| Nicolai Foss |
Birger Wernerfelt’s 1984 paper in the Strategic Management Journal, “A Resource-based Theory of the Firm,” is conventionally considered one of the founding contributions to the RBV, on par with Jay Barney’s 1986 and 1991 papers. The paper has more than 6,000 hits on Google Scholar (which probably translates into more than a thousand on Web of Science), while Barney’s 1991 paper has more than 10,000. Although the underlying conceptualization of the firm is similar, the papers address different dependent variables, namely diversification and growth (Wernerfelt) and sustained competitive advantage (Barney) (a point missed by those who indiscriminately cite both papers, usually in the context of competitive advantage).
In a recent paper in Organization Studies, “The Development of the Resource-based View: Reflections from Birger Wernerfelt,” Andy Lockett, Rory P. O’Shea, and Mike Wright draw on conversations with Wernerfelt to tell the story of the 1984 paper.
Like the present blogger Wernerfelt has a background at the economics dept of the University of Copenhagen (plus he added studies in philosophy and mathematics). He remembers the (dominant) work being carried out there (at the end of the 1970s) as “old-fashioned general equilibrium economics, that unless you could show something in general equilibrium, it probably wasn’t true anyway” (this was still the situation when I studied econ there from 83 to 89).
Wernerfelt got frustrated with this “extremely conservative view” and “sort of jumped to the complete other side of the field,” teaching strategy at the University of Michigan. The 1984 paper essentially arose from the clash between Wernerfelt’s econ and math background and practical strategy stuff he had to teach. In particular, the RBV (Wernerfelt style) arose from the application of equilibrium (which suggested that firm-level heterogeneity be introduced to account for long-lived performance differences) and the duality principle of optimization theory (which suggested that looking solely at products and neglecting resources made little sense).
Other interesting pieces of info: The paper was very quickly written (! ) and was not at all indebted to Edith Penrose’s work (in fact, none of the founding contributions to the RBV, including Barney’s, were). Wernerfelt also stresses that the RBV is not a theory of the firm; that the theory of the firm that may be closest to the RBV is Rajan and Zingales’ work on power. A fascinating read.