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Resource Based View (Current Literature) (Intangible Assets (reputation,…
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Resource Based View in a Post-Conflict Space: How Do Firms Gain Competitive Advantage (Case Study Liberia)
1: Uniqueness
Before we even talk about resources, the first factor necessary for a business is a unique idea*
“a firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy” (Barney, 1991)
Every business is doing the same thing. Liberians see one idea working and they duplicate it. There are very few businesses that stand out.
This is caused by a lack of critical and creative thinking that should have been done through education. Education gap created through war (more detail later).
This is why the current business's in Liberia that have competitive advantage are:
1) Liberians who were educated elsewhere (many fled from the war as refugees and have returned: "Repats")
2) The Foreign Business Community (Lebanese, Indian, Chinese)
- Access to Tangible Assets. Due to market failures, competitive advantage is primarily based on access to tangible resources in developing countries. In post-conflict countries, these market failures are substantially caused by the fallouts from the civil wars and make them even more difficult to find.
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2.2 Human Capital Gap
It is extremely difficult to find "middle managers" for businesses. Good, well-educated and experienced education hard to find.
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Foreign businesses are educated outside of Liberia and tend to bring in other expats to fill their middle management jobs
Repats have education from elsewhere and fill some of this gap but end up needing to do most of the middle management jobs themselves which constraints growth
- Access to Intangible Assets: If companies in Liberia are able to gain access to tangible resources (this is rare in Liberia), then competitive advantage than is derived from intangible. However, the civil war has negatively influenced these assets for Liberians making it difficult for them to gain competitive advantage.
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3.3 Networks
There is a dominant merchant group of foreign businesses who often work together and support one another. This includes large family businesses.
Due to a lack of trust, Liberian businesses do not have a culture of supporting each others businesses.
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- Conclusion: RBV shows that the companies that have the highest competitive advantage are foreign companies as they have more access to tangible resources and some intangible resources. This explains why they control over 90% of the local economy. Repats also have a competitive advantage because they have more creativity and access to finance (but in many cases, they still get stuck unable to find tangible resources). However, Liberian entrepreneurs often get left behind as they get stuck at 1. and if not, at financial capital. Many of these barriers to resources have stemmed from the civil war.
This is a bit different from RBV because the business IDEA is categorized more as intellectual property within intangible assets. However, in this setting, I think the idea of a business and how it "stands out" is the first step to competitive advantage.
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Thesis for first half of Chapter: Using the RBV, it is evident that Liberian entrepreneurs lack the basic competitive advantage to grow and succeed within the private sector. Due to the fact that there are only a limited number of foreign businesses and 'repats' in the country, this lack of competitive advantage for Liberian businesses makes it almost impossible for the economy to rebuild. These large capital gaps and the lack of intangible resources that give firms a competitive advantage in the market have primarily stemmed from the civil war.
Research Question for the Second Half of Chapter: Impact Investors are supposed to fill the financial gap and through technical assistance, the training/human/capabilities gap. Is this enough to give firms in post-conflict countries a competitive advantage?
- Compare investors and businesses experiences who have received investments in Liberia and SL (as a comparison).