Competitive Strategy

Competitive Strategy

What are the similarities and differences in the ways in which this week's articles explain performance differences among firms?

From the articles describing various theories of a firm's performance, there are a few common themes and a few minor differences focusing on definitions. In viewing the articles, we find that all of the authors state that the primary difference in performance of firms is the management of internal resources. The management of resources includes the development, acquisition, integration and implementation of these resources. While the resource perspective varies among the different articles, the unifying themes are: the optimum utilization of resources drives above normal performance, utilization of resources would adapt to changing environments, and a unified strategy must exist to manage the resources.

According to the resource based school, Barney articulates his vision of resources as comprising of the financial, physical, human, and organizational attributes of the firm. Similar to the other articles, Barney states that above normal performance could be derived from competitive advantages resulting from one or more of a firm's resources and capabilities. In contrast to the other articles, Barney states that in order for a firm's resource to lead to competitive advantages, it must add value, be rare, be non-imitable, and be implemented in a well-organized fashion. Barney does not elaborate on the process of acquisition and development of valuable resources, but focuses on what makes a resource valuable.

In the same vein, Peteraf states that the appropriate utilization of resources could lead to a sustained competitive advantage. Like Barney, she states four conditions by which a resource could lead to a competitive advantage; however, Peteraf expands her analysis to the acquisition/development of resources and maintenance of the same. According to Peteraf, resources should have heterogeneity and imperfect mobility. These requirements are loosely related to Barney's resource characteristics in terms of the inherent characteristics of an attractive resource. Peteraf adds the conditions of Ex Post and Ex Ante limits to competition to describe the favorable acquisition/development of resources and the successful maintenance of those resources. In contrast to Barney, Peteraf believes that even if a resource is heterogeneous and immobile, the rents accrued from the resource may dissipate. This dissipation may occur if competition for the resource exists either prior to or after the acquisition of the resource. In this way, Peteraf expands the resource based view of performance to incorporate the sustainability of the resource.

Grant agrees with Peteraf and Barney that above normal performance arises due to attractive resources existing within the firm. He further elaborates on the concept of knowledge as the most attractive firm resource. In this article Grant builds on Barney's view of human resources. He distinguishes between explicit and tacit knowledge, with tacit knowledge being a better source of competitive advantage due to its difficulty to imitate. Therefore, the organizational capabilities, seen as the integration of tacit knowledge within the individuals of the firm, are the primary concern of firm top management.

Prahalad and Hamel expand on Grant's focus on the process of managing knowledge as a strategic resource leading to above normal performance. Prahalad and Hamel, however, focus the integration of knowledge concept to the ideas of core competencies and core products. Resources, in this view, develop internally as core competencies