Armed with a definition of sustained competitive advantage, it is now possible to explore the impact of resource heterogeneity and immobility on this concept. This is done by first examining the possibility of sustained competitive advantage when firm resources are perfectly homogeneous and mobile. Then, the possibility of sustained competitive advantage under heterogeneity and immobility is examined.
Of course, the analysis of sustained competitive advantage under perfect firm homogeneity and mobility does not suggest that there are industries where the attributes of perfect homogeneity and mobility actually exist. Although this is ultimately an empirical question, it seems reasonable to expect that most industries will be characterized by at least some degree of resource heterogeneity and immobility (Barney and Hoskisson 1989). Thus, rather than making an assertion that firm resources are homoge- neous and mobile, the purpose of this analysis is to examine the possibility of discovering sources of sustained competitive advantage under these con- ditions. Not surprisingly, it is argued that firms, in general, cannot expect to obtain sustained competitive advantage when strategic resources are evenly distributed across all competing firms and highly mobile. This conclusion suggests that the search for sources of sustained competitive advantage must focus on firm resource heterogeneity and immobility.
Imagine an industry where firms possess exactly the same resources. This condition suggests that firms all have the same amount and kinds of strategically relevant physical, financial, human, and organizational capital. Is there a strategy that could be conceived and implemented by any one of these firms that could not also be conceived and implemented by all other firms in this industry? The answer to this question must be no. The conception and implementation of strategies employs various firm resources (Wernerfelt 1984; Barney 1986a; Hatten and Hatten 1987). That one firm in an industry populated by identical firms has the resources to conceive and implement a strategy means that these other firms, because they possess the same resources, can also conceive and implement this strategy. Because these firms all implement the same strategies, they all will improve their efficiency and effectiveness in the same way and to the same extent. Thus, in this kind of industry, it is not possible for firms to enjoy a competitive advantage.
One objection to this conclusion concerns so-called ‘first-mover advan- tages’ (Lieberman and Montgomery 1988). In some circumstances, the first firm in an industry to implement a strategy can obtain a sustained competitive advantage over other firms. These firms may gain access to distribution channels, develop goodwill with customers, or develop a posi- tive reputation, all before firms that implement their strategies later. Thus, first-moving firms may obtain a competitive advantage which might also be sustained.
However, upon reflection, it seems clear that if competing firms are identical in the resources they control, it is not possible for any one firm to obtain a competitive advantage from first moving. To be a first mover by implementing a strategy before any competing firms, a particular firm must have insights about the opportunities associated with implementing a strategy that are not possessed by other firms in the industry, or by poten- tially entering firms (Lieberman and Montgomery 1988). This unique firm resource (information about an opportunity) makes it possible for the better-informed firm to implement its strategy before others. However, by definition, there are no unique firm resources in this kind of industry. If one firm in this type of industry is able to conceive and implement a strategy, then all other firms will also be able to conceive and implement that strategy, and these strategies will be conceived and implemented in parallel, as identical firms become aware of the same opportunities and exploit that opportunity in the same way.
It is not being suggested that there can never be first-mover advantages in industries. It is being suggested that in order for there to be a first-mover advantage, firms in an industry must be heterogeneous in terms of the resources they control.
A second objection to the conclusion that sustained competitive advan- tages cannot exist when firm resources in an industry are perfectly homo- geneous and mobile concerns the existence of ‘barriers to entry’ (Bain 1956) or more generally, ‘mobility barriers’ (Caves and Porter 1977). The argument here is that even if firms within an industry (group) are perfectly homogeneous, if there are strong entry or mobility barriers, these firms may be able to obtain a sustained competitive advantage vis-à-vis firms that are not in their industry (group).
However, from another point of view, barriers to entry or mobility are only possible if current and potentially competing firms are heterogeneous in terms of the resources they control and if these resources are not per- fectly mobile (Barney, McWilliams, and Turk 1989). The heterogeneity requirement is self-evident. For a barrier to entry or mobility to exist, firms protected by these barriers must be implementing different strategies than firms seeking to enter these protected areas of competition. Firms restricted from entry are unable to implement the same strategies as firms within the industry or group. Because the implementation of strategy requires the application of firm resources, the inability of firms seeking to enter an industry or group to implement the same strategies as firms within that industry or group suggests that firms seeking to enter must not have the same strategically relevant resources as firms within the industry or group. Thus, barriers to entry and mobility only exist when competing firms are heterogeneous in terms of the strategically relevant resources they control. Indeed, this is the definition of strategic groups suggested by McGee and Thomas (1986).
The requirement that firm resources be immobile in order for barriers to entry or mobility to exist is also clear. If firm resources are perfectly mobile, then any resource that allows some firms to implement a strategy protected by entry or mobility barriers can easily be acquired by firms seeking to enter into this industry or group. Once these resources are acquired, the strategy in question can be conceived and implemented in the same way that other firms have conceived and implemented their strategies. These strategies are thus not a source of sustained competitive advantage.
Again, it is not being suggested that entry or mobility barriers do not exist. However, it is being suggested that these barriers only become sources of sustained competitive advantage when firm resources are not homoge- neously distributed across competing firms and when these resources are not perfectly mobile.
Research that has focused on the impact of opportunities and threats in a firm’s environment on competitive advantage has recognized the limi- tations inherent in analyzing competitive advantage with the assumption that firm resources are homogeneously distributed and highly mobile. In his work, Porter (1985) introduced the concept of the value chain to assist managers in isolating potential resource-based advantages for their firms. The resource-based theory developed here simply pushes this value chain logic further, by examining the attributes that resources isolated by value chain analyses must possess in order to be sources of sustained competitive advantage (Porter 1990).
Source: Barney Jay B., Clark Delwyn N. (2007), Resource-Based Theory: Creating and Sustaining Competitive Advantage, Oxford University Press; Illustrated edition.