AP/ADMS 4900

Management Policy I
Session 3
Today’s Agenda and Learning Objectives

• Chapter 3
• Case: IKEA
• After today, in addition to learning objectives on
Page 62, you should know
• The arguments of the RBV model and how to use the
model
• What social capital is about
What’s on next session?

• Chapters 4 and 5

• Case: Palliser Furniture Ltd.: The China

question (Product # 9B04M005)
Analyzing Internal Environment

• Internal environment analysis looks at

how the bundles and organization of
internal resources and activities drive
firm performance

• Resource-based view of the firm (RBV)

Resource-based view of the firm
(RBV)
• Why do firms in the same industry
vary in performance over time?

• Two critical assumptions of the RBV

• Resource heterogeneity (Penrose, 1959)

• Resource immobility (Selznick, 1957; Ricardo, 1817)
Resources
• Tangible resources - easy to identify,
touchable, can be quantify

• Intangible resources - hard to quantify or

identify
• Intellectual properties
• Human capital
• Social capital
Social Capital
• What is social capital? -> web of
relationships allows actors to achieve
desired outcome
• Where does social capital come from/how
does social capital come about? -> through
repeated interaction & mutual
understanding
• Types of social capital
• Relational social capital
• Structural social capital
Relational social capital
• Relational social capital looks at relationships
between actors

• Strength of ties (i.e., relationships)

• Strong ties vs weak ties

Structural social capital
• Structural social capital looks at the structure of relationships
among actors

• At the individual level – actor’s position in the network

• Centrality -> quicker access to information
• Structural hole -> position to connect 2 networks,
transformational center, access to diverse info

• At the network level

• Open vs close (close -> everyone knows each
other&information flows fast, open -> members do not know
each other, information flows slow) close network is better
So what?
• Knowing the types of social capital people can have has
important implications

• At the individual level

• At the firm level (i.e., from management perspective)

• Firms can have different

performances even if they have

identical resources – this is
because?
Organizational capabilities
• Another factor contributing to performance
difference is how firms allocate/use/integrate
resources

• How firms allocate/use/integrate resources

is related to organizational capabilities (e.g.,
R&D cap, marketing cap, etc).

• How do firms develop capabilities?

VRIO Analysis
• V: Valuable, relevant

• R: Rareness

• I: Difficult to imitate

• O: Organization
• Organizational policies/structure to
support/implement R&Cs
VRIO – Barriers for imitation
• Unique historical conditions
• Causal ambiguity
• Social complexity
• Legal protection (e.g., patents)

• These make imitation difficult in terms of timing

and cost

• Forms of imitation: direct duplication and

substitution
• What are the limitations of VRIO analysis?
WRAP-UP