Resources and Capabilities 43
alike and me-too aspects, making it nearly impossible to differentiate all aspects of the
new venture from aspects of existing firms. Such differentiation is probably undesirable
as well, because customers also want the convenience of procuring familiar services and
products from the firm. However, for the nascent entrepreneur and new venture cre-
ation, which theory, RBV or institutional, is more useful in providing accurate descrip-
tion and prediction?
Nonsubstitutable Resources
Nonsubstitutable resources are strategic resources that cannot be replaced by common
resources. For example, let us say there are two firms, A and B. Firm A has a rare and
valuable resource, which it uses to implement its strategy. If firm B has common
resources that can be substituted for firm A’s valuable and rare resources, and these com-
mon resources do basically the same things, then the rare and valuable resources of firm
A do not confer strategic advantage. In fact, if firm B can obtain common resources that
threaten firm A’s competitive advantage, then so can many other firms, thereby ensur-
ing that firm A has no advantage.
Very different resources can be substitutes for each other. For example, an expert-sys-
tem computer program may substitute for a manager. A charismatic leader may substi-
tute for a well-designed, strategic-planning system. A well-designed, programmed-learn-
ing module may substitute for an inspirational teacher. Figure 2.1 summarizes the four
resource attributes needed for competitive advantage.
RESOURCE TYPES
Our resource-based theory recognizes six types of resources: physical, reputational, orga-
nizational, financial, intellectual/human, and technological; they can be called our
PROFIT factors. These resources are broadly drawn and include all “assets, capabilities,
organizational processes, firm attributes, information, and knowledge.”
28
Strictly speak-
ing, a list like this one (as is true of many lists in this book) should be exhaustive, and
the items on it mutually exclusive. Here, the list is exhaustive. But sometimes, the cate-
gory types are not mutually exclusive. For example, if the organization has great market-
ing, does this characteristic reside in the person who is a great marketer or in the mar-
keting department? Sometimes it is tough to tell. From our point of view, it is more
important to identify great marketing than to put marketing into the most correct cate-
gory.
We explore these six resource types and note the special situations in which they may
confer a particular advantage or no advantage at all.
Physical Resources
Physical resources are the tangible property the firm uses in production and adminis-
tration. These include the firm’s plant and equipment, its location, and the amenities
available at that location. Some firms also have natural resources, such as minerals, en-
ergy resources, or land. These natural resources can affect the quality of the firm’s phys-
ical inputs and raw materials.
Physical resources can be the source of SCA if they have the four attributes described
