Building versus Acquiring Resources: Analysis and Application to Learning Theory

The resource-based literature has indicated two general approaches available to the firm to obtaining resources for strategy implementation: that of building resources within the firm and that of acquiring resources from outside the firm. But existing research has not critically examined the implications of the two approaches for the potential of resources to generate economic rents and sustained competitive advantage. In this chapter, we review previous work on this issue and analyze the missing link in a critical fashion. Our central argument is that, in a resource-based view, what matters to rent generation and competitive advantage is not the means through which firms obtain resources; rather, to generate economic rents and sustained competitive advantage, resources must be obtained ex ante at a cost lower than their value ex post, and they must be valuable, rare, inimitable, and non-substitutable, whether they are built within the firm over time or acquired from outside all at once. To illustrate the importance of value, rareness, inimitability, and non-substitutability to the sustainability of competitive advantage, we discuss our argument in the context of organizational learning, and analyze the conditions under which learning can be a source of sustained competitive advantage.