A Historical Comparison of Resource-Based Theory and Five Schools of Thought Within Industrial Organization Economics: Do We Have a New Theory of the Firm?

A resource-based approach to strategic management focuses on costly-to-copy attributes of the firm as sources of economic rents and, therefore, as the fundamental drivers of performance and competitive advantage. Interest presently exists in whether explicit acknowledgement of the resource-based view may form the kernel of a unifying paradigm for strategy research. This article addresses the degree to which a resource-based view represents a fundamentally different approach from theories used in industrial organization (10) economics. The central thesis is that, put informal terms, the resource-based approach is reaching for a theory of the firm. To determine its distinctiveness in comparison to IO, therefore, an appropriate comparison is with other theories of the firm developed within that tradition. Section I summarizes and analyzes five theories that have been significant in the historical evolution of IO. These are neoclassical theory's perfect competition model, Bain-type IO, the Schumpeterian and Chicago responses, and transaction cost theory. The first part of Section II analyzes the resource-based approach in terms of similarities to and differencesfrom these IO-related theories. The conclusion is that resource-based theory both incorporates and rejects at least one major element from each of them; thus resource-based theory reflects a strong IO heritage, but at the same time incorporates fundamental differences from any one of these theories. The second part of Section II analyzes resource-based theory as a new theory of the firm.