Does VRIO help managers evaluate a firm’s resources?

Abstract

Purpose

The resource-based view and value-rarity-imitability-organisation (VRIO) method have diffused widely into courses aimed at managerial practice, but research has yet to verify whether they help managers analyse a firm’s resources. Following recent interest in the use of strategy tools, the purpose of this paper is to focus on what happens when VRIO informs strategy action.

Design/methodology/approach

The paper uses experimental method to evaluate directly users’ analysis guided by VRIO relative to analysis that is not. Systematic coding of the responses evaluates how users select resources to evaluate, in which areas they make recommendations, and what account they take of competitors, dynamic evolution, and resource disadvantages, risks and limitations.

Findings

VRIO encouraged users to evaluate resources relative to competitors and competitive dynamics, but resource selection difficulties and failure to evaluate resource disadvantages limited its value. In addition, it drew users to the existing operations and business model.

Research limitations/implications

The study highlights a tendency for users to evaluate antecedents and outcomes of resources, and partly supports the view that VRIO elicits inward-looking descriptions. Field-based research is needed to show how using VRIO plays out in full strategy making context.

Practical implications

Highlighted limitations in VRIO analysis could be alleviated by better specifying resource selection and by addressing the positive-only tenor of VRIO materials.

Originality/value

Only a small number of published studies evaluate VRIO as a method of practical strategic analysis, and this paper is the first to look directly at users’ responses.

Citation

Knott, P.J. (2015), "Does VRIO help managers evaluate a firm’s resources?", Management Decision, Vol. 53 No. 8, pp. 1806-1822. https://doi.org/10.1108/MD-08-2014-0525