124 ENTREPRENEURSHIP
petitive advantage, they must possess resources and capabilities that are rare, valuable,
hard to copy, and nonsubstitutable (with resources that are neither rare nor valuable).
One way of thinking about this issue is from the payments perspective.Each resource
employed by the firm in the design, manufacture, and delivery of every product must
earn a return or a payment. These payments are the rents on the resources. The total pay-
ments earned by the firm’s resources are equal to its total revenue. The enemies of value
and scarcity are imitation and substitution. Therefore, the critical strategy is the coupling
of entrepreneurship and isolating mechanisms (see below).^17Rent-Seeking Strategies
Strategy in the resource-based framework is rent seeking.^18 There are five types of rents,
and the strategies available to obtain them are different. Firms can attempt to capture
more than one type of rent simultaneously. The five types of rents are as follows:- Ricardian rent: These are rents derived from acquiring, owning, and controlling a
scarce and valuable resource. They are most often derived from ownership of land or
natural resources or from a preferred location. These types of rent can be collected as
long as ownership and control exist, possibly in perpetuity. - Monopoly rent: These are rents collected from government protection, collusive
agreements, or structural entry barriers. Examples of government protection include
patents and copyrights, restrictive licenses, and government-granted franchises. Many
collusive practices such as price fixing and conspiracies in restraint of trade are illegal in
the United States, but enforcement varies by time and place. - Entrepreneurial rent: These are rents accrued from risk-taking behavior or
insights into complex and uncertain environments. This type of rent is also known as
“Schumpeterian rent,” and is the type most closely associated with new venture creation.
Schumpeterian rents are not as long-lasting as Ricardian and monopoly rents because of
the eventual diffusion of knowledge and competing firms’ entry into the market. - Quasi-rent: These are rents earned by using firm-specific assets in a manner that
other firms cannot copy. These rents are often based on idiosyncratic capital
and dedicated assets. They are derived from a distinctive competence in how
to use the resource as opposed to mere control of that resource. These rents can be col-
lected by discovering or estimating the value of combinations of resources. The combi-
nations are more difficult to price than stand-alone resources and therefore add value.
The most important implication here is that it is possible to capture value in a tradable,
scarce but not unique resource due to complementarities, asymmetrical information, or
simply high levels of bargaining skill.^19 - Relational rents: These are rents earned by cooperative-type strategies and interor-
ganizational relationships.^20 They are somewhat similar to quasi-rents but they require
that the venture work with another company. These rents may be a result of (1) relation-
ship-specific assets, such as site specificity (co-location); (2) knowledge-sharing rou-
tines, such as technology-transfer agreements; (3) complementary resources that are not
available or are priced in factor markets; or (4) effective governance, which minimizes
transaction costs among organizations.
Resource-based strategies are geared toward rent-seeking behavior. The most preva-