Strategizing by firms in the presence of markets for resources

Abstract

Strategizing by firms from the resource-based view is concerned with the process through which firms acquire a distinctive bundle of resources that is costly and time-consuming for competitors to duplicate or imitate. A central question facing any firm, therefore, is its strategy for accumulating the resources that underpin its production activities. In this article, the process of resource accumulation is discussed as one involving potentially both internal resource development and external resource acquisition, from the perspective of the strategic issues involved in making a choice between these options. Emerging markets for technologies and know-how, through licensing and other forms of resource exchange, have opened up new avenues through which firms may jostle for advantage. The article is concerned with three major aspects of this process, illustrating the discussion with cases from biotechnology and pharmaceuticals. First, the strategizing by firms around the 'internal development' vs. 'external sourcing' issue is discussed, as informed by the practices of leading firms, and how these lend greater variety of strategic options for firms; second, the potential competitive advantages as well as disadvantages to be secured by firms through the process of external sourcing (as compared with the well-known potential advantages accruing to incumbents through internal development, such as time compression diseconomies and causal ambiguity); and third, the criteria to be used by firms to strategically evaluate resources individually, as contrasted with the strategic evaluation of the resource bundle, or totality. These criteria, it is argued, turn on the issues of marginal value contribution, resource complementarities and synergies, resource variety and transferability (involving intellectual property issues). Successful firms, it is argued, expand their options through blending internal resource accumulation with external resource leverage, thereby deepening their distinctive dynamic capabilities. This approach extends the framework of the RBV, enabling it to encompass resource-driven Schumpeterian competition and such aspects of industrial dynamics as specialization, modularization and imitative challenge. Copyright 2003, Oxford University Press.