A Natural-Resource-Based View of the Firm

There has been an sprightly debate among counseling scholars concerning the relative importance of internal warm capabilities (e.g., Galbraith & Kazanjian, 1986 Peters & Waterman, 1982 Prahalad & Hamel, 1990) versus environsal brokers (e.g., Hannan & Freeman, 1977 Pfeffer & Salancik, 1978 Porter, 1980, 1990) to sustain competitive profit. Evidence suggests, however, that both internal and foreign factors atomic number 18 crucial to competitive success (Fiegenbaum, Hart, & Schendel, In press Hansen & Wernerfelt, 1989).In fact, many youthful contri providedions attempt an integration of the internal and external perspectives under the banner of the option-based pick up of the firm (e.g., Barney, 1991 Wernerfelt, 1984). Resource-based theory takes the perspective that valuable, costly-to-copy firm imagerys and capabilities provide the key sources of sustainable competitive utility.Without question, the resource-based pull in has generated a productive dialogue among prev iously isolated perspectives (Conner, 1991). However, this theory (like its more limited internal and external predecessors) still contains unrivalled serious omission It systematically ignores the constraints imposed by the biophysical (natural) environment (e.g., Brown, Kane, & Roodman, 1994 Meadows, Meadows, & Randers, 1992).Historically, management theory has used a narrow and parochial concept of environment that emphasizes political, economic, social, and technological aspects to the virtual exclusion of the natural environment (Shrivastava, 1994 Shrivastava. & Hart, 1992 Stead & Stead, 1992).Given the ontogenesis magnitude of ecological problems, however, this omission has rendered existing theory inadequate as a basis for identifying strategic emerging sources of competitive emolument. The goal of this bind is, therefore, to insert the natural environment into the resource-based postureto develop a natural-resource-based view of the firm.Accordingly, the first section of the paper reviews resource-based theory, highlighting the relationships among firm resources, capabilities, and sources of competitive payoff. Next, I discuss the driving forces behind the natural-resource-based viewthe growing casing and compass of human activity and its potential for irreversible environmental damage on a global scale.The natural-resource-based view is then developed with the connection in the midst of the environmental challenge and firm resources operationalized with three interconnected strategical capabilities pollution prevention, product-stewardship, and sustainable development. Propositions argon then developed connecting these strategies to key resource requirements and sustained competitive advantage. The article closes with suggestions for a future research agenda.THE RESOURCE-BASED VIEWResearchers in the field of strategic management live with long understood that competitive advantage enumerates upon the match between distinctive internal (organizational) capabilities and changing external (environmental) circumstances (Andrews, 1971 Chandler, 1962 Hofer & Schendel, 1978 Penrose, 1959).However, it has still been during the past decade that a bona fide theory, known as the resource-based view of the firm, has emerged, articulating the relationships among firm resources, capabilities, and competitive advantage. Figure 1 provides a pictorial summary of these relationships and some of the key authors associated with the meaning ideas.The concept of competitive advantage has been treated extensively in the management literature. Porter (1980, 1985) thoroughly developed the concepts of cost leadership and differentiation relative to competitors as two important sources of competitive advantage a low-cost position enables n firm to use aggressive pricing and high sales volume, whereas a distinguish product creates brand loyalty and positive reputation, facilitating premium pricing.Decisions concerning timing (e.g., lamen table early versus late) and commitment level(e.g., entering on a large scale versus more incrementally) also are crucial in securing competitive advantage (Ghemawat, 1986 Lieberman & Montgomery, 1988).If a firm vexs an early move or a large move, it is sometimes possible to preempt competitors by setting new standards or gaining preferred access to critical raw materials, locations, production capacity, or customers.Preemptive commitments frankincense enable firms to gain a strong focus and dominate a particular niche, either finished lower costs, differentiated products, or both(Ghemawat, 1986 Porter, 1980). Finally, Hamel and Prahalad(1989, 1994) have emphasized the importance of competing for the future as a neglected symmetry of competitive advantage.According to this view, the firm essential be concerned non only with profitability in the present and growth in the medium term, but also with its future position and source of competitive advantage. This view requires appa rent strategizing about how the firm pull up stakes compete when its current strategy phase is either copied or made obsolete.The connection between firms capabilities and competitive advantage also has been well established in literature. Andrews (1971) and, later, Hofer and Schendel (1978) and Snow and Hrebiniak (1980) noted the centrality of distinctive competencies to competitive success.More late(a)ly, Prahalad and Hamel (1990) and Ulrich and Lake (1991) reemphasized the strategic importance of identifying, managing, and leveraging core competencies rather than stress only on products and markets in business planning.The resource-based view takes this thinking single step further It posits that competitive advantage can be sustained only if the capabilities creating the advantage are supported by resources that are not easily duplicated by competitors. In other words, firms resources must raise barriers to personation (Rumelt, 1984).Thus, resources are the basic units of a nalysis and include physical and financial assets as well as employees skills and organizational (social) processes. A firms capabilities result from bundles of resources being brought to pay off on particular value-added tasks (e.g., design for manufacturing, just-in-time production).Although the terminology has varied(Peteraf, 1993), there appears to be universal agreement in the management literature about the resource characteristics that tot to a firms sustained competitive advantage.At the most basic level, such(prenominal) resources must be valuable (i.e., rent producing) and nonsubstitutable (Barney, 1991 Dierickx & Cool, 1989). In other words, for a resource to have enduring value, it must contribute to a firm talent that has competitive significance and is not easily accomplished through preference means. Next, strategically important resources must be rare and/or specific to a given firm (Barney, 1991 Reed & DeFillippi, 1990).That is, they must not be widely distrib uted within an industry and/or must be near identified with a given organization, making them difficult to transfer or trade (e.g., a brand image or an exclusive bring home the bacon arrangement). Although physical and financial resources may produce a temporary advantage for a firm, they often can be readily acquired on factor markets by competitors or new entrants. Conversely, a unique path through history may enable a firm to obtain extraordinary and valuable resources that cannot be easily acquired by competitors (Barney, 1991).Finally, and perhaps most important, such resources must be difficult to replicate because they are either soundless (causally ambiguous) or socially complex (Teece, 1987 Winter, 1987).Tacit resources are skill based and pile intensive. Such resources are invisible assets based upon learning-by-doing that are accumulated through experience and refined by practice (Itami, 1987 Polanyi, 1962). Socially complex resources depend upon large numbers of peop le or teams engaged in integrated action such that few individuals, if any, have sufficient breadth of cognition to grasp the overall phenomenon (Barney, 1991 Reed & DeFillippi, 1990).The strategic significance of firms resources and capabilities has been heightened by recent observations that companies that are better able to understand, nurture, and leverage core competencies outperform those that are preoccupied with more conventional approaches to strategic business planning (Prahalad & Hamel, 1990).However, a firms commitment to the existing competency base also may make it difficult to acquire new resources or capabilities. Put another way, the resource-based view may lead to an organization that is like the proverbial child with a hammer- everything starts looking like a nail. Technological discontinuities or shifts in external circumstances may render existing competencies obsolete or. at a minimum, invite the rapid development of new resources (Tushman & Anderson, 1986).Un der such circumstances, core competencies might become core rigidities (Leonard-Barton, 1992). In this article, I argue that star of the most important drivers of new resource and capability development for firms will be the constraints and challenges posed by the natural (biophysical) environment.