The resource based view (RBV) of the firm - tremendous influence on shaping strategy content in the last decade - suggesting that unique firm competencies provide competitive advantage.
This stream of research gained momentum in the late 80s/early 90s (e.g., Barney, 1986 and Peteraf, 1993) picked up ideas expressed earlier by Wernerfelt (1984). In addition inspired by Prahalad and Hamel (1990).
Competitive advantage, from RBV perspective achieved by focusing on and exploiting the firm's internal characteristics, specifically its resource profile. Researchers adopting these perspectives have had to define the concept of resources and core competence, as well as the characteristics of these resources that make them strategically relevant.
Look at Hierarchy of competencies (slide)
from - M. Javidan, Core competence: what does it mean in practice? Long Range Planning 31 1 (1998)
On the lowest level of this hierarchy are the resources. Each corporation has various resources, but companies differ in how they leverage them.
Resources are not homogeneous within firms and provide unique services or abilities.
Capabilities refer to the corporation's ability to exploit its resources. They consist of business processes and routines that manage interaction among the company's resources - also they are functionally based.
Competency is a cross-functional integration and co-ordination of capabilities. Competencies result from integration among the Strategic Business Unit's functional capabilities.
Core competencies cross SBU boundaries and result from interaction between different SBUs' competencies. A CC is a collection of competencies that are widespread in the corporation. In utilising these resources, a firm achieves a marketplace advantage because their resources are unique ( Prahalad and Hamel).
In RBV, a firm's resources or competencies are generally defined as all the assets, capabilities, processes and knowledge that reside in the firm (Amit and Grant). According to Prahalad and Hamel core competencies should...