The strategic implication of knowledge attributes : Understanding the conditions in which knowledge matters to performance

Purpose – The purpose of this paper is to refine the resource-based theory of the firm. It intends to deal with key theoretical issues affecting the development of a model that empirically captures the relevance of knowledge to performance. The research task is not only to look inside the firm in search of candidates for a strategic resource, but also to better understand how a resource becomes strategic as the consequence of specific attributes. This approach has the potential of providing a relevant insight into the characteristics that resources must possess as well as a more effective way to compare their relative relevance to competitive advantage. Design/methodology/approach – Hypotheses are tested by a comprehensive panel data of 29 AIDS/HIV drugs from 1997 to 2010, covering the performance trajectory of more than 90 percent of all branded products in this segment. Findings – Based on the VRIO framework (Barney 1991, 2001a), which asserts that resources need to be valuable, rare, inimitable, and difficult to organize in order to become a source of sustainable competitive advantage, the paper derives seven empirical constructs of technological knowledge. Five of these constructs are statistically significant, explaining up to 36 percent of the variance in sales outcomes. Results show that the most important resource attributes are value and organizational capabilities. Inimitability is partially relevant, but rarity is not. Practical implications – Results suggest that the best way to generate competitive advantage is through continuous improvement of technological knowledge. This conclusion shows that knowledge heterogeneity is more strategically relevant to performance than knowledge immobility. Originality/value – Differently from previous papers, instead of measuring how much a resource (or its accumulated stock) influences competitive advantage, this paper identifies and measures the attributes through which the resource matters to market outcomes. It is not the resource itself, but its strategic attributes which actually generate differential benefits to firms.