A Natural-Resource-Based View of the Firm

There has been an active debate among management scholars concerning the sex act grandness of internal besotted capabilities (e.g., Galbraith & Kazanjian, 1986 Peters & Waterman, 1982 Prahalad & Hamel, 1990) versus environmental factors (e.g., Hannan & Freeman, 1977 Pfeffer & Salancik, 1978 Porter, 1980, 1990) to sustained hawkish expediency. Evidence suggests, however, that both internal and out-of-door factors are crucial to competitive success (Fiegenbaum, Hart, & Schendel, In press Hansen & Wernerfelt, 1989).In fact, many fresh contributions attempt an integration of the internal and external perspectives under the banner of the resource-based figure of the unattackable (e.g., Barney, 1991 Wernerfelt, 1984). Resource-based theory takes the perspective that valuable, costly-to-copy firm resources and capabilities provide the let out sources of sustainable competitive advantage.Without question, the resource-based view has generated a productive dialogue among previously i solated perspectives (Conner, 1991). However, this theory (like its more limited internal and external predecessors) still contains one serious cut 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 extrusion of the natural environment (Shrivastava, 1994 Shrivastava. & Hart, 1992 Stead & Stead, 1992).Given the growing magnitude of ecological problems, however, this omission has rendered existing theory inadequate as a basis for identifying important emerge sources of competitive advantage. The goal of this article is, therefore, to insert the natural environment into the resource-based viewto 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 advantage. Next, I discuss the driving forces behind the natural-resource-based viewthe growing scale and scope of human activity and its potential for irreversible environmental disability on a global scale.The natural-resource-based view is then developed with the connection between the environmental challenge and firm resources operationalized through three interconnected strategic capabilities pollution prevention, product-stewardship, and sustainable development. Propositions are 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 airfield of strategic management have long understood that competitive advantage depends upon the match between distinctive internal (organizational) capabilities and changing exte rnal (environmental) circumstances (Andrews, 1971 Chandler, 1962 Hofer & Schendel, 1978 Penrose, 1959).However, it has only 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 graphical summary of these relationships and some of the key authors associated with the core 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 diffe betrothiation relative to competitors as two important sources of competitive advantage a low-cost position modifys n firm to use aggressive pricing and high gross revenue volume, whereas a differentiated product creates brand loyalty and positive reputation, facilitating premium pricing.Decisions concerning timing (e.g., moving early versus late) and commitment l evel(e.g., entering on a larger-than-life scale versus more incrementally) also are crucial in securing competitive advantage (Ghemawat, 1986 Lieberman & Montgomery, 1988).If a firm makes an early move or a big 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 thus enable firms to gain a strong focus and dominate a particular niche, either through 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 dimension of competitive advantage.According to this view, the firm moldiness be concerned not only with profitability in the feed and growth in the medium term, but also with its future position and source of competitive advantage. This view requires explicit strategizing about how the firm will cop e when its current strategy configuration is either copied or made obsolete.The connection between firms capabilities and competitive advantage also has been tumesce established in literature. Andrews (1971) and, later, Hofer and Schendel (1978) and cytosine and Hrebiniak (1980) noted the centrality of distinctive competencies to competitive success.More recently, Prahalad and Hamel (1990) and Ulrich and Lake (1991) reemphasized the strategic importance of identifying, managing, and leveraging core competencies rather than focusing only on products and markets in business plan.The resource-based view takes this idea one step further It posits that competitive advantage can be sustained only if the capabilities creating the advantage are supported by resources that are not easy duplicated by competitors. In other words, firms resources must raise barriers to imitation (Rumelt, 1984).Thus, resources are the basic units of analysis 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 bear 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 general agreement in the management literature about the resource characteristics that contribute to a firms sustained competitive advantage.At the most basic level, such 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 capability that has competitive entailment and is not easily accomplished through alternative 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 distributed within an industry and/or must be closely identified with a give n organization, making them difficult to exaltation or trade (e.g., a brand image or an exclusive supply 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 chronicle may enable a firm to obtain unusual 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 tacit (causally ambiguous) or socially complex (Teece, 1987 Winter, 1987).Tacit resources are skill based and people intensive. Such resources are camouflaged 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 people or teams engaged in coordinated action such that few individuals, if any, have su fficient breadth of knowledge 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).Under such circumstances, core competencies might stupefy core rigidities (Leonard-Ba rton, 1992). In this article, I argue that one 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.