4.4 Towards an integrative approach
From the empirical findings of this study, it could be argued that each view of competitive advantage only explains a part of the whole. None of them can fully describe the overall phenomenon displayed by the case firms. As stated in Chapter 2, there is debate regarding the resource-based view versus the activity-position view. However, some common ground still exists between them. For instance, Porter (1991) argues that competitive advantage stems from the competitive context that shapes a firm’s strategy, determining how its activities are organised and linked and how the resources are configured. One of the four components of the competitive context proposed by Porter (1990; 1991) refers to factor conditions, which emphasise specialised inputs. This is typically compatible with how firms deploy their valuable, rare, and difficult to replicate resources as suggested by the resource-based view (Barney, 1991; 2001b). Similarly, another component of the competitive context—related supporting industries—concerns capable and locally based (especially clustered) suppliers. This is in line with the relational view, arguing that a firm’s critical resources can be created beyond a firm’s boundaries and the networks or alliances can thus generate relational advantages (Dyer & Singh, 1998; Lavie, 2006; Hervas-Oliver & Albors-Garrigos, 2009). In particular, Porter argues that performance differences among firms “are partly a function of managerial choices, differential rates of resource accumulation, or chance” (1991; p. 115). It could be argued that a firm achieves its competitive advantage through both resources and activities.
In the literature, there are quite a few researchers argue for integrating the resource-oriented and activity-oriented approaches. For example, Porter states, “If you
could hook the resource-based view to the value chain, to strategic choices, and ultimately to profit, then you could build a more robust role for resource/capability thinking” (Argyres & McGahan, 2002, p. 50). Ray et al. acknowledge the role activities play in creating competitive advantage by saying that: “Activities, routines, and business processes are the mechanisms through which resources and capabilities get exposed to market processes where their ultimate value and ability to generate competitive advantage are realised” (2004, p. 35). Sheehan and Foss (2007) suggest that the resource-based view and the activity-position view are complementary. They argue that, on the one hand, the weakness of assumptions in factor markets (i.e., homogeneity of factors) proposed by the activity-position view can be improved by the resource-based view; on the other hand, inclusion of the activity-position view could unravel the criticism addressing the static nature of the resource-based view. Stoelhorst and van Raaij (2004) suggest that bridging the gap between the two perspectives may be achieved by understanding the role of process efficiencies in transforming unique resources into positional advantages in order to explain performance differentials.
It is clear that the theoretical framework of this study (Figure 3.1) fits well with the empirical results. From the discussion in the previous two sections, the source of competitive advantage can be better understood by incorporating both resource and positional advantages. Firstly, resource advantages of a firm are based on its strategic resource portfolio. Individual strategic resource alone is not enough to create a unique advantage. The resource-based, the relational, and the stakeholder views help explain how a firm builds up its resource advantages, as each of them emphasises different types of resources. Strategic resources of case companies were purchased from the
markets, built up within the organisation, generated by alliance partnerships, or created by other channels. The notion of strategic resource mix emphasises resources from multiple sources, rather than an individual one. According to this logic, the source of competitive advantage of a firm is based on its capacity to utilise and combine the strategic resources acquired or accumulated from multiple channels (Lado et al., 1997; Sanchez, 1995; 1997). Hence, the resource-based, the relational, and the stakeholder views contribute to our understanding of resource advantages, as each of them emphasises different types of resources.
Secondly, a firm may achieve its positional advantages by providing its customers with lower cost or better-value products through its activities and drivers. This study found strong evidence in support of the activity-position view. In particular, strategic activities of case companies were responses to the competitive context, including factor conditions, demand conditions, related supporting industries, and context for strategy and rivalry. The case companies in this study revealed two distinctive features. One is that the ways in which case companies responded to the competitive context were not limited to local proximity only, but also included global context, for example, Beta and Kappa’s responses to demand conditions. The other is that drivers are not one-directional only. The same driver could be positive for one company but negative for another, for example, the degree of vertical integration. Firms need to identify the opportunities and respond to them appropriately (Porter, 1991; Sheehan & Foss, 2007). As Porter (1991; p. 115) put it: “Firms must understand and exploit their local environment in order to achieve competitive advantage.” In this regard, the activity-position view contributes to our understanding of positional advantages.
Thus, competitive advantage comes from a firm’s resource capacity (superior resources, unique capabilities, and solid relationships) and a mix of activities/drivers that respond to the competitive context. The integrative approach of the theoretical framework proposed in Chapter 3 of this study has been supported by the empirical findings of this chapter.
The following proposition is generated from the above discussion: