Outsourcing: Strategic Management and Competitive Advantage Essay

Submitted By WiesmannA1
Words: 6720
Pages: 27


Anton Wiesmann
International Graduate School of Business
University of South Australia
Adelaide, Australia

Tatiana Zalan
International Graduate School of Business
University of South Australia
Adelaide, Australia tatiana.zalan@unisa.edu.au Abstract
In this article we present an alternative approach to assessing competitive advantages of a firm and operationalizing the resource-based view (RBV) of the firm in the context of strategic outsourcing. When resource bundles are viewed in the form of activities, they become easier to observe, identify, understand and measure, thus activities can be used to operationalize bundles of resources and capabilities when empirically testing the RBV. We propose a conceptual model and present several propositions for subsequent empirical testing of the RBV.
One of the key aims in strategic management has been to understand sustained competitive advantage (SCA) and unravel the way it can be systematically created (Meyer, 1991; Porter, 1980; Rumelt, 1984). Research within the field traces its origin on a supra-firm level analysis such as Porter’s(1980) industry analysis/positioning approach, based on principles of industrial organization economics. In this approach all explanatory power was placed on aggregate environmental factors. Theoretical frameworks such as the “five forces” approach portrayed managers as mere analysts of industries and the relative positions of firms in their product markets of a given industry. Firm level or sub-firm level factors received no relevant treatment. For this reason the introduction of the resource-based view of the firm (RBV) has often been welcomed as the solution of this theoretical shortcoming, as it provides a detailed and explicit focus on the factor market and the internal configuration of a firm’s internal resources and capabilities. Thus, the RBV places the explanatory power of competitive advantage on resources controlled and configured by the firm rather than on industry structure and competitive dynamics (Foss, 2007). The RBV arguably represents reductionist progress in strategy research, as it brings the level of analysis to a firm level where sources of competitive advantages are most likely located.
The RBV has become one of the most widely accepted theoretical perspectives on understanding the origins of competitive advantage and superior firm performance (Powell, 2001; Priem and Butler, 2001a; Rouse and Daellenbach, 2002; Bingham and Eisenhardt, 2007). The RBV postulates that differences in firm performance occur when they possess valuable resources that competitors do not have, enabling them to generate Ricardian rents in a quasi monopolist environment (Wernerfeld, 1984), because the key drivers of creating monopolistic rents is caused by imperfect competition in either obtaining or developing resources of potential value (Mahoney and Pandian, 1992). In this view, the most crucial activity in the business development process revolves around the identification, assembly, manipulation and allocation of resources (Venkataraman and Van De Ven,1998). The RBV presents an explanation for heterogeneous competition, based on the premise that close competitors differentiate from each other, based on the difference in productivity and performance of the resources they control (Helfat and Peteraf, 2003).
However, the usefulness of the RBV as a theoretical framework has remained a subject of debate (Barney, 2001; Hoopes, Madsen, & Walker, 2003; Priem & Butler, 2001a, 2001b; Williamson, 1999). Despite being conceptually strong, the RBV has little value as an analytical tool to solve practical business problems. Further, its empirical support has been weak: for example, a review of 55 empirical tests of the RBV suggests that little more than half (53%) of tests support the…