Assessing performance measurement in RBV research

Purpose – The purpose of this paper is to demonstrate why greater attention to performance measurement is so essential to assessing the meaningfulness and usefulness of the knowledge gained from empirical tests of the resource-based view (RBV). Design/methodology/approach – This paper reviews the RBV empirical literature and relies on illustrative examples from various industries in order to assess the degree to which the empirical operationalization of the dependent variable in RBV research adheres to its theoretical specification. Findings – This analysis shows that although RBV theorists routinely conceptualize the dependent variable in terms of a firm's performance in direct comparison to the performance of its competitors, or relative performance, the overwhelming majority of empirical studies conducted in the field operationalize the dependent variable in terms of a firm's performance in isolation, or absolute performance. Research limitations/implications – Because significant findings are only meaningful if they are grounded in valid data, the findings suggest that support for the RBV and subsequent practical advice about resource-based strategy appears tenuous. Therefore, this paper highlights several possible reasons for the tendency to equate absolute and relative performance, discusses the implications of this disconnect on the RBV's usefulness and scientific rigor, and suggests how both theorists and empiricists might advance theory and method to produce more meaningful knowledge about the RBV. Originality/value – By providing a critical view of the RBV, this paper offers new insights into what the authors know, what the authors do not know, and how the authors can improve what is known about this important and well-accepted theory.