Unraveling the resource‐based tangle

TLDR

Resource‑based theory integrates management and economics perspectives, yet its arguments risk becoming entangled; increasing analytic precision and elaborating its economic logic remain worthwhile pursuits. The authors argue that understanding RBT’s domain limits is essential, and they sharpen definitions of competitive advantage, value, critical resources, and economic rents. They refine competitive advantage by linking it to value creation and demand‑side concerns, and they provide precise, economically meaningful definitions of value, critical resources, and economic rents. The study shows that without a resource‑level, efficiency‑oriented view, RBT’s contribution is unclear, that extending beyond this domain adds confusion, and that the clarified definitions yield a coherent logic from resources to rents. © 2003 John Wiley & Sons, Ltd.

Abstract

Abstract Resource‐based theory (RBT) is a prime example of a theory that integrates a management perspective with an economics perspective. As such, its challenge is to keep its arguments logically consistent and clear, despite the risk of their becoming entangled, due to competing and possibly conflicting theoretical influences. We argue, in this paper, that to meet this challenge, it is essential to understand the limits to the domain of RBT. Unless RBT is understood as a resource‐level and efficiency‐oriented analytical tool, its contribution cannot be understood and appreciated fully. Incorporating aspects of economic theory that fall outside this domain will not increase its power and will only add to the confusion. Continued efforts to increase the analytic precision of RBT and to elaborate its economic logic, however, are worthwhile pursuits. To these aims, then, we provide a sharper definition of competitive advantage, linking this term to value creation and to demand side concerns. Similarly, we provide an economically meaningful definition of value and more precise definitions of critical resources and of economic rents. This allows us to trace a clearer trail of logic, consistent with both the management and the economics perspectives, leading from critical resources to the generation of rents. Copyright © 2003 John Wiley & Sons, Ltd.