STRATEGIC MANAGEMENT AND HUMAN RESOURCES 69A firm which builds a relatively consistent pattern of superior returns for
its shareholders has developed some form of ‘competitive advantage’ (Porter
1985). How long such superior performance can be sustained is, of course,
variable. We should not think that superior performance can be maintained
indefinitely. Imitative forces come into play when rivals detect that someone
has achieved an unusual level of profitability and seek to compete it away.
It is helpful to think of ‘barriers to imitation’ as having different heights
and different rates of decay or erosion (Reed and DeFillippi 1990). And,
as Barney (1991) reminds us, there is always the possibility of ‘Schum-
peterian shocks’. This refers to the view that capitalism involves ‘gales of
creative destruction’ (Schumpeter 1950: 84). These are major innovations in
products or processes which can destroy whole firms and the sectors they
inhabit.
Following theorists like Porter (1985, 1991), strategy textbooks in the last
twenty years have typically assumed that competitive advantage is the depen-
dent variable of interest in the whole subject. In our view, this emphasis
is somewhat unbalanced. It focuses too much on how firms might make
themselves different. Firms are inevitably different—in good, bad, and ugly
ways—but we think it is more balanced to use the notion of two strategic
problems or dependent variables—viability and sustained advantage. In other
words, firms must meet certain baseline conditions that make them similar to
other firms and must continue to do so as markets and means of serving them
change while also having the opportunity to make gains from being positively
different.
Our emphasis on the problem of viability is broadly consistent with the
arguments of ‘organizational ecologists’ (such as Carroll and Hannan 1995)
and ‘institutionalists’ (such as DiMaggio and Powell 1983) who examine the
processes that account for similarity among organizations. Recognition that
firms face pressures to conform in order to gain social approval—or ‘legit-
imacy’ (one of the three key goals for HRM we discuss below)—and have
economic reasons to adopt successful strategies in their sector is growing in
the strategic management literature (see, e.g. Deephouse 1999; Oliver 1997;
Peteraf and Shanley 1997).
In saying, then, that competitive advantage is a desirable end, we do not
want to convey the impression that firms which pursue it will become com-
pletely different from their rivals. They will not. Rather, they will retain many
similarities. If successful in securing competitive advantage, however, they will
possess some distinctive traits that deliver superior profitability.
A large part of any firm’s distinctiveness stems from the calibre of the people
employed and the quality of their working relationships. In the hugely popu-
lar, resource-based view (RBV) of the firm, taxonomies of valuable resources
always incorporate an important category for ‘human capital’ (Barney 1991)
or ‘employee know-how’ (Hall 1993). Resource-based theorists stress the value
of the complex interrelationships between the firm’s human resources and its