The “Resource-based approaches to the theory of competitive advantage point towards four characteristics of resources and capabilities creating sustainable competitive advantage for the firm, including: durability, transparency, transferability, and replicability” [Grant, 1991, p. 124], that are complement to the
VRIN model of Barney [1991] [in which the resources that create sustainable competitive advantage for the firm must be valuable, rare, inimitable and nonsubstitutable]. The durability means that how long until a resource becomes obsolete or depreciate. “In the absence of competition, the longevity of a
firm’s competitive advantage depends upon the rate at which the underlying resources and capabilities depreciate or become obsolete. The durability of resources varies considerably: the increasing pace of technological change is shortening the useful life-spans of most capital equipment and technological resources. On the other hand, reputation [both brand and corporate] appears to depreciate relatively slowly, and these assets can normally be maintained by modest rates of replacement
investment” [Grant, 1991, p. 124].1. Durability
“Firm capabilities have the potential to be more durable than the resources upon which they are based because of the firm’s ability to maintain capabilities through replacing individual resources [including people] as they wear out or move on” [Grant, 1991, p. 124]. And, “one of the most important roles that organizational culture plays in sustaining competitive advantage may be through its maintenance support for capabilities through the socialization of new employees” [Grant, 1991, p. 125].
2. Transparency
“The firm’s ability to sustain its competitive advantage over time depends upon the speed with which other firms can imitate its strategy”. “If a firm wishes to imitate the strategy of a rival, it must first establish the capabilities which underlie the rival’s competitive advantage, and then it must determine what resources are required to replicate these capabilities. I refer to this as the “transparency” of competitive advantage” [Grant, 1991, p. 125].
“With regard to the first transparency problem, a competitive advantage which is the consequence of superior capability in relation to a single performance variable is more easy to identify and comprehend than a competitive advantage that involves multiple capabilities conferring superior performance across several variables” [Grant, 1991, p. 125].
“With regard to the second transparency problem, a capability which requires a complex pattern of coordination between large numbers of diverse resources is more difficult to comprehend than a capability which rests upon the exploitation of a single dominant resource” [Grant, 1991, p. 125]. “Imperfect transparency is the basis […] of “uncertain imitability”: the greater the uncertainty within a market over how successful companies “do it,” the more inhibited are potential entrants, and the higher the level of profit that established firms can maintain within that market” [Grant, 1991, p. 125].
3. Transferability
Firm can proceed resources and capacities necessary for a competitive challenge in the markets for these inputs. However, “most resources and capabilities are not freely transferable between firms” [Grant, 1991, p. 126]. Imperfections in transferability arise from several sources as follows:
- Geographical immobility: “The costs of relocating large items of capital equipment and highly specialized employees” [Grant, 1991, p. 126].
- Imperfect information: “Assessing the value of a resource is made difficult by the heterogeneity of resources [particularly human resources] and by imperfect knowledge of the potential productivity of individual resources” [Grant, 1991, p. 126].
- Firm-specific resources: For example: reputation; “an employee’s productivity is influenced by situational and motivational factors, then it is unreasonable to expect that a highly successful employee in one company can replicate his/her performance when hired away by another company” [Grant, 1991, p. 126].
- The immobility of capabilities: “Capabilities, because they require interactive teams of resources, are far more immobile than individual resources-they require the transfer of the whole team” [Grant, 1991, p. 126].
4. Replicability
“The second route, [with by market], by which a firm can acquire a resource or capability is by internal investment” [Grant, 1991, p. 127]. However, “much less easily replicable are capabilities based upon highly complex organizational routines” [Grant, 1991, p. 127]. “Even where replication is possible, the dynamics of stock- flow relationships may still offer an advantage to incumbent firms. Competitive advantage depends upon the stock of resources and capabilities that a firm possesses. In practice, “firms which possess the initial stocks of the resources required for competitive advantage may be able to sustain their advantages over time.” Among the stock-flow relationships they identify as sustaining advantage are: “asset mass efficiencies” – the initial amount of the resource which the firm possesses influences the pace at which the resource can be accumulated; and “time compression diseconomies” – firms which rapidly accumulate a resource incur disproportionate costs” [Grant, 1991, p. 127].