The Resource Based View of the Firm
The concept of the resource based view of the firm is based on three important issues; the asset specificity of the resources which enable a particular activity, the organization’s specificity and the organization’s endowment with the resources (Zott & Amit, 2006, p. 1). The resource based perspective concerns the activities which could be outsourced in contrary to those which can be undertaken within the organization (Barney & Hesterly, 2008). For instance in an organization which is well endowed with resources with low assets specificity, such an organization needs to embrace a hierarchical structure of governance (Zott & Amit, 2006, p.
1). The concept of asset specificity refers to the degree to which the assets made use of in particular activity loses value in another activity as well as with a trading partner (Klein et al 1978, pp. 297-326). What this implies is that an organization which is well endowed with resources such as Wal-Mart Stores, Inc can afford to employ a hierarchical organization structure (Barney & Hesterly, 2008). This is because with its vast endowment of resources, it can comfortably purchase Lianhua Supermarket Holdings Co. Ltd. , China’s #1 grocery retailer.
In other words, asset specificity implies
2). This would more so be in a situation where there is high opportunity cost of the resources (Barney & Hesterly, 2008). Organizational managers are usually concerned with the governance of a particular activity which emphasizes the need to analyze organizational level attributes (Zott & Amit, 2006, p. 2). An analysis of the attributes of Wal-Mart indicates that the company is strongly competitive and has the potential of purchasing Lianhua Supermarket Holdings Co. Ltd. , China’s #1 grocery retailer.