Dollinger index

Resources and Capabilities 47

For new ventures that have emerged from the embryonic stage, or those that are a

spin-off or business development effort of an ongoing firm, other intangible resources

are available. Collective remembered history (myth) and recorded history (files and

archives) may also be considered organizational resources. These are part of the organi-

zation’s past and, to the extent that past is prologue, organizational history will be incor-

porated into the culture of the new venture, providing a set of rules, norms, policies, and

guides for current and future behavior.

Financial Resources

Financial resources represent money assets. Financial resources are generally the firm’s

borrowing capacity, its ability to raise new equity, and the amount of cash generated by

internal operations.

35

Being able to raise money at below-average cost is an advantage

attributable to the firm’s credit rating and previous financial performance. Various in-

dicators of a venture’s financial resources and financial management skills are its debt-

to-equity ratio, its cash-to-capital investment ratio, and its external credit rating.

Although start-up entrepreneurs see that access to financial resources is the key to get-

ting into business (it is certainly a necessary component), most agree that financial re-

sources are seldom the source of sustainable competitive advantage. Why is it, then, that

fledgling entrepreneurs see money and financial resources as the key to success while es-

tablished businesses seldom do so? Table 2.1 summarizes the results of a survey that

compares high-tech and service-industry entrepreneurs’ perceptions of the sources of

sustainable competitive advantage. Financial resources did not rank near the top. In fact,

financial resources were named by just 16 percent of high-tech manufacturing firms and

23 percent of service firms. Out of 20 different factors mentioned, financial resources

were ranked 12th by manufacturers and 6th by service firms.

Factor High Tech* Service

Reputation for quality 38 44

Customer service/product support 34 35

Name recognition/profile 12 37

Good management 25 38

Low-cost production 25 13

Financial resources 16 23

Customer orientation/market research 19 23

Product line depth 16 22

Technical superiority 44 6

Installed base of satisfied customers 28 19

Product innovation 22 18

TABLE 2.1 Sources of Sustainable Competitive Advantage

* The numbers represent the frequency of mention by respondents. Numbers may add up to more than

100 percent.

SOURCE: Adapted from D. Aaker, “Managing Assets and Skills: The Key to Sustainable Competitive Advantage,” California
Management Review 31, Winter l989:91–106. Abridged from a list of 20 factors from a study of 248 California businesses.