Exemplars of resource-based research

Three of the articles cited above can be seen as exemplars of how resource- based research can be done. Consider, for example, Henderson and Cock- burn’s examination (1994) of the impact of ‘component competence’ and architectural competence on the research productivity of pharmaceutical firms. Henderson and Cockburn measure the value of these competencies by estimating their impact on the research productivity of pharmaceutical firms, under the assumption that pharmaceutical firms with more produc- tive research efforts will outperform pharmaceutical firms with less pro- ductive research efforts. They measure the rarity of these competencies by showing that their level varies across competing pharmaceutical firms. And they measure the imitability of these competencies by showing that firm differences in the level of these competencies remain very stable over time. To the extent that high levels of research productivity are valuable in the pharmaceutical industry, Henderson and Cockburn’s results are consistent with resource-based theory.

Makadok (1999) provides another paper that rigorously tests resource- based theory. Makadok examines the impact of differential levels of economies of scale on the ability of money-market mutual funds to increase their market share. Makadok measures the value of these economies of scale by first estimating the impact of the size of a fam- ily of funds on both its weighted-average risk-adjusted gross yield and its weighted-average expense ratio and then shows that these yields and expenses affect the market share of a family of funds. He measures the rarity of economies of scale by showing that they vary across families of funds. And he examines the imitability of these scale differences by examining their impact on the market shares of families of funds over time. Consistent with resource-based theories, because economies of scale are not path dependent, causally ambiguous, or socially complex, Makadok does not expect these capability differences to be a source of sustained competitive advantage. And, in fact, the impact of scale differences on market share becomes smaller over time—results that are again consistent with resource- based theory.

Hatch and Dyer (2004) provide a third exemplar of resource-based empirical research in their study of the impact of firm-specific investments in human capital on learning-by-doing performance in the semiconductor manufacturing industry. They measured the effects of preemployment screening tests, HR training, deployment of human capital, and inim- itability of human capital on learning-by-doing performance. Hatch and Dyer found that firms using screening tests in their selection process were able to more effectively identify employees with the ability to learn and adapt to the new environment. Effective screening enabled firms to move more quickly down the learning curve. Depth of human capital skills was more valuable than breadth of capital skills (training on multiple machines) in influencing learning performance. Firms with greater deploy- ment of human capital to learning activities were able to realize learning advantages. In addition, the importance of firm-specific human capital on learning was demonstrated by showing that defects increased with newly hired employees and as turnover increases. Consistent with resource-based theory, Hatch and Dyer show that managing the selection, development, and deployment of human capital can significantly improve learning-by- doing and firm performance. Further, they provide empirical evidence that rivals cannot quickly or costlessly imitate or substitute for the value of firm- specific human capital.

Source: Barney Jay B., Clark Delwyn N. (2007), Resource-Based Theory: Creating and Sustaining Competitive Advantage, Oxford University Press; Illustrated edition.

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