A time-continuous model of resource development

The resource-based view (RBV) of the firm maintains that superior performance is due to competitive advantage - the possession of valuable and rare resources is what gives a market leader its edge. Resources, however, are vulnerable to attack through imitation, so companies must be alert to issues of sustainability and maintain barriers to imitation.

by Gonçalo Pacheco-de-Almeida, Peter Zemsky
Last Updated: 23 Jul 2013

This long-accepted position has recently been criticised for its lack of rigour, but so far no satisfactory alternative to RBV has emerged in the literature. Resources still remain a solid basis for analysis.

Gonçalo Pacheco-de-Almeida, assistant professor of management at the Leonard N. Stern School of Business at NYU, and Peter Zemsky, associate professor of strategy at INSEAD, have constructed a dynamic model of resource development by firms that deepens the theoretical foundations of RBV. Their model validates the classic theory and answers some of these criticisms.

Pacheco-de-Almeida and Zemsky's time-continuous model builds on measurable phenomena affecting barriers to imitation and sustainability - the time required for resource development (timing strategy); resource development processes; and time-compression diseconomies (the trade-off between the cost of enhanced development time and the gains from speedier time-to-market).

They build in factors to tackle the issue of imitation, through a market leader/follower dynamic, and examination of causal ambiguity. Competitive advantage is treated as a concept that applies at a specific point in time.

The model provides a precise answer to the question of what determines the sustainability of competitive advantages based on internally developed resources and also the relationship between competitive advantage and relative performance.

Many of their results run counter to received wisdom. Market leaders are demonstrated to show superior performance for inimitable resources - but followers in the market may have superior performance related to imitable resources.

They also show that an imitator can sometimes benefit from increases in causal ambiguity or, equivalently, decreases in knowledge spill-overs from a leader firm. The authors conclude that market leaders can manage their competitive advantage, and barriers to imitation, by a more judicious use of licensing.

INSEAD 2006

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