The resource-based theory of competitive advantage received stiff critiques during the years, and research discovered several weaknesses. By incorporating resource-based view into competitive heterogeneity we’ll try to weaken common critiques and strengthen the applicability of resource-based view in creating sustainable competitive advantage.

1. Explicating resource-based view
critiques from a competitive
heterogeneity perspective
Author: Kevin Rommen (S4072294)
Course: MOR-005 - Project Designing Research
Contact information: info@kevinrommen.nl / 00 31 (0)6 4390 5126

2. 2 Explicating resource based view critiques from a competitive heterogeneity perspective
Introduction
Whether resource based view is applicable to the field of strategic management or not we can
definitely state that this view had, and still has an enormous impact in the field over the last 25
years. Many papers were, and still are, written about the subject either critiquing, improving or
extending the view. Hoopes, Madsen and Walker (2003) state that resource-based view is
powerful within the conceptual landscape and by looking at the critiques made by among others
Kraaijenbrink, Spender and Aard (2010), Hoopes et al. (2003), Priem & Butler (2001) and Makadok
(2001) we see that a problem regarding resource-based view generally lies in translating
resource-based view from a conceptual model to an applicable theory.
The resource-based theory of competitive advantage received stiff critiques during the years,
and research discovered several weaknesses. By incorporating resource-based view into
competitive heterogeneity we’ll try to weaken common critiques and strengthen the
applicability of resource-based view in creating sustainable competitive advantage.
The problem statement can be redefined in these subquestions:
Can competitive heterogeneity, or other concepts within competitive heterogeneity, weaken
common critiques regarding resource-based view?
Does competitive heterogeneity provide a solid base for translating resource-based view from
a conceptual model towards practical applicability?
Can resource-based view be seen as an integral part of competitive heterogeneity as theory
for sustainable competitive advantage?
Competitive Heterogeneity
Exploring all ins and outs of competitive heterogeneity is out of the scope of this paper. Specifically
we want to examine if parts of competitive heterogeneity can supplement the resource-based view
and ultimately strengthen its position as a firm and applicable view within the theory of
competitive heterogeneity for which Hoopes et al. (2003) paved the way.
Hoopes et. al (2003) and Hoopes, Madsen (2008) define competitive heterogeneity as “Like the
RBV, competitive heterogeneity refers to enduring and systematic performance differences among
close rivals” (2003, p. 890). Hoopes et al. (2003) also believe that resource-based view is merely
one of the explanations which causes intra-industry differences, a view supported by Helfat and
Peteraf (2003), and suggest that a perspective beyond resource-based view can improve general
understanding of the competitive differences within close rivals. Competitive heterogeneity uses
the VPC-framework (value, price and cost), which a bargaining model. This results in the
possibility for defining superior performance independently from resources and capabilities. This

3. 3 Explicating resource based view critiques from a competitive heterogeneity perspective
of a product, which in terms delivers a certain value (V) to the buyer and also costs (C) the supplier
an amount to product (Hoopes et al., 2003). To summarize, whoever has the highest value and the
lowest costs has an advantage over its competitors. Furthermore, as illustrated in the example in
Hoopes et al. (2003), this also derives into the fact that a “resource or capability is only valuable
when it increases the difference between value and cost (V-C) relative to that achieved by
rivals” (Hoopes et al., 2008, p. 396).
Competitive heterogeneity provides us with a general view which, in contrast to resource-based
view, doesn’t limit itself due to its assumptions and definitions. An interesting point is that
competitive heterogeneity can contain multiple opposing concepts which can work together within
a VPC-framework.
The VPC-framework can incorporate other concepts like dynamic capabilities, firm evolution and
industry evolution (Hoopes et al., 2003). This is an important expansion because this implies the
causal relationship between other factors which can influence the strive for sustainable
competitive advantage, a problem we’ll see in the critiques regarding resource-based view. To
conclude competitive heterogeneity can lead to sustainable competitive advantage in multiple
ways, and the resource-based view is one of them (Hoopes et al., 2003).
Resource-based view
Barney (1991) is taking a complete new approach to reach sustainable competitive advantage. He
is changing important assumptions, thus giving resource-based view a complete new position
opposite to the work of, for example, Porter (1980, 1985). The resource-based view assumes that
one, organizations can differ in the recourses they control and two, resources maybe not
transferable between these organizations. In other words resources are heterogenous and
immobile.
The resource-based view states that sustainable competitive advantage is accomplished not by
looking from an outside-in perspective, the environment of an organization according to the
weaknesses, strengths opportunities and threats, but by looking from an inside-out perspective,
the attributes of an organization. (Barney, 1991; Porter 1980,1985). Within the resource-based
view Barney (1991) changes the emphasis from an environmental view into an emphasis on the
attributes of the organization. Resource-based view can be seen as a framework which emphasizes
the relationship between resource heterogeneity & immobility towards sustainable competitive
advantage (Barney, 1991). However Hoopes, Madsen and Walker (2003) criticize that the resource-
based view doesn’t provide tangible translations for operationalizing the theory and furthermore
many researchers consider the resource-based view to be a tautology (Priem & Butler, 2001;

