Exam (2~2)

Critically evaluate the contribution of the Resourse-Based View (RBV) to the strategic role of HRM in enhancing an organisation's competitive advantage.

Introduction

Contemporary organisations inhabit a highly competitive landscape, incentivising sustained competitive advantage (Barney & Wright, 1998). Multiple factors contribute to this advantage, such as effective leadership, product innovation, and exceptional customer service (Teece, 1997). A pronounced causal link exists between competitive differentiation, heightened profitability prospects, and longer-term structural success (Crain, 2010). A critical theory in concert with this is the Resource-Based View (RBV), a strategic management framework emphasising internal resources as the primary cause of competitive and performative advantage (Wernerfelt, 1995). By incorporating RBV principles, Human Resource Management (HRM) can be pivotal in developing and managing an organisation’s unique and valuable resources, such as knowledge, skills, and culture (Wright et al., 2001). But how significant a proposition is the RBV framework to achieve a more comprehensive understanding of the strategic role of HRM in enhancing competitive advantage?

Strategic Role of HRM

The RBV framework suggests competitive advantage stretches from an organisation’s ability to leverage internal resources and capabilities deemed valuable, rare, inimitable, and non-substitutable (VRIN) (Barney & Wright, 1998). It is a framework with particular implications for the strategic role of HRM, as it manages personnel, fosters organisational culture, and facilitates knowledge distribution (Boxall & Purcell, 2011). HRM’s strategic role should not be underestimated, and those organisations that recognise and invest in its function align with the RBV conception of long-term success (Armstrong & Taylor, 2023). HRM is crucial in cultivating strong, positive workplace cultures by recruiting individuals aligned with an organisation’s values and executing reinforcement systems to reward desired behaviours (Kraaijenbrink et al., 2010). An organisation’s culture and values are the intangible elements that influence worker interaction with decisions and duties (Schein, 2016). A strong organisational culture can be viewed as a VRIN resource as it stimulates workers’ motivation, commitment, and performance (Barney, 1991). By extension, a desirable organisational culture may promote retention, thereby reducing the associated costs of turnover and loss of knowledge (Lee et al., 2017).

The acquisition and maintenance of organisational knowledge is a strategically vital role of HRM, from its distribution, promotion of a learning culture, and development of practice (Wright et al., 2001). Knowledge is managed by HRM through its creation, division, and application to enhance organisational efficiency, innovation, and competitiveness (Armstrong & Taylor, 2023). In this respect, an organisation’s workers represent a collective matrix of its knowledge, skills, and capabilities (Barney, 1991). By efficiently capturing, storing, and leveraging the knowledge and expertise of workers, HRM aligns with the RBV conception of VRIN (Barney, 1991). HRM cultivates a highly skilled and adaptable workforce through training and development, making it a rare and inimitable resource (Boxall & Purcell, 2011). This further aligns RBV and HRM to competitive advantage by enabling the organisation to deliver superior products or services, optimise operations, and innovate more effectively than competitors (Barney & Wright, 1998).

Use Cases

Organisations such as Google epitomise the successful implementation of RBV principles into HRM practice (Shrivastava et al., 2018). Google’s emphasis on worker well-being, continuous learning, and unique organisational culture has secured it a dominant position in the technology industry (Brock, 2015). HRM practitioners can use this example to adapt and devise similar practices for specific organisational requirements. Such strategies may include competitive benefits or generous growth and development opportunities. Within the literature, a study by Barney (1991) found that organisations with a strong focus on HRM can achieve a sustainable competitive advantage (Barney, 1991). The research emphasises HRM’s role in developing and managing VRIN assets to gain a competitive edge (Barney, 1991). Relatedly, Boselie et al. (2005) conducted a meta-analysis of 104 empirical studies to explore the relationship between RBV, HRM, and organisational performance (Boselie et al., 2005). The results indicated a positive correlation between HRM practices and organisational performance, thus evidencing HRM’s role in enhancing competitive advantage by applying RBV principles.

Criticisms & Limitations

Despite its contributions, the RBV framework has been criticised for its narrow focus on internal resources at the expense of considering external factors (Priem & Butler, 2001). In so doing, RBV prioritises an organisation’s unique assets and minimises the significance of peripheral elements such as economic downturns or labour shortages (Boxall & Purcell, 2011). A lack of appreciation for external dynamics may result in unexploited avenues for competitive advantage (Wright et al., 2001). Relatedly, industry dynamics are often characterised by the market power of commercial rivals, rapid technological advancement, or regulatory changes (Crain, 2010). This highlights the importance of external factors in maintaining a competitive advantage. As such, some organisations solely relying on RBV in HRM may be insufficiently equipped to develop effective HRM strategies (Barney & Wright, 1998). A final challenge in evaluating the contribution of RBV to HRM is the efficacy of identifying and quantifying intangible resources, such as worker knowledge, skills, and abilities (Wright et al., 2001). HRM practitioners could consider integrative alternatives that complement the RBV framework to mitigate such limitations. For example, the Dynamic Capabilities Theory highlights the importance of organisational adaption and response to changing market conditions or competitive threats (Teece et al., 1997).

Conclusion

The RBV framework has significantly contributed to understanding the strategic role of HRM in augmenting an organisation’s competitive advantage (Barney & Wright, 1998). RBV does this by emphasising HR’s value as a unique resource, the importance of non-substitutable resources, and a theoretical basis for the relationship between HRM practices and organisational performance (Wright et al., 2001). However, the framework is characterised by a narrow focus on internal resources, which could lead to the inattentiveness of external forces, specifically market dynamics and competitors’ activities (Priem & Butler, 2001). By incorporating alternative theories and frameworks, HRM practitioners could holistically account for internal and external factors that affect competitive advantage (Lengnick-Hall et al., 2011).