How do you evaluate Resource-Based View in a business strategy?

How to evaluate it

Run the VRIO test on each major resource. Resources that fail any one of the four criteria do not generate advantage; they generate competitive parity at best.

What we are evaluating

The resource-based view holds that sustained competitive advantage stems from the firm's bundle of resources and capabilities, not from industry positioning alone. Resources that are valuable, rare, inimitable, and supported by organization (the VRIO test) generate persistent advantage.

The benchmark framework

Resources include tangible assets (plants, capital, location), intangible assets (brand, intellectual property, data), and capabilities (the firm's ability to coordinate activities — innovation processes, customer-relationship know-how, manufacturing excellence). The strongest competitive positions rest on resource bundles whose value depends on combinations rivals cannot replicate, often built through path-dependent learning over years.

An evaluation walk-through

A pharmaceutical firm's portfolio of patents is valuable and rare but eventually expires, so it must be paired with a capability to discover and develop the next generation. The discovery capability — the talent, processes, and data accumulated over decades — is harder for rivals to replicate than the patents themselves.

Failure modes to flag

Treating any unique resource as advantage ignores whether the resource is actually valuable to customers. Strategy built on resources that are not VRIO-passing creates only temporary advantage.

Source basis: Open Textbook Library: READ MORE