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Value, profit and risk: accounting and the resource-based view of the firm

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  • Steven Toms

Abstract

Purpose – This paper aims to argue that the principal components of the Resource-Based View (RBV) as a theory of sustained competitive advantage are not a sufficient basis for a complete and consistent theory of firm behaviour. Two missing elements are value theory and accountability mechanisms. Design/methodology/approach – The paper proposes a link between value theory and accountability using a Resource Value-Resource Risk perspective as an alternative to the Capital Asset Pricing Model. The link operates first from the labour process, where value is created but is imperfectly observable by intra-firm mechanisms of organizational control and outside governance arrangements without incurring monitoring costs. Second, it operates through contractual arrangements which impose fixed cost structures on activities with variable revenues. Findings – The paper thereby explains how value originates in risky and difficult to monitor productive processes and is transmitted as rents to organizational and capital market constituents. It then reviews recent contributions to the RBV, arguing that the proposed new approach overcomes gaps inherent in the alternatives, and thus offers a more complete and integrated view of firm behaviour. Originality/value – The RBV can become a coherent theory of firm behaviour, if it adopts and can integrate the labour theory of value, associated measures of risk arising from the labour process and mechanisms of accountability.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Accounting, Auditing & Accountability Journal.

Volume (Year): 23 (2010)
Issue (Month): 5 (June)
Pages: 647-670

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Handle: RePEc:eme:aaajpp:v:23:y:2010:i:5:p:647-670

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Related research

Keywords: Competitive advantage; Labour; Resources; Risk management;

References

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  1. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
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  8. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply," Management Science, INFORMS, vol. 35(12), pages 1514-1514, December.
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  12. Cliff Bowman & Juani Swart, 2007. "Whose Human Capital? The Challenge of Value Capture When Capital is Embedded," Journal of Management Studies, Wiley Blackwell, vol. 44(4), pages 488-505, 06.
  13. Toms, Steven, 2004. "Asset pricing models, the labour theory of value and their implications for accounting," The York Management School Working Papers 2, The York Management School, University of York.
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  18. Armstrong, Peter, 1991. "Contradiction and social dynamics in the capitalist agency relationship," Accounting, Organizations and Society, Elsevier, vol. 16(1), pages 1-25.
  19. Harcourt,G. C., 1972. "Some Cambridge Controversies in the Theory of Capital," Cambridge Books, Cambridge University Press, number 9780521096720, October.
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  22. Henry Ogden Armour & David J. Teece, 1978. "Organizational Structure and Economic Performance: A Test of the Multidivisional Hypothesis," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 106-122, Spring.
  23. Glenn MacDonald & Michael D. Ryall, 2004. "How Do Value Creation and Competition Determine Whether a Firm Appropriates Value?," Management Science, INFORMS, vol. 50(10), pages 1319-1333, October.
  24. Toms, Steven, 2005. "The resource-based view of the firm and the labour theory of value," The York Management School Working Papers 9, The York Management School, University of York.
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