
But Hunt, as we learn in the preface, has more ambitious and
sophisticated aims. He sets out to develop the structure, foundation and
implication of a new, general, interdisciplinary, evolutionary,
disequilibrium-provoking, process theory of competition. And because no-
one would be able to remember all this, he christens this new theory the
"resource-advantage theory" or "R-A theory" for short.
Hunt quite clearly takes on a mammoth task - and the book is not light
airport bookshop reading. The back-cover appeal to the masses by Robert F.
Lusch, University of Oklahoma, should therefore not be taken too literally.
He suggests that "executives and entrepreneurs, management consultants,
policy makers, and scholars and students in economics, law, political science,
and business" should study and read this book. Although possibly in line
with a publisher's preferred catch-all approach, in reality, this suggestion is
over-ambitious. The rootedness of RA theory may be eclectic, but the
readership of this book will not! Nevertheless, for a specialised target
audience with appropriate expectations, an audience truly interested in
theory development. Hunt's book offers fascinating reading.
In pursuit of his objectives. Hunt takes a very systematic approach. And
Hunt spells systematic with a capital "S", so much so that he himself is
concerned about his readers. He recognises that "the attention devoted to
research traditions on which resource-advantage theory draws (or shares
affinities with)" might "exceed their [i.e. the readers'] comfort level" (p. XIII).
Hunt immediately concedes that "even for an academic book, approximately
six hundred references are a lot" (p. XIV). Pointing also to his extensive use

1 Professor Bodo B Schlegelmilch, Chair of International Marketing and

Management, Wirtschaftsuniversitat Wien, Augasse 206, Vienna 1090, Austria
ISSN0267-257X / 2002 /1-200221+06 £4.00 / 0 ©Westburn Publishers Ltd.
222 Bodo B. Schlegelmilch

of direct quotations, we begin to understand why Hunt might worry about

losing his audience.
Readers who proceed, despite the author's warnings, are initially
rewarded by three chapters that outline no fewer than eleven research
traditions related to R-A Theory: (1) evolutionary economics, (2) Austrian
economics, (3) heterogeneous demand theory, (4) differential advantage
theory, (5) historical tradition, (6) industrial organization economics, (7)
resource-based tradition, (8) competence-based tradition, (9) institutional
economics, (10) transaction cost economics, and (11) economic sociology. In a
very thorough and systematic manner. Hunt reviews those parts of the
theories and research traditions that have a bearing on R-A theory. Although
reading chapters two to four may rekindle memories of economic history
lessons and, at least for the theories familiar to the reader, appear somewhat
pedestrian, the temptation to skip the material should be resisted. The three
chapters not only illustrate the interdisciplinary nature of R-A theory but also
reveal the evolutionary character of the theories. As a valuable aside, a
review of the development of the various theories over time also drives home
the danger of methodological and epistemological exclusiveness. Thus, here
is one history lesson for journal editors: embrace heterogeneity of approaches
and procedures to avoid the suppression of knowledge by mainstream
dogmatism.
The following two chapters (five and six) continue to anchor the R-A
theory by discussing its foundational premises and structures. In chapter
five. Hunt outlines the premises of perfect competition and contrasts them
with those of R-A theory. In doing so. Hunt anticipates the likely charge of
potential critics, namely that he uses perfect competition as a "straw man."
Although the applicability of perfect competition to "real economics" has
been questioned by many economists, and most scholars in management,
marketing and sociology have never held perfect competition in high regard
in the first place. Hunt argues that this comparison helps communicate the
nature of R-A theory. He then proceeds very meticulously to show the
limitation of the key premises of perfect competition and points to some
implications. In this way, we are reminded, for example, that perfect
competition views consumer information as perfect and costless and learn
that R-A theory sees consumer information as imperfect and costly. Apart
from gathering support for the premises of R-A theory through drawing on
appropriate literature, this section holds no surprises: perfect competition is
too simplistic and usually not at all "perfect," R-A theory is reflecting reality
more closely, incorporates perfect competition as a special case, and is
superior in explanatory power. The "news-value" appears limited.
Chapter six has more to offer. It opens by examining the process of R-A
competition. Hunt argues that competition is evolutionary and uses R-A
 Comments on Shelby D. Hunt's A General Theory of Competition 223