4. 4 Explicating resource based view critiques from a competitive heterogeneity perspective
Bromiley and Fleming, 2002; Foss, Knudsen and Montgomery, 1995). These are some of the
critiques which resource-based view faces and are amongst other a source for the inapplicability of
the view.
1) The RBV has no managerial implications (Kraaijenbrink et al., 2010)
Because Barney (1991) states that resource-based view is a framework for defining the
relationship between heterogeneity & immobility and sustainable competitive, or in other
words trying to explain competitive advantage between close rival firms, “and, as such, was
never intended to provide managerial prescriptions” (Kraaijenbrink et al., 2010, p. 352).
Furthermore Barney (2001) explains that resource-based view can be used in different ways,
combining different related papers according to the empirical context of the organization under
research. So the lack of workable guidelines can be refuted.
The fact that this can be refuted doesn’t strengthen or improve the position at all, this is mere
gentlemen’s battle over who is “right”. So even when this argument is refuted, resource-based
view still has complications regarding managerial implications. An issue which from a competitive
heterogeneity perspective can be refuted and even solved. The VPC-framework offers a dynamic
growth cycle for firms to improve their market position (Hoopes et al (2003), i.e. gain sustainable
competitive advantage. The resource-based view acts as a control-mechanism within this
perspective.
2) The RBV implies infinite regress (Kraaijenbrink et al., 2010)
Realizing that the theory of resource-based view is ultimately aimed at creating sustainable
competitive advantage within organizations, and not a “positivistic quest for certainty-for the
ultimate source of sustainable competitive advantage” (Kraaijenbrink et al., 2010, p. 352)
refutes the critique of infinite regress. Depending on the view regarding capabilities, where
from a practical management perspective the interaction between capabilities is more
interesting than the hierarchal order perspective, resource-based view it’s infinite regress is
inapplicable.
The theory of resource-based view lacks a degree of dynamics, most researchers look at resource-
based view from a static perspective. However, competitive advantage, disadvantage and also the
environment changes over time. The resource-based view must incorporate the time aspects
regarding resources and capabilities (Helfat et al., 2003). This perspective of continuous change
contradicts infinite regress.
3) The RBV’s applicability is too limited (Kraaijenbrink et al., 2010)
Arguments that resource-based view cannot be generalized, applies only to large organizations,

5. 5 Explicating resource based view critiques from a competitive heterogeneity perspective
and that sustainable competitive advantage resources are expensive to acquire in the first place
are refuted from different viewpoints. Kraaijenbrink et al. (2010) refute the critiques regarding
applicability by stating that they are either “being overly academic”, “diluted whenever non-
tangible resources are admitted” and “that every firm’s past shapes its present and future
performance”, respectively.
Even though these critiques can be refuted Barney (2002) indicates that the applicability of
resource-based view is bounded by the “rules of the game” within an industry. These “rules” need
to be relatively fixed, when this is not the case sustainable competitive advantage needs to be
explained beyond the resource-based view. From this we can derive that resource-based view
indeed could be proven useful as part of a larger theory. Then constraints opposing resource-based
view can be dealt with by other concepts, other parts of the general theory where resource-based
view is merely part of. Important to realize that this doesn’t change resource-based view on a
theoretical level, but other concepts can fill the gaps. The many papers written on extending the
resource-based view (Hoopes et al., 2003 & 2008; Helfat et al., 2003; Makadok, 2001; Lavie,
2006; Felin and Hesterly, 2007)
4) SCA is not achievable (Kraaijenbrink et al., 2010)
Because organizations are continuously changing and innovating the marketplace it is
suggested that sustainable competitive advantage isn’t achievable. Kraaijenbrink et al. (2010)
indeed agree that long term sustainable competitive advantage can’t last forever, but they also
mention that just that dynamic instinct can trigger sustainable competitive advantage in the
short run. Hereby emphasizing the goal of sustainable competitive advantage leading to an
overrun of the “natural” timing of an industry. Resource-based view thus plays the role of
improving innovation or slowing imitation.
Kraaijenbrink (2010) his reasoning claims that the strive for long term sustainable competitive
advantage aims the managers into the right direction and emphasizes the need to beat the
“market’s natural timing”. This implies a dynamic environment in which organizations reside, and
therefore requires resource-based view to incorporate this dynamic in order to reach a state pf
sustainable competitive advantage. Dynamic capabilities need to be continuously changed,
extended, improved, created and protected in order to flow with that changing environment
(Teece, 2007). From a competitive heterogeneity viewpoint other variables, i.e. differences
between close rivals, can be pointed out which influence the timeframe for sustainable competitive
advantage. Different examples of these variables, as pointed out in Hoopes et al. (2003), are
network relationships and market segmentation (loyalty, switching costs, etc).

