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Comparing the resource‐based and market‐based views of the firm: empirical evidence from Czech privatization

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  • Mona Makhija

Abstract

The recent privatization of state‐owned enterprises in the Czech Republic forms a natural experiment to test and compare the predictive ability of the resource‐based view (RBV) against the market‐based view (MBV) under conditions of great change. It has been recognized in the literature that, under normal stable circumstances, a firm's internal resources and its external market power are fundamentally intertwined. Consequently, it is difficult to identify the relative roles of these two theories in explaining expected firm performance and firm value. However, when market conditions are in a state of flux, as in the case of the Czech Republic in 1992, we expect the firm's resources to be the primary determinants of firm value. In order to test this notion, an RBV model was developed, based on a set of firm features reflecting the rare and valuable ability to compete in the emerging capitalistic economy (as opposed to the currently prevailing bureaucratically planned economy). A contrasting MBV model was also developed, highlighting the role of market power in this regard. These models were assessed in a cross‐sectional sample of 988 Czech firms undergoing privatization. The empirical findings show that the RBV‐driven variables are remarkably better at explaining share values of Czech firms in the period of privatization than MBV‐driven variables. These results underscore the role of firm resources as a primary determinant of firm value in rapidly changing environments. Copyright © 2003 John Wiley & Sons, Ltd.

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  • Mona Makhija, 2003. "Comparing the resource‐based and market‐based views of the firm: empirical evidence from Czech privatization," Strategic Management Journal, Wiley Blackwell, vol. 24(5), pages 433-451, May.
    • Handle: RePEc:bla:stratm:v:24:y:2003:i:5:p:433-451
    DOI: 10.1002/smj.304
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    1. Lu, Zhi & Bolton, Lisa E. & Ng, Sharon & Chen, Haipeng (Allan), 2020. "The Price of Power: How Firm’s Market Power Affects Perceived Fairness of Price Increases," Journal of Retailing, Elsevier, vol. 96(2), pages 220-234.
    2. HoWook Shin & Seung-Hyun Lee, 2019. "Economic crisis, intra-MNC production shifts and MNC performance from a network perspective," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 185-217, March.
    3. Anna Marie Dyhr Ulrich & Svend Hollensen & Britta Boyd, 2014. "Entry Mode Strategies into the Brazil, Russia, India and China (BRIC) Markets," Global Business Review, International Management Institute, vol. 15(3), pages 423-445, September.
    4. Tarun Kumar Soni & Akshita Arora & Thi Le, 2022. "Firm-Specific Determinants of Firm Performance in the Hospitality Sector in India," Sustainability, MDPI, vol. 15(1), pages 1-16, December.
    5. Ernest Ouédraogo & Ibrahim Ouédraogo & Emmanuel Lompo, 2020. "Political Instability and Firm Performance: A Microeconomic Evidence from Ivory Coast," American Journal of Economics and Business Administration, Science Publications, vol. 12(1), pages 49-55, October.
    6. Katrin Muehlfeld & Diemo Urbig & Utz Weitzel, 2017. "Entrepreneurs’ Exploratory Perseverance in Learning Settings," Entrepreneurship Theory and Practice, , vol. 41(4), pages 533-565, July.
    7. Moon Young Kang, 2020. "Sustainable Profit versus Unsustainable Growth: Are Venture Capital Investments and Governmental Support Medicines or Poisons?," Sustainability, MDPI, vol. 12(18), pages 1-11, September.
    8. David H. Weng & Kuo-Pin Yang, 2024. "How does organizational slack influence firm performance? A replication and extension of Peng, Li, Xie, and Su (2010)," Asia Pacific Journal of Management, Springer, vol. 41(1), pages 377-406, March.
    9. Khairul Rizan Mat Ludin & Zakiah Muhammaddun Mohamed & Norman Mohd-Saleh, 2017. "The association between CEO characteristics, internal audit quality and risk-management implementation in the public sector," Risk Management, Palgrave Macmillan, vol. 19(4), pages 281-300, November.
    10. Samuel Sponem, 2010. "Diversité des pratiques de contrôle budgétaire:approches contingentes et néo-institutionnelles," Revue Finance Contrôle Stratégie, revues.org, vol. 13(3), pages 115-153., September.
    11. Abel D Alonso, 2019. "Resources, competitiveness, and socioeconomic development: The case of a South American emerging economy," Local Economy, London South Bank University, vol. 34(1), pages 68-87, February.
    12. Anna Ujwary-Gil & Natalia Regina Potoczek, 2020. "A dynamic, network and resource-based approach to the sustainable business model," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(4), pages 717-733, December.
    13. Yulia N. Hristova, 2021. "Sustainability of competitive positioning and challenges for intermediaries in the new car market in Bulgaria," Upravlenets, Ural State University of Economics, vol. 12(3), pages 67-80, July.
    14. Veiga, Gabriela Lobo & Pinheiro de Lima, Edson & Frega, José Roberto & Gouvea da Costa, Sérgio Eduardo, 2021. "A DEA-based approach to assess manufacturing performance through operations strategy lenses," International Journal of Production Economics, Elsevier, vol. 235(C).

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