A resource-based view of the firm
The core insight in the article that rather than just viewing firms in terms of their outputs in terms of products, we might better analyze firms by considering them "from the resource side."
According to Wernerfelt, resources can be (1) any strength or weakness of a firm or (2) any semi-permanent advantages. He lists a number of examples in his article:
- Machine capacity
- Customer loyalty
- Production experience
- Technological leads
In his framing, Wernerfelt builds explicitly off of Porter's (1980) Competitive strategy: Techniques for analyzing industries and competitors and breaks down each of his five forces and explains them in terms of struggle over the acquisition of certain resources (either tangible or intangible)
Another important question for Wernerfelt is how firms acquire resources.
Where do they come from. He offers several alternatives. First, they can be held internally. In these cases, looking at a firm's stock of resources can be a useful way for a firm to make strategic decisions. If a firm is missing resources, it can acquire them. One way to acquire resources is through mergers and acquisitions, which Wernerfelt discusses at some length.
Wernerfelt gives an extended example using a resources-product matrix and a companion set of formal models where he lists resources which can be useful to particular markets and describes how the analysis of this link can help evaluate when different strategies will be useful. Wernerfelt uses a model to demonstrate the resource situations in which sequential entry will be the best option. He also briefly considers both the "exploit and develop" strategy and the "stepping stones" model in light of the RBV.
Theoretical and practical relevance:
Birger Wernerfelt's article on the resource-based view of the firm is the seminal article in what became a literature refered to with that name and a broad theory that is perhaps the dominant theortical framing in the literature on corporate strategy.
- Wikipedia article on the resource-based view