What Is the Resource-Based Theory of Competitive Advantage?
The resource-based theory argues that sus- tained competitive advantage is a function of the organization’s tangible and intangible resources. Tangible resources include capital facilities, human, informational, financial, and similar types of observable resources. Resources such as reputation, goodwill, and so on are intan- gible. Although not directly observable, they are real none the less. How much goodwill does St. Jude’s Research Hospital for Children possess? What is the reputation of the Cleveland Clinic worth? How can anyone put a true value on the name Mayo Clinic?
Although the roots of resource-based the- ory can be traced to early economic thought, researchers indicate that the most direct ori- gins of the theory emerged in the early 1980s.1 Although resource-based theory might appear logical, even self-evident, notable exceptions to the argument are identifiable. In almost all industries some examples of relatively weak companies (resource wise) exist that effectively compete against their richer industry neigh- bors. In 1968, how could Hospital Corporation of America (HCA) expand by building new hospitals, acquiring and upgrading existing facilities, and building one of the first national hospital companies in the midst of so many well-established and successful hospitals and health care organizations? Perhaps the best explanation for this seemingly contradictory evidence is that HCA was able to develop cer- tain intangible resources such as leadership and managerial capabilities that enabled it to
muster and combine its limited resources in innovative ways.