theory to explore diversity in the financial performance of companies. We are

even treated to a diagram and a matrix - something regular readers of
strategy books had to forgo to this point. The matrix is presumably most
welcome by strategy consultants, who find it difficult to express ideas
without two-by-two boxes. Hunt even treats us to a three-by-three box! But
although there is little to argue about the central message of this chapter, i.e.
that a comparative advantage in resources leads to a competitive market
position which, in turn, leads to superior financial performance, not much
light is shed on how companies accrue their comparative resource advantages
in the first place and how they manage the process of turning comparative
resource advantages into competitive advantages.
In contrast, we do learn that advantages in resources might erode through
companies' lack of attention to various internal and external factors. Hunt
states, for example, that competitors' actions can potentially neutralize a
resource's comparative advantage by, among others, "developing a
strategically equivalent resource" (p. 142) or even a "strategically superior
resource" (p. 142). Now that sounds interesting! But hold your excitement:
how a company might develop such valuable resources still remains
shrouded in mystery. Instead, Hunt provides explanations like: "...the
effectiveness of these actions and the time it takes to neutralize a specific
competitor's resource advantage successfully depends on certain
characteristics of the marketplace offering and certain characteristics of the
resources producing the offering" (p. 142). Although, in all fairness, he goes
on to provide more detail than that, this statement is indicative of the
abstract meta-level stance in most of the book.
The chapter closes by contrasting the relative contributions of "industry
effects," as predicted by neoclassical theory, and "firm effects," as
emphasised by the R-A theory on explaining variance in firms' performance.
Here, the available empirical evidence very clearly supports R-A theory, i.e.
firm factors account for significantly more variance in the performance of
companies than industry factors. Clearly very important, but to this point.
Hunt tells us little about the exact nature of the resources and capabilities that
drive those firm factors. Let's turn to the next chapters; perhaps the fog will
be lifted here.
However, hopes that the discussion might now take on a firm-level
perspective on competition fail to materialise. Instead, in the next three
chapters Hunt takes a decisively macro-economic perspective. Specifically,
chapters seven and eight examine several aspects impinging on the wealth of
nations. Among others. Hunt revisits the "socialist calculation debate" that,
in the 1920s and 1930s, pitted the Austrian camp, primarily led by Hayek
(1935, a,b,c, 1940) and Mises (1920), against the advocates of socialism (such
as Dickinson (1933) or Lange and Taylor (1936). While the lengthy review of
224 Bodo B. Schlegelmilch

