In order for a ﬁrm’s culture to provide sustained competitive advantages, three conditions must be met (Barney 1991a). First, the culture must be valuable; it must enable a ﬁrm to do things and behave in ways that lead to high sales, low costs, high margins, or in other ways create economic value to the ﬁrm. Because sustained competitive advantage is an economic con- cept, culture, to generate such performance, must have positive economic consequences. Second, the culture must be rare; it must have attributes and characteristics that are not common to the cultures of a large number of other ﬁrms. Finally, such a culture must be imperfectly imitable; ﬁrms without these cultures cannot engage in activities that will change their cultures to include the required characteristics, and if they try to imitate these cultures, they will be at some disadvantage (reputational, experience, etc.) compared to the ﬁrm they are trying to imitate.
These three characteristics are all derived from the VRIO framework presented in Chapter 3. The ﬁrst requirement that a ﬁrm’s culture must enable it to do things and behave in ways that add economic value to the ﬁrm is clearly a prerequisite for generating even competitive parity. If a ﬁrm’s culture enables it to behave in ways that are inconsistent with a ﬁrm’s competitive situation, then that culture cannot be a source of superior performance, sustained, or otherwise.
The requirement that valuable cultures must be rare to generate sus- tained competitive advantages reﬂects the dynamics of competition created by a competitive advantage. If many ﬁrms have similar cultures that allow them to behave and compete in approximately the same way, then none will possess a culturally based competitive advantage.
Finally, even if the above conditions are met, it is still necessary for a ﬁrm’s culture to be imperfectly imitable for it to generate sustained superior ﬁnancial performance. Perfectly imitable cultures, even if they are valuable, and even if they are currently rare, are subject to imitation that dissipates any competitive advantages they may provide. The culture- driven success of one ﬁrm creates an incentive for other ﬁrms to modify their cultures to duplicate that success. If the culture is perfectly imitable, it cannot give any one ﬁrm a sustained competitive advantage. Thus, for example, if the cultural attributes isolated by Peters and Waterman (1982) are, in fact, easily transferable, as is suggested on the cover of one of the paperback editions of their book, then these cultural attributes cannot be a source of sustained competitive advantage.
A ﬁrm that has a valuable, rare, and imperfectly imitable culture enjoys a sustained competitive advantage that reﬂects that culture. Such a ﬁrm will enjoy the positive economic consequences of its culture. Relatively few other ﬁrms will be able to obtain these same beneﬁts, and those ﬁrms that currently do not enjoy them cannot engage in activities that will make it possible to obtain them. However, the overall performance of a ﬁrm with such advantages can be reduced if a ﬁrm fails to manage other strategically relevant functions successfully (Peters and Waterman 1982). These other functions might include both the ﬁnancial and analytical characteristics of a ﬁrm’s business. In addition, while a ﬁrm with a valuable, rare, and imper- fectly imitable culture can obtain sustained advantages, other attributes of a ﬁrm, including, perhaps, unique geographic advantages and luck, also can lead to such performance (Barney 1985b).
This analysis does not imply that ﬁrms currently enjoying culturally based advantages will always enjoy these advantages, because a valuable culture today could, in diﬀerent economic or competitive conditions, become an economic liability. Moreover, because other attributes of a ﬁrm also can generate sustained advantages, it is possible that several ﬁrms in an industry all can obtain sustained superior ﬁnancial performance based on diﬀerent competitive advantages (Lippman and Rumelt 1982). However, it will not be possible for a large number of ﬁrms to obtain such performance on the basis of a single type of organizational culture.
Source: Barney Jay B., Clark Delwyn N. (2007), Resource-Based Theory: Creating and Sustaining Competitive Advantage, Oxford University Press; Illustrated edition.