The cornerstones of competitive advantage: A resource-based view
Citation: Margaret A. Peteraf (1993) The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal (RSS)
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Tagged: Business (RSS) strategy (RSS), RBV (RSS)
The goal of strategy is sustained competitive advantage and Margaret Peteraf attempts to use the resource-based view of the firm (RBV) (see Wernerfelt's (1984) A resource-based view of the firm) to provide an alternative model of how firms achieve sustainable competitive advantage. Her goal is to build on existing work to create a parsimonious model. Her model contains four conditions, and all of them must be met.
The four "cornerstones" to competitive advantage are described in RBV terms:
- Heterogeneity of resources which allow firms access to and control over superior resources which are not available to other firms. Firms with access to these resources can use them to extract either Ricardian or monopoly rents. In the first case, there is a scarcity in supply of the resources and in the second case, there is a restriction in output.
- Ex post limits to competition which means that there should be barriers to other firms simply competing away these rents. In traditional RBV terms, this is often discussed as either imperfect imitability or imperfect substitutability of resources.
- Imperfect mobility which means that resources cannot be traded.
- Ex ante limits to competition which suggests that prior to a firm establishing control over a set of resources, there must be limited competition for that positions.
In the model, heterogeneity is the major force. The other cornerstones can be seen as way of protecting the rents secured by the first. In other words, (1) establishes rents, (2) sustains those rents, (3) ensure those sustained rents are retained within the firm and (4) ensures the the rents that are obtained are not offset by up-front costs necessary to acquire them.
Theoretical and Practical Relevance
Margaret Peteraf's extremely influential article has been cited more than 4,500 times it was published more than 17 years ago.
The argument is very logical (and perhaps even rather obvious and uncontroversial) but it's a very clear version of RBV that put to rest a huge debate in the previous years that involved people arguing for their own particular mechanisms. This was a logical explanation of what should be a complete set of drivers for RBV's relevance in a strategic context.
Peteraf has become basically the paper that people cite when they want to reference RBV. This ends up being the best sort of summary of RBV.