6. 6 Explicating resource based view critiques from a competitive heterogeneity perspective
Logically not all resources are capable of delivering sustainable competitive advantage and Barney
(1991) describes different important attributes that a specific resources needs tot have in order to
be applicable in sustainable competitive advantage:
Value resources
In order to be a potential interesting resource which will lead the organization towards sustainable
competitive advantage it’s important that the resource is valuable, i.e. the resource will lead to
more efficiency or effectivity within the organization. If not the resource lacks the possession to
improve the organization in any way (Barney, 1991).
Rare resources
When a resource is not rare and can be easily duplicated within the industry, the possibility of a
homogenous situation is created. Therefore some, especially as many, of the resources of the
company should be rare. When not, other organizations can conceive the same strategy; hereby
diminishing the sustainable competitive advantage (Barney, 1991).
Imperfectly imitable resources
Even though when resources are both rare and valuable its important that other organizations
cannot obtain or even posses the same resources. They have to be imperfectly imitable, which can
have a single reason or have a combination of three reasons. Barney (1991) calls these reasons:
unique historical conditions, causal ambiguity and socially complex. He states that resources are
amongst others also based upon the history of an organization and the specific place in time that
this gives the organization. These resources cannot be imitated due to the fact that other
organizations have another space and place in time. If the link between sustainable competitive
advantage and resources isn’t understood this lead to another reason for imperfectly imitation.
Without this understanding duplication of the situation is practically impossible. Lastly social
complexity is an important which makes resources imperfectly imitable, this means that resources
can be a socially complex phenomenon. Examples of a social complex phenomenon are corporate
culture, interpersonal relationships, traditions, etc. (Barney, 1991)
Substitutability
Barney (1991) describes one last important attribute for resources to be applicable towards gaining
sustainable competitive advantage. The requirement is that a resource cannot be substituted for
another equivalent of this resource. An equivalent of an resource can inevitably conceive, however
with different resources, the same strategy and thereby undermining the desired sustainable
competitive advantage.

7. 7 Explicating resource based view critiques from a competitive heterogeneity perspective
5) VRIN/O is neither necessary nor sufficient for SCA (Kraaijenbrink et al., 2010)
This critique is one of the first which is more challenging to refute, but which in the future must
be in order for the resource-based view to sustain an important role within the field. This
critique comes in twofold, bearing both a sufficiency issue and a necessity issue. Where
resource-based view states that resources lead to sustainable competitive advantage when
those resources are VRIN/O. However, empirical support for this view is lacking. That is the first
sufficiency issue at hand. Furthermore the sufficiency side of this critique states that having
VRIN/O resources doesn’t automatically lead to sustainable competitive advantage, next to
VRIN/O resources organizations must be able to deploy these resources.
When incorporating resource-based view within a theory of competitive advantage
more empirical research could be accounted for, due to the fact that empirical research
at this moment implies other factors to influence sustainable competitive advantage.
Competitive advantage incorporates among others dynamic capabilities, industry
evolution & industry evolution (Hoopes et al., 2003) which account for some of the
factors which current empirical research couldn’t account for. Also the deployment of
these resources is an influence to sustainable competitive advantage, which is further
elaborated and proved by Adner and Helfat (2003). They define as follows: “Dynamic
managerial capabilities are the capabilities with which managers build, integrate, and
reconfigure organizational resources and competences.” (Adner et al., 2003, p. 1012).
6) The value of a resource is too indeterminate to provide for useful theory (Kraaijenbrink et
al., 2010)
Kraaijenbrink et al. (2010) conclude that resource-based view can be best seen as a heuristic
instead of a theory. The definitions of value and resource are tautological in its explanations
and therefore we cannot fully understand and interpret resource-based view, because we
cannot test statements which are true by definition.
When we put resource-based view as part of competitive heterogeneity, thus incorporating it with
the VPC-framework the critique on resources would be solved. There the value of a resource is
defined as “only valuable when it increases the difference between value and cost (V-C) relative to
that achieved by rivals” (Hoopes et al., 2008, p. 396).
7) The definition of resource is unworkable (Kraaijenbrink et al., 2010)
The inclusiveness of the definition of resource strengthens the tautology perspective of
resource-based view and thereby weakening it.

