The Resource-Based View of the Firm and the Importance of Factor Markets

Abstract

The resource-based view of the firm attributes sustainable competitive advantage to the possession of valuable, nonsubstitutable and inimitable resources. The importance of competition in the factor markets to acquire such resources suggests a hypothesis that firm behavior and industry conduct should be conditional on the resources that underpin competitive advantage in the industry. By using value-added intensity to identify the competitively relevant resource, this paper verifies among industries competing over different resources. The results suggest that industries are heterogeneous and that normative strategic prescriptions should be contingent on the resource which is critical to competitive advantage in the industry.

JEL Classification: D21