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Criticism/Limitations
There was an academic debate in strategic management in 2001 which was published in Vol.26 (1) of the Academy of Management Review. Priem and Butler (2001a) started off by their critique of Barney’s (1991) original article. Barney (2001) then responded and supported his research, followed by another critical comment by Priem and Butler (2001b).
Priem and Butler (2001) highlighted many important points of criticism:
The RBV may be tautological, or self-verifying. Barney has defined a competitive advantage as a value-creating strategy that is based on resources that are, among other characteristics, valuable (1991, p106). This reasoning is circular and therefore operationally invalid (Priem and Butler, 2001a, p31).
According to Priem and Butler (2001a), Barney’s perspective does not constitute a theory of the firm. The conditions of lawlike generalizations (Rudner, 1966) of empirical content, nomic necessity and generalized conditionals are not met.
Different resource configurations can generate the same value for firms and thus would not be competitive advantage
The role of product markets is underdeveloped in the argument
Limited focus on capabilities
Retrospective causality issues: any current success could be attributed to a number of reasons (e.g. unique resources), but the causality is not always clear.
The theory has limited prescriptive implications
However, Barney (2001) provided counter-arguments to these points of criticism. For example, he said that any theory could be rephrased to appear tautological. He also stated that his theory applies to static (equilibrium) environments, but not to dynamic environments. As today’s business realities are clearly not static but dynamic and characterized by high velocity and rapid change, Barney (2001) thus admitted that his 1991 VRIN theory has little potential for applicability to the real world. It does, however, provide a good way for senior managers to better understand their resource base. Barney (2001) also suggested re-defining the criterion of “value” and pointed to different ways of describing “competitive advantage” as strategic advantage, above-average industry profits and economic rents. The tone of his paper appears defensive at times, showing that Priem and Butler (2001a) have actually raised some important issues.
Priem and Butler (2001a;2001b), however could be criticized for slightly missing the point. This is because they focus on the status of the RBV as a theory, the tautology allegation and sustainable competitive advantage. In business reality, senior managers are often not interested whether or not the RBV constitutes a real theory or not. Instead, they require guidance for achieving competitive survival. As Ludwig and Pemberton (2011) have shown, any firm operating in today’s dynamic external business environments needs to focus on competitive survival and their capabilities.
Additionally, it is not difficult to retrospectively criticise a theory. Priem and Butler (2001a) were arguably ten years too late in their critique of Barney’s (1991) framework. In the process, they present a rather superfluous debate instead of focusing on really important issues being faced by senior managers.
Further criticisms of the RBV are:
There is insufficient focus on depreciating resource value, i.e. the negative effect of external change on the resource/asset base of the SBU.
It would be suggestible that RBV changes the focus from achievement of sustainable competitive advantage to ensuring competitive survival.
It is perhaps difficult to find a resource which satisfies all of the Barney’s VRIN criteria.
There is the assumption that a firm can be profitable in a highly competitive market as long as it can exploit advantageous resources, but this may not necessarily be the case. It ignores external factors concerning the industry as a whole; a firm should also consider Porter’s Industry Structure Analysis (Porter’s Five Forces).
Long-term implications that flow from its premises: A prominent source of sustainable competitive advantages is causal ambiguity (Lippman & Rumelt, 1982, p420). While this is undeniably true, this leaves an awkward possibility: the firm is not able to manage a resource it does not know exists, even if a changing environment requires this (Lippman & Rumelt, 1982, p420). Through such an external change, the initial sustainable competitive advantage could be nullified or even transformed into a weakness (Priem and Butler, 2001a, p33; Peteraf, 1993, p187; Rumelt, 1984, p566).
Premise of efficient markets: Much research hinges on the premise that markets in general or factor markets are efficient, and that firms are capable of precisely pricing in the exact future value of any value-creating strategy that could flow from the resource (Barney, 1986a, p1232). Dierickx and Cool argue that purchasable assets cannot be sources of sustained competitive advantage, just because they can be purchased. Either the price of the resource will increase to the point that it equals the future above-average return, or other competitors will purchase the resource as well and use it in a value-increasing strategy that diminishes rents to zero (Peteraf, 1993, p185; Conner, 1991, p137).
The concept of rarity is obsolete: Although prominently present in Wernerfelt’s original articulation of the resource-based view (1984) and Barney’s subsequent framework (1991), the concept that resources need to be rare to be able to function as a possible source of a sustained competitive advantage is unnecessary (Hoopes, Madsen and Walker, 2003, p890). Because of the implications of the other concepts (e.g. valuable, inimitable and no substitutability) any resource that follows from the previous characteristics is inherently rare.
Sustainable: The lack of an exact definition of sustainability makes its premise difficult to test empirically. Barney’s statement that the competitive advantage is sustained if current and future rivals have ceased their imitative efforts is versatile from the point of view of developing a theoretical framework, but is a disadvantage from a more practical point of view, as there is no explicit end-goal.
The relational view is an extension of the resource-based view for considering networks and dyads of firms as the unit of analysis to explain relational rents, i.e., superior individual firm performance generated within that network/dyad.
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