Chapter 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages 87Intangible Resources
Compared to tangible resources, intangible resources are a superior source of capabilities
and subsequently, core competencies.^51 In fact, in the global economy, a firm’s intellec-
tual capital often plays a more critical role in corporate success than do physical assets.^52
Because of this, being able to effectively manage intellectual capital is an increasingly
important skill for today’s leaders to develop.^53
Because intangible resources are less visible and more difficult for competitors to
understand, purchase, imitate, or substitute for, firms prefer to rely on them rather than
on tangible resources as the foundation for their capabilities. In fact, the more unob-
servable (i.e., intangible) a resource is, the more valuable that resource is to create capa-
bilities.^54 Another benefit of intangible resources is that, unlike most tangible resources,
their use can be leveraged. For instance, sharing knowledge among employees does not
diminish its value for any one person. To the contrary, two people sharing their indi-
vidualized knowledge sets often can be leveraged to create additional knowledge that,
although new to each individual, contributes potentially to performance improvements
for the firm.
Reputational resources (see Table 3.2) are important sources of a firm’s capabilities
and core competencies. Indeed, some argue that a positive reputation can even be a
source of competitive advantage.^55 Earned through the firm’s actions as well as its words,
a value-creating reputation is a product of years of superior marketplace competence as
perceived by stakeholders.^56 A reputation indicates the level of awareness a firm has been
able to develop among stakeholders and the degree to which they hold the firm in high
esteem.^57
A well-known and highly valued brand name is a specific reputational resource.^58
A continuing commitment to innovation and aggressive advertising facilitates firms’ efforts
to take advantage of the reputation associated with their brands.^59 Harley-Davidson has
a reputation for producing and servicing high-quality motorcycles with unique designs.
Because of the desirability of its reputation, the company also produces a wide range of
accessory items that it sells on the basis of its reputation for offering unique products with
high quality. Sunglasses, jewelry, belts, wallets, shirts, slacks, belts, and hats are just a few
of the large variety of accessories customers
can purchase from a Harley-Davidson dealer
or from its online store.^60
Taking advantage of today’s technol-
ogies, some firms are using social media
as a means of influencing their reputation.
Comcast for example is “adding more
social media representatives as it tries
to work on its reputation for inefficient,
unresponsive or just plain rude customer
service.”^61 Similarly, General Motors is
using social media to respond to customer
concerns about product recalls the firm
has experienced over the past few years.
A key purpose of GM’s efforts with its
social media campaign is to “fundamen-
tally redefine (itself ) as an open, transpar-
ent, listening organization.”^62 Recognizing
that thousands of conversations occur
daily throughout the world and that
what is being said can affect its reputation,
©iStockPhoto.com/Courtney Keating
Developing capabilities in specific functional areas can give companies
a competitive edge. The effective use of social media to direct adver-
tising to specific market segments has given some firms an advantage
over their rivals.