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Unraveling the resource-based tangle

Listed author(s):
  • Margaret A. Peteraf

    (Tuck School of Business at Dartmouth, 100 Tuck Hall, Hanover, NH 03755, USA)

  • Jay B. Barney

    (Bank One Chair for Excellence in Corporate Strategy, Fisher College of Business, Ohio State University, 860A Fisher Hall, 2100 Neil Ave., Columbus, OH 43210-1144, USA)

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    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.

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    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 24 (2003)
    Issue (Month): 4 ()
    Pages: 309-323

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    Handle: RePEc:wly:mgtdec:v:24:y:2003:i:4:p:309-323
    DOI: 10.1002/mde.1126
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    1. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
    2. Schmalensee, Richard, 1985. "Do Markets Differ Much?," American Economic Review, American Economic Association, vol. 75(3), pages 341-351, June.
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