An Integrated Resource Based Theory of the Firm

Resources, the way they are defined in management, cover anything tangible or intangible. They are the most critical inputs for production in a firm when we consider it as a production unit. The Resource dependency theory (RDT) and the Resource based theory (RBV) were developed on the premise that resources which are valuable, rare, inimitable and non-substitutable (VRIN) provide the path to competitive advantage when the dependencies on these were managed effectively. Firms are heterogeneous because they possess different bundles of such VRIN like resources. Of late there has been a realization that both RDT and RBV are Axiomatic in application and conceptual understanding but are extremely difficult to prove empirically. The reason for this has been that resources as defined are not linked to productive services as is necessary if a firm is to be viewed as a production unit. To elaborate further, this linkage must prove how the competitive advantage is achieved, sustained and how innovation impacts this ability to maintain such advantage. Incorporating answers to all these questions, we propose an integrated Resource based view of the firm. We take a Penrosian view and show how resources are treated as bundles of services. We show how technology interacts with strategy of a firm to generate alternate and more effective ways of delivering the same services or generate substitutes. We show that a productive service follows the same evolutionary path as technology with varying timelines between stages based on how new or substitute services emerge and get adopted. By proposing this integrated theory we hope to settle the age old and persisting problem of empirical assessment of any application of Resource based view including dependency. By doing so we hope that extension of these theories is facilitated