the socialist calculation debate might be interesting for economic historians,

it will tax the patience of many other readers. Nevertheless, Hunt maintains
that an understanding of the debate is required to understand why
neoclassical theory, as interpreted by mainstream economists, cannot
contribute to explaining the productivity differences between market-based
and socialist economies. However, the point is not so much that neoclassical
theory cannot, but that R-A theory can! Specifically, Hunt advances four key
reasons why R-A theory contributes, to explaining the superior productivity
of market-based economies versus socialist economies: first R-A theory
explains the motivation for innovation, second, R-A competition takes
account of opportunity costs and makes economic calculation efficient in
allocating scarce, tangible resources, third, R-A theory explains why
companies learn to be efficient and effective and, finally, R-A competition
motivates the creation of resources.
Chapter eight focuses on economic growth and starts, once more, with a
close look at the assumptions, implications and predictions of the
neoclassical growth theory. Subsequently, this is contrasted with the view of
R-A theory that growth is endogenous, i.e. a result of the process of
competition. In this context. Hunt argues eloquently that R-A theory is not
bound to the neoclassical view of capital but that firms, through the process
of competition, accumulate, develop, and create the various kinds of
tangible, intangible and "higher order" resources that collectively constitute
an economy's private sector capital. The role of R-A theory in explaining
economic growth is further shaped by contrasting five predictions with those
made by neoclassical growth theory. R-A theory reaches opposite predictions
in each case. The chapter closes with a heavy dose of empirical evidence
supporting the case of R-A theory. And the evidence Hunt lines up leaves no
doubt: once again, neoclassical theory loses - R-A theory wins.
Building on the previous two chapters. Hunt turns to two related issues.
First, he explores whether it is possible to develop formal models of
economic growth in which innovations are endogenous. Second, he looks at
an intriguing question, namely why not all market-based economies are
wealthy. As to the first issue, he provides an overview of so called
"endogenous growth models" and demonstrates that such models are
inconsistent with perfect competition theory. R-A theory, in contrast, can
provide a theoretical foundation for endogenous growiii models. For the
second question. Hunt recalls that the process of competition is significantly
influenced by societal resources (e.g. natural resources and formal
education), societal institutions, (e.g. culture, law and moral codes), the
characteristics of suppliers (e.g. dependability), consumers (e.g. preferences)
and public policy (e.g. patent, trademark, and antitrust policies). These
environmental factors determine the vigour of the competition. Societal
 Comments on Shelby D. Hunt's A General Theory of Competition Tib

institutions are part of these factors. But which institutions promote vigorous
R-A competition? Hunt attempts to answer this question by focusing on
'social trust.' He shows that R-A theory can contribute to explaining how
trust-producing societal institutions can be productivity enhancing while the
absence of such institutions can hinder economic growth. In this context.
Hunt's long standing interest in business ethics comes to play - another
indication that R-A theory is truly an interdisciplinary theory.
In his concluding chapter. Hunt returns to the relationship between R-A
theory and neoclassical, perfect competition. Having devoted large sections
of the book to contrasting both theories. Hunt argues that perfect competition
theory is neither a rival to nor a complement of R-A theory. Instead, "R-A
theory is a general theory of competition that incorporates perfect
competition theory as a special case" (p. 239). After developing this line of
thinking and providing arguments supporting R-A theory as a "general"
theory of competition. Hunt begins - in his own words - "a very preliminary
discussion of the public policy implications of R-A theory" (p. 240). To this
end, he initially focuses on the antitrust debate and distinguishes both the
wealth-transfer and the Chicago efficiency approach of antitrust. Noting that
the neoclassical research tradition is the starting point for both approaches.
Hunt launches into a condemning critique and argues that the antitrust
debate - resting on neoclassical tradition - is entirely meaningless. And, as
radical as this might appear, the arguments he puts forward are logically
developed from previous chapters and are largely convincing. Among
others, he points to fact that the antitrust debate ignores the view of the
Austrian school that interpersonal comparisons of utility are not possible and
that the antitrust debate requires the existence of homogeneous supply and
demand - none of which exists in the majority of industries. Hunt sums up:
"It is not the case that demand and supply curves are difficult to measure; it
is the case that demand and supply curves cannot exist and, hence, cannot be
estimated" (p. 255). Staying with public policy issues, in the light of the
insights gained through the R-A theory Hunt also calls for a
reconceptualisation of "competition", and "monopoly," as well as a
revisiting of the issue of 'static efficiency' versus 'dynamic efficiency'. The
book closes with a brief summary of the key advantages and characteristics
of R-A theory and an acknowledgement that the theory still represents "a
work in progress."
Taken collectively. Hunt's book was completely different from what I
expected. For a start, its perspective is primarily that of an economist rather
than that of a business strategist. From a corporate point view, his R-A theory
lacks specificity. Resources, and in particular the creation of new resources,
are addressed in such an abstract manner that most executives will be hard
pressed to turn Hunt's observations into concrete strategy recommendations.
226 Bodo B. Schlegelmilch