8. 8 Explicating resource based view critiques from a competitive heterogeneity perspective
Firm resources include all assets, capabilities, organizational processes, firm attributes, information,
knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies
that improve its efficiency and effectiveness. (Barney, 1991, p. 101)
This over-inclusive definition of resource makes it impossible to derive whether a resource is an
input for the organization or a resource is a process within the organization which uses that
input. Next to that, there is no distinction in types of resources which can differ in contribution
towards competitive sustainable advantage.
While the definition of resources could be seen as over-inclusive, this can also be one of
the strengths of the resource-based view (Barney, 2001). However, this does not mean
every single resource has to be equally strong in improving efficiency and effectiveness.
Furthermore the strength of a resource also changes, as too the environment changes.
One important distinction, the one between resource and capability, is necessary to
make (Makadok, 2001; Helfat et al., 2003). This is defined by Amit and Schoemaker
(1993, p. 35).
Capabilities, in contrast, refer to a firm’s capacity to deploy Resources, usually in combination, using
organizational processes, to effect a desired end. They are information-based, tangible or intangible
processes that are firm-specific and are developed over time through complex interactions among the
firm’s Resources. They can abstractly be thought of as ‘intermediate goods’ generated by the firm to
provide enhanced productivity of its Resources, as well as strategic flexibility and protection for its final
product or service. [italics in the original]
While still mostly unclear, the relationship between resources and capabilities within resource-
based view and competitive heterogeneity is extremely important. Especially in case of
incorporating resource-based view and dynamic capabilities with each other.
Conclusion & Discussion
In this paper we’ve investigated if common critiques regarding the resource-based view could be
weakened or even refuted, thereby strengthening its position, when placed within another
context; this context being competitive heterogeneity as a global theory of reaching sustainable
competitive advantage. Hoopes et al. (2003) paved the way in for this idea in their paper “Why is
there a resource-based view? Toward a theory of competitive advantage”.
Can competitive heterogeneity, or other concepts within competitive heterogeneity, weaken
common critiques regarding resource-based view? We can definitely state that concepts within
competitive heterogeneity have a positive impact on the critiques regarding resource-based view.

9. 9 Explicating resource based view critiques from a competitive heterogeneity perspective
We can determinate, through the VPC-framework, the value of a resource and find that dynamic
capabilities are necessary to keep up with an ever-changing environment. To conclude competitive
heterogeneity is more than capable of weakening critiques regarding resource-based view. Does
competitive heterogeneity provide a solid base for translating resource-based view from a
conceptual model towards practical applicability? Especially through the growth cycle competitive
heterogeneity provides a tangible mechanism which is applicable. When combined resource-based
view acts as a monitoring and controlling mechanism, there is action and reaction between both
competitive heterogeneity and resource-based view. While this doesn’t intrinsically change
resource-based view it does provide a way of applicably working with resource-based view.
Can resource-based view be seen as an integral part of competitive heterogeneity as theory for
sustainable competitive advantage? Within this paper we can conclude that different critiques can
be weakened from the perspective of competitive heterogeneity and deriving from that there does
appear to be a causal relationship between the two, however to further research is needed. While
competitive heterogeneity ”shows great talent” we cannot take a shortcut, there’s still research
that needs to be done into this perspective proving if a theory of competitive heterogeneity is even
possible. For example, the implications of dynamic managerial capabilities viewpoint (Adner et al.,
2003) should be explored. Only by building on the view by Hoopes et al.(2003) which is
empirically tested in Hoopes et al. (2008), creating a conceptual theory and finally testing that
theory with empirical research the viewpoints of this paper can be truly tested.
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