3 The resource-based view of organisations

Since the 1950s scholars and researchers of innovation have tried to analyse and explain innovation and what makes some organisations successful at it while other organisations are not (e.g. Penrose, 1959; Wernerfelt, 1984; Kim and Chang, 2009). An increasingly influential sector of this research has focused on the resources held by an organisation and how these are managed and used. The resource-based view of the firm (RBVF), or, put more simply, the resource-based view (RBV) as this approach is now known, argues that the essence of competition – and thus the basis for the success of an organisation – centres on an organisation’s resources, not its goods and services. Thus RBV research and theorising seeks to analyse the relationship between organisations and innovation by focusing on the resources and capabilities organisations possess and questions whether it is the level of resources or the deployment of such resources that leads to differences in firm performance (DeSarbo et al., 2007; Newbert, 2007).

Leaving aside, for the moment, the observation that it might be a bit of both, it is necessary at this early stage to note the relationship between capabilities and resources and why the distinction is important. The nature of the relationship is often reflected in definitions of capabilities, such as ‘Capabilities, defined as the ability to deploy resources effectively so that inputs can be transformed into desirable outcomes, may be at the root of why two firms that have similar resources obtain drastically different levels of performance.’ (Emphasis added.) (Menguc, et al., 2014, p. 315). In this example, a capability is fundamentally an ‘ability’ to do something: ‘deploy resources effectively’.