The strategic management question and the emergence of resource-based theory*

The field of strategic management, like other social science disciplines, is organized around a central research question. That question is: ‘Why do some firms persistently outperform others?’ This question does not presume that there will always be persistent performance differences between firms. Sometimes firms do not outperform others; sometimes performance differences are short lived. Rather, this question only suggests that it may be the case that, in some situations some of the time, persistent performance differences will exist between firms. It is these differences in firm performance that strategic management scholars seek to understand. At the broadest level, two explanations about why some firms persistently outperform other firms have been developed in the literature. The first, and older of the two, was originally articulated by Porter (1979, 1981) and draws heavily on the structure-conduct-performance (SCP) paradigm in industrial organization economics (Bain 1956). This explanation focuses on the impact that a firm’s market power has on the ability of a firm to raise prices above a competitive level (Porter 1981). If entry into industries where firms are exercising market power is restricted by various barriers, then these performance differences can persist (Bain 1956). This chapter draws from Peteraf and Barney (2003) and Barney and Arikan (2001).