Resource-Based Theory: Path to Competitive Advantage

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Resource Dependency Theory: How External Resources Affect Organizational Behavior

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:04 What Is Resource-Based Theory?
  • 1:26 Tangible Resources
  • 2:06 Intangible Resources
  • 2:50 Capabilities vs. Resources
  • 3:30 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Timeline
Autoplay
Autoplay
Speed Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Amber Dejmal
In this lesson, you'll learn the definitions of resource-based theory and the three key terms used within the theory: tangible resources, intangible resources, and capabilities.

What Is Resource-Based Theory?

Resource-based theory states that the possession of resources is valuable, difficult to imitate, rare, and cannot be substituted. The resource-based theory suggests that organizations should look inside the company to find the sources of competitive advantage through the use of their resources. Competitive advantage is an advantage that a firm has over its competitors that allows it to generate sales or margins and/or retain more customers than the competition. A firm's competitive advantage evolves from the resources that the organization has.

In the resource-based theory model, resources are given the major role of assisting companies in achieving higher organizational performance and competitive advantage. The theory has been redeveloped and redefined through research and the evidence that supports it. Resource-based theory prescribes that organizations position themselves strategically based on their resources and capabilities rather than their products and services. Within resource-based theory, the key terms include tangible resources, intangible resources, and capabilities.

Let's pretend that you're the owner of a fast food chain called McDreamy's. In your company, you have tangible resources, intangible resources, and capabilities that all contribute to your success in the fast food industry.

Tangible Resources

Tangible resources are resources that can be seen, touched, and quantified. A few examples of tangible resources include the company's property, factory, equipment, and even cash. These physical resources can easily be bought by other fast food chains, so in the long run, the physical resources give you little advantage. However, you must have these types of resources in order to achieve the company's goals.

Blendy's, your main rival, was founded over a decade after you founded McDreamy's. Blendy's uses many of the same tangible resources. It has a very similar building, similar cooking supplies, and even similar ingredients as your company.

Intangible Resources

Intangible resources are resources that are hard to see, touch, or quantify. An example of this type of resource would be the skills of the employees, the company's reputation, patents, brand names, customer loyalty, and copyrights. These are things that have no physical presence.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support