Too little is said about the process by which resources lead to competitive
advantages and too much appears to be tautological. For example, resources
are, among others, reputation and finance - but are these not also
performance variables? Somewhat frustrating is also the lack of regard for
changing economic rules. There is nothing in the text that even raises the
question of the future of business strategy in the light of the revolutionary
environmental changes we are now experiencing.
Having said all this, the book is a gem. It is one of the most
comprehensive criticisms of neoclassical theory I have come across -
although admittedly, this is not Hunt's main purpose. As marketers, we
always "knew" that perfect competition is as rare as rocking horse manure -
but having read Hunt, we now understand why. His very thorough
approach, detailed to a degree that it sometimes reaches the pain barrier, is
certainly effective in dispelling the last belief anyone might have held in
neoclassical economics. Unfortunately, the R-A theory he develops to replace
- or as he emphasises - to incorporate perfect competition theory as a special
case, remains rather amorphous. The act of gaining a comparative resource
advantage remains foggy and the process by which resources are combined
to create competitive advantages is still clouded in mystery.
Notwithstanding my critical remarks, I would recommend the book to
any economist and, in particular, to any business researcher with an interest
in marco-marketing and public policy issues. There is a multitude of topics
providing ample food for thought. Hunt's book can truly be regarded as a
treasure-chest for identifying promising future research avenues.

References

Dickinson, H. D. (1933), "Price Formation in a Socialist Community,"

Economic Journal, 43, pp. 237-250.
Hayek, Friedrich A. (1935a), "The Nature and History of the Problem," pp. 1-
40 in Hayek, F.A. (Ed.) Individualism and Economic Order, Chicago:
University of Chicago Press.
Hayek, Friedrich A. (1935b), "The State of the Debate," pp. 201-243 in Hayek,
F.A. (Ed.) Collectivist Economic Planning. London: Routiedge. Reprinted
1948, pp. 148-180 in Hayek, F.A. (Ed.) Individualism and Economic Order,
Chicago: University of Chicago Press.
Hayek, Friedrich A. (1935c), Collectivist Economic Planning: Critical Studies on
the Possibilities of Socialism, London, Routiedge.
Hayek, Friedrich A. (1940), "The Competitive Solution," Economica 7: pp.
125-149. Reprinted 1948, pp. 181-208 in Hayek, F.A. (Ed.) Individualism and
Economic Order, Chicago: University of Chicago Press.
 Comments on Shelby D. Hunt's A General Theory of Competition 227

Hunt, Shelby D. (2000), A General Theory of Competition: Resources,

Competences, Productivity, Economic Growth, Thousand Oaks: Sage
Publications, Inc.
Lange, Oskar R. and Taylor, Fred M. (1936), "On the Economic Theory of
Socialism." Reprinted 1964, pp. 55-143 in Lippincott B. (Ed.) On the
Economic Theory of Socialism, New York: McGraw-Hill.
Mises, Ludwig von (1920), "Economic Calculation in Socialist
Commonwealth." S. Adler, Trans., Archiv fur Sozialwissenschaft und
Sozialpolitik, 47. Reprinted 1935, pp. 87-130 in Hayek, F.A. (Ed.)
Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism,
London: Routledge.

About the Author

Bodo B. Schlegelmilch is Professor and Chair of International Marketing &

Management at the Wirtschaftsuniversitat Wien (Vienna University of
Economics and Business Administration). He is Director of the Vienna
Executive and International MBA Programs and Adjunct Professor of
International Business Studies at the University of Minnesota, Carlson School
of Management and at Kingston University, London, U.K. Currently, he
serves as the first ever European Editor-in-Chief of the Journal of International
Marketing. Earlier, he held tenured professorships at Thunderbird in Arizona
and the University of Wales in Swansea, as well as posts at the University of
Edinburgh in Scotland, the University of California at Berkeley and the
University of Miami in Florida.