Academic journal article International Journal of Management

Differences between Resources and Strategy in Strategic Management: An Experimental Investigation

Academic journal article International Journal of Management

Differences between Resources and Strategy in Strategic Management: An Experimental Investigation

Article excerpt

According to Jay Barney, resources and capabilities are the core of the resource-based view (RBV) of strategic management. However, the difference between resources and capabilities remains controversial among strategic management scholars. This study uses a classroom experiment to test for the difference between resources and capabilities to students. In a nutshell, the results of the experiment suggest that: (a) resources and capabilities are different constructs, (b) inter-group (inter-organizational) differences in capabilities is the major determinant of inter-group (inter-organizational) difference in performance, and (c) active participation of students in classroom experiments is a teaching tool that enhances students 'knowledge of key strategic management constructs such as resources and capabilities. These findings suggest that strategic management professors should use classroom experiments as separate or complementary teaching tools to enhance students' knowledge of strategic management concepts.

Introduction

The Academy's new Teaching Committee, chaired so ably by Peter Frost, is helping us conceive of new links among management research, management practice, and the classroom (Hambrick, 1994:14, boldface mine)

The above quote is culled from an Academy of Management Review article on the Academy's 1993 Presidential Address captioned "What if the Academy Actually Mattered?" delivered by Donald C. Hambrick. In that presidential address, Hambrick eloquently underscored the importance of integrating management research and practice with classroom teaching so that graduating students are equipped with the skills industry manager are demanding from college graduates (Stephen, Parente, & Brown, 2002). To attain this end, strategic management professors are crafting innovative teaching tools in teaching strategic management concepts to students. The present study makes a contribution to strategic management by using an innovative classroom experiment to illustrate the difference between resources and capabilities, a controversial topic in strategic management.

Agreeably, teaching strategic management as a capstone course is a Herculean task (Greiner, Bhambri & Cummings, 2003) exacerbated by the controversial differences between resources and capabilities (Carmeli & Tishler, 2005; Makadok, 2001). Insofar as this controversy (Amit & Shoemaker, 1993; Priem & Butler, 2001) persists, it will continue to be a milestone against theory development in strategic management (Priem & Butler, 2001). Carmeli and Tishler (2005: 300) expressed this concern as follows:

Resources as a general term is taken to include three main constructs-resources, capabilities, and competencies, which have been variously defined in the strategic management literature, making it difficult to generalize across studies.

Concomitantly, it has also be argued that "How researchers measure resources and capabilities varies extensively" (Hoopes, Madsen & Walker (2003: 890), which is a milestone to academic dialogue and replication of empirical results (Priem & Butler, 2001). Consequently, Schneider and Lieb (2004) compellingly argued that even though the resource-based view (RBV) of strategic management has become one of the dominant perspectives, it is scantly mentioned in the classroom. There is no a prior reason to assume that lack of clarity between resources and capabilities has not contributed to under-representation of the RBV in the classroom, relative to the industrial organization economics perspective.

The purpose of this paper is to make a contribution to the teaching of strategic management (business strategy) by using an experiment to illustrate the differences between resources and capabilities. In doing so, the experiment is used to illustrate the notion that capabilities are embedded in organizations (Makadok, 2001), and capabilities are the major determinant of superior organizational competitive advantage (Grant, 1991; Makadok, 2001; Amit & Shoemaker, 1993). …

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