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Resource-Based Theory

Resource-Based Theory. Buy (or acquire) resources and skills cheaply. Transform (the resource or skill) into a product or service. Deploy and implement (the strategy). Sell dearly (for more than you paid). Sustainable Competitive Advantage.

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Resource-Based Theory

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  1. Resource-Based Theory Buy (or acquire) resources and skills cheaply Transform (the resource or skill) into a product or service Deploy and implement (the strategy) Sell dearly (for more than you paid)

  2. Sustainable Competitive Advantage Competitive advantage created when firms possess and employ resources that are: • Valuable • Allowing exploitation of environmental opportunities • Rare • Not enough for all competitors • Hard to copy • Competitors cannot easily duplicate them • Non-substitutable

  3. Resource Attributes and Competitive Advantage Creates Competitive Resource No Competitive Advantage Dimension Advantage Valuable resources Exploits opportunities Neutralizes threats Not suited to the environment - Common

  4. Resource Attributes and Competitive Advantage Creates Competitive Resource No Competitive Advantage Dimension Advantage Valuable resources Exploits opportunities Neutralizes threats Not suited to the environment - Common Unique Costly to procure Rare resources Readily available Inexpensive

  5. Resource Attributes and Competitive Advantage Creates Competitive Resource No Competitive Advantage Dimension Advantage Valuable resources Exploits opportunities Neutralizes threats Not suited to the environment - Common Unique Costly to procure Rare resources Readily available Inexpensive Unique history Causally ambiguous Socially complex Imitable resources Ordinary history Causality known Socially simple

  6. Resource Attributes and Competitive Advantage Creates Competitive Resource No Competitive Advantage Dimension Advantage Valuable resources Exploits opportunities Neutralizes threats Not suited to the environment - Common Unique Costly to procure Rare resources Readily available Inexpensive Unique history Causally ambiguous Socially complex Imitable resources Ordinary history Causality known Socially simple Not possible: Similar modes Different modes Not possible through: Similar modes Different modes Substitutable resources

  7. Profit Factors - 6 Strategic Resources ResourcesValuableRare Hard-to-CopyNonsubstitutable Physical yes sometimes not usually sometimes Reputational yes yes yes yes Organizational yes yes yes yes Financial yes sometimes no no Intellectual yes yes usually sometimes Technological yes sometimes sometimes sometimes

  8. Reputational Resources • The quality of management • The use of corporate assets • The firm’s financial soundness • The firm’s value as a financial investment • The quality of products and services • Innovativeness • The ability to attract, develop, and retain top people • The extent of community and environmental responsibility

  9. Competitive Advantage & Business Environment FactorHigh Tech Service Reputation for quality 38% 44% Customer service / product support 34% 35% Name recognition / profile 12% 37% Good management 25% 38% Low cost production 25% 13% Financial resources 16% 23% Customer orientation / market research 19% 23% Product line depth 16% 22% Technical superiority 44% 6% Base of satisfied customers 28% 19% Product innovation 22% 18%

  10. A Psychological Approach Personality characteristics: • The need for achievement • Problem solving orientation • Goal setting • Self-reliant • Crave feedback • Moderate risk propensity • Locus of control • “Externals” (fate, chance and luck dictate results) • “Internals” (personal effort dictates results) • Risk-taking propensity • Not consistent among entrepreneurs

  11. The Supply of Entrepreneurship Impetus for Entrepreneurship Situational Characteristics Negative Displacement Perceptions of Desirability Perceptions of Feasibility Between Things Entrepreneurship Positive Pull Entrepreneurial Event Positive Push

  12. The Supply of Entrepreneurship Impetus for Entrepreneurship Negative Displacement • Immigrant status • Fired • Angered, bored • Middle-aged • Divorced Between Things • Army • School • Prison Entrepreneurship

  13. The Supply of Entrepreneurship Entrepreneurship Positive Pull • From partner • From mentor • From investor • From customer Impetus for Entrepreneurship Positive Push • Strong father • Career • Education • Experience

  14. The Supply of Entrepreneurship Situational Characteristics Perceptions of Desirability • Culture • Family • Colleagues • Mentors • Peers Perceptions of Feasibility • Support • Demonstration • Models • Mentors • Partners Entrepreneurial Event • Initiative taking • Consolidation of resources • Management of organization • Relative autonomy • Risk bearing Entrepreneurship

  15. The Entrepreneur as a Human Resource:Sociological Approach Entrepreneurial inclinations propelled by: • Negative displacement (losing a job, etc.) • Being between things (transition from school to career, etc.) • Positive pull (example made by parent, mentor, etc.) • Positive push (a job, education, etc.) … and activated by situations which positively affect: • Perceptions of desirability (message from culture, peers, etc. • Perceptions of feasibility (demonstration, etc.) … and culminate in an entrepreneurial event

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