Resources and Capabilities 35
heads-or-tails caller in the world, someone will win. We will start out with six billion
pairs of tossers, and after the first toss, we will have three billion left. This process will
be repeated until we have the final 64. The tournament will be televised and all the play-
ers will have coaches, who will be interviewed on their coin-tossing strategy. Eventually,
we will get down to the final four, and then two; then the coin-tossing tournament win-
ner will be crowned.
If it was a fair coin and a fair toss, the winner won simply by luck. But ask her about
the experience and she (as well as the last 16 or so competitors left) will give you all sorts
of explanations about her technique, her decision-making process, her personality, her
father’s coin-tossing expertise, and how smart she is. People often confuse being smart
with being lucky.^2
A second possibility is that the winner succeeded after many failures, an expensive
and time-consuming method. But the most likely explanation is that he or she succeed-
ed as a result of having a tacit, or unspoken, theory of how his or her business and indus-
try operates. Like Sam Walton, the entrepreneur who created Wal-Mart and Sam’s Club,
and his rules (see Chapter 1, Street Story 1.3), a lifetime of experience can help to sum-
marize the theory, but some pieces remain so complex and intuitive that even the theo-
rist doesn’t know them.
This chapter introduces the fundamentals of the resource-based theory(often
referred to as the resource-based view, RBV) of entrepreneurship.^3 The resource-based
theory is efficient and practical because it focuses on the strengths, assets, and capabili-
ties of entrepreneurs and their ventures..4It incorporates market opportunity, industry
structure, and competition, but it emphasizes resources, skillsand capabilities (includ-
ing the skill and capability to learn new skills and capabilities). The entrepreneur may
already control these resources or may be able to obtain them in the future. But with-
out resources with which to exploit a situation, even the best-case scenario cannot cre-
ate an entrepreneur.^5 As you read through the chapter, note how the examples, the Street
Stories, and the end-of-chapter case provide guidance on how entrepreneurs have used
an implicit model (they may not have been aware of the theory) of the RBV to make
their businesses successful.
IDENTIFYING ATTRIBUTES OF STRATEGIC
RESOURCES
What is a resource? A resource*is any thing or quality that is useful,^6 tangible or intan-
gible. Another characteristic of a resource is that it is semipermanent or sticky; it
adheres to the venture and the entrepreneur.^7 Resources can be property based or
knowledge based. Property-based resources give the entrepreneur “rights.” If one owns
a machine, one has the right to use it. If one has an exclusive long-term contract, that
contract protects one’s rights. Property-based resources enable a firm to control its
environment. Knowledge-based resources are more intangible, like talent or skill. These
are protected by their tacit nature. Knowledge-based resources enable the firm to adapt
to a changing environment. Miller and Shamsie reported that property-based resources
*To improve the readability of this text, at various times we write the terms resource, capital, and assetinterchangeably.
Alos, we say resource, we include “skill” and “capability.” Capabilityand skillin this context mean the ability to do some-
thing useful.
