Firm Resources and Sustained

Competitive Advantage
Author: Jay Barney
Journal of Management (1991), Vol. 17, No. 1, 99-120
Presented by: Bradley Skousen
Purpose
• According to Barney, “the purpose of this article is to specify
the conditions under which firm resources can be a source of
sustained competitive advantage for a firm.”

• To build his argument, Barney indicates that previous research

on competitive advantage has assumed (1) that firms within
an industry are homogenous in terms of resources and
strategies, and( 2) heterogeneity, if developed, within an
industry will be short lived because resources used to
implement strategies are highly mobile.

• Under the resource-based view these assumptions are

relaxed.
New Assumptions
• Assumption 1: Firms within an industry (or group) may
be heterogeneous with respect to the strategic resources
they control.

• Assumption 2: Resources may not be perfectly mobile

(resource immobility) across firms, and thus
heterogeneity can be long lasting.

• Under these assumptions, the author uses the resource-

based view/logic to analyze the sources of sustained
competitive advantage.
Key Definitions
• Firm Resources: include all assets, capabilities, organizational
processes, firm attributes, information, knowledge, etc. controlled
by a firm that enable the firm to conceive of and implement
strategies that improve its efficiency and effectiveness.
• Physical Capital Resources: Include the physical technology used in a
firm, a firm’s plant and equipment, its geographic location, and its
access to raw materials.
• Human Capital Resources: Include the training, experience,
judgment, intelligence, relationships, and insight of individual
managers and workers in a firm.
• Organization Capital Resources: Include a firm’s formal reporting
structure, its formal and informal planning, controlling, and
coordinating systems, as well as informal relations among groups
within a firm and between a firm and those in its environment.
Key Definitions, Continued
• Competitive Advantage: A firm is said to have a
competitive advantage when it is implementing a value
creating strategy not simultaneously being implemented
by any current or potential competitors.

• Sustained Competitive Advantage: A firm is said to have

a sustained competitive advantage when it is
implementing a value creating strategy not
simultaneously being implemented by any current or
potential competitors and when these other firms are
unable to duplicate the benefits of this strategy.
Competition with Homogeneous and
Perfectly Mobile Resources
• Under conditions of resource homogeneity and mobility, firms
cannot achieve a competitive advantage.

• Barney, asserts that first-mover advantages are the result of

heterogeneity.

• Barney, further asserts that barriers to entry exist under

conditions of heterogeneity but not homogeneity.

• As a result, Barney suggests that in order to analyze the

sources of sustained competitive advantage we must assume
that firm resources may be heterogeneous and immobile.
Attributes of Firm Resources that lead to a
Sustained Competitive Advantage
• Resource attributes that have the potential to lead to a
sustained competitive advantage:
• 1) Valuable
• 2) Rare
• 3) Imperfectly Imitable
• 4) Non-substitutable

• According to Barney, these attributes of firm resources can be

thought of as empirical indicators of how heterogeneous and
immobile a firm’s resources are and thus how useful these
resources are for generating sustained competitive
advantages.
Valuable and Rare Resources

• Resources are valuable when they enable a firm to

conceive of or implement strategies that improve its
efficiency and effectiveness.

• A Resource is rare if the resource is not possessed by

large numbers of firms.
Imperfectly Imitable Resources
• Resources are imperfectly imitable if other firms that do
not possess them cannot obtain them.

• Barney identifies three reasons for imperfectly imitable

resources:
• 1) Unique Historical Conditions
• 2) Causal Ambiguity
• 3) Social Complexity
Substitutability of Resources
• Two valuable firm resources are strategically equivalent when
they each can be exploited separately to implement the same
strategies.

• Substitutability can take at least two different forms:

• 1) A firm may be able to substitute a similar resource that enables

it to conceive of and implement the same strategies.

• 2) Very different firm resources can be strategic substitutes. For

example, good strategic planning procedures may be able to
substitute for a charismatic leader.
Framework
• Barney argues that by analyzing the attributes of the firm’s
resources one can gain a better understanding of the sources
of sustained competitive advantage.
Conclusion
• Barney applies the framework (i.e. information processing,
positive reputations, etc.) to illustrate how his framework adds
value to understanding the sources of sustainable competitive
advantage.

• Barney illustrates how the resource-based view complements

and extends traditional economic social welfare theory,
organization theory, and our understanding of firm
endowments in relation to sustained competitive advantage.

• In sum, this paper has sought to link the attributes of firm

resources to sustainable competitive advantage.