Content area
Full text
For empirical work in the resource-based view of the firm, characterizing the resources that are responsible for firm growth is difficult because valuable resources are often tacit, ambiguous, or difficult to identify. This is a particular problem for empirical assessments that rely upon the concept of relatedness between resources to characterize the direction of growth of the firm. We tackle the problem for the general case by developing a general interindustry relatedness index. The index harnesses the relatedness information embedded in the multiproduct organization decisions of every diversified firm in the U.S. manufacturing economy. The index is general in that it can be used across industry contexts without requiring explicit identification of resources and it provides a percentile relatedness rank for every possible pair of four-digit Standard Industrial Classification manufacturing industries. The general index is tested for predictive validity and found to perform as expected. Applications of the index in strategy research are suggested.
Key words: relatedness; resource-based view; corporate strategy
History: Received January 10, 2007; accepted April 13, 2009, by Pankaj Ghemawat, business strategy. Published online in Articles in Advance July 10, 2009.
(ProQuest: ... denotes formulae omitted.)
If there are profitable opportunities for increased production anywhere in the economy they will provide for some firm an external inducement to expand. But this alone tells us nothing about their significance for any given firm. [Opportunities] are external inducements to expand only for what might be termed "qualified" firms-firms whose internal resources are of a kind either to give them a special advantage in the "profitable" areas or a least not to impose serious obstacles. (Penrose 1959, p. 86)
1. Introduction
According to resource-based theory, a firm's valuable and unique resources are at the root of its competitive advantage (Penrose 1959, Wernerfelt 1984, Barney 1991, Peteraf 1993, Conner and Prahalad 1996). However, identifying which of a firm's resources matter most for competitive advantage is no easy task. Although resource ambiguity may tend to protect competitive advantage, it presents difficult challenges for researchers in testing predictive theory. Consider the problem of predicting the direction of growth of the firm. Resource-based theory suggests that excess capacity in idiosyncratic resources, combined with externally determined opportunities, leads to expansion in directions related to a firm's existing resource stock...