The resource-based view of the firm

As we discussed in the previous chapter, economists have been traditionally concerned with the understanding of markets and, more recently, their displacement by firms. In contrast, strategy scholars have focused on how businesses are actually managed and what determines their performance. It is not surprising that the reason for firms to exist has not been an important issue in strategy and the notion of competitive advantage has taken instead the central place within the field. In search for better understanding of why some firms succeed while others fail, strategy scholars have frequently drawn from economic theories. Interestingly, they have found a somewhat marginal theory in economics that analyzes the process of firm growth developed by Edith Penrose in 1959. This approach focuses on the firm as a collection of resources and it has inspired what today is called the resource-based view of the firm (RBV). This chapter explores this theory and some related perspectives that share a very similar conceptualization of the firm, like the literature on evolutionary economics, knowledge-based theories, dynamic capabilities, and core competences. We will build on them to discuss the nature of the firm in strategy and, later, we will push it forward to include the notions of value creation and appropriation.

Penrose's (1959) insightful analysis has become the basis of the RBV, which focuses on the process of growth of the firm.