Resource Based View - The VRIN Characteristics

Introduction

The resource-based view (RBV) is a way of viewing the firm and in turn of approaching strategy. Fundamentally, this theory formulates the firm to be a bundle of resources. It is these resources and the way that they are combined, which make firms different from one another. It is considered as taking an inside-out approach while analysing the firm. This means that the starting point of the analysis is the internal environment of the organization.

Resources

Resources of the firm can include all assets, capabilities, organizational processes, firm attributes, information and knowledge. In short resources can be considered as inputs that facilitate the organization to perform its activities. All resources that an organization has may not have strategic relevance. Only certain resources are capable of being an input to a value creating strategy which put the organization in a position of competitive advantage. An organization’s resource should have four attributes to provide the potential for competitive advantage. These form the VRIN characteristics.

The VRIN characteristics

The important features for a resource to be strategically important are as below

  • Valuable - When resources are able to bring value to the firm they can be a source of competitive advantage.

  • Rare - Resources have to deliver a unique strategy to provide a competitive advantage to the firm as compared to the competing firms. Consider the case where a resource is valuable but it exists in the competitor firms as well. Such a resource is not rare to provide competitive advantage

  • Inimitable - Resources can be sources of sustained competitive advantage if competing firms cannot obtain them. Consider the case where a resource is valuable and rare but the competing organizations can copy them easily. Such resources also cannot be sources of competitive advantage

  • Non-substitutable - Resources should not be able to be replaced by any other strategically equivalent valuable resources. If two resources can be utilized separately to implement the same strategy then they are strategically equivalent. Such resources are substitutable and so are not sources of sustained competitive advantage.

The VRIN characteristics mentioned above are individually necessary for the resources to be valuable.



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