Business Dynamics IT

8/6/2019 Business Dynamics IT

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Chapter I

Resource-Based

Theory of theFirmIn this book, we apply the resource-based theory of the firm that has establisheditself as an important perspective in strategic management. According to theresource-based theory of the firm, performance differences across firms canbe attributed to the variance in the firms strategic resources and capabilities.Resources that are valuable, unique, and difficult to imitate can provide thebasis for firms competitive advantages (Garud & Kumaraswamy, 2005)

In order to explore the usefulness of the resource-based theory for informationtechnology resources, it is necessary to explicitly recognize the characteristicsand attributes of resources that lead them to become strategically important.

Although firms possess many resources, only a few of these have the potentialto lead the firm to a position of sustained competitive advantage (Wade &Hulland, 2004). In this chapter we will see what separates regular resourcesfrom those that confer a sustainable strategic benefit.Resources are employed in the production of goods and services, which occursin the firms value configuration. The value configuration is the way aparticular organization conducts its business. There are three alternative valueconfigurationsthe value chain, the value shop, and the value networkas

we shall see later in this chapter. To comprehend the value that IT providesto organizations, we must understand their value configurations (Stabell &Fjeldstad, 1998).To some readers, this first chapter might seem too theoretical and possiblyput them off. Hopefully, this will not happen. It is important to cover thematerial included here before going on to the other chapters. What is mostimportant to remember from this chapter when moving on to the rest of thebook are (1) strategic resources that influence the success of IT management,and (2) value configurations that introduce a contingent approach toIT management.

Organizational ResourcesThe central tenet in resource-based theory is that unique organizationalresources of both tangible and intangible nature are the real source of competitiveadvantage. With resource-based theory, organizations are viewedas a collection of resources that are heterogeneously distributed within andacross industries. Accordingly, what makes the performance of an organizationdistinctive is the unique blend of the resources it possesses. A firmsresources include not only its physical assets, such as plant and location,but also its competencies. The ability to leverage distinctive internal and


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external competencies relative to environmental situations ultimately affectsthe performance of the business.Exploring competencies in the context of the management of informationtechnologyis a relatively recent development in the evolution of the information

systems discipline. The importance of developing competencies that alloworganizations to successfully take advantage of information in their specificcontext has been noted. The concept of competence in the information systemsliterature is predominantly focused upon individual competence in the formof IT skill sets, rather than treated as an organizational construct. The focushas been on the technology supply side and individuals skills, emphasizingthe requirement for IT professionals to have not just technical skills but alsobusiness and interpersonal skills. More recently, being a change agent hasbeen proposed as a skill for IT professionals. The implication of this literaturestream is that equipping IT specialists with additional skills can solvethe problem of lacking benefits from IT. The inference is that the inability to deliver value from information arises from shortcomings in the IT functionand among IT professionals (Peppard, Lambert, & Edwards, 2000).Conversely, when the IT function is able to deliver value from the informationresource, the firm will improve its performance and gain competitiveadvantage. In turn, competitive advantages produce positive returns. Accordingto Hitt et al. (2001), most of the few empirical tests of the resource-basedtheory that have been conducted have supported positive, direct effects ofresources.The essence of the resource-based theory of the firm lies in its emphasis onthe internal resources available to the firm, rather than on the externalopportunitiesand threats dictated by industry conditions. Firms are consideredto be highly heterogeneous, and the bundles of resources available to eachfirm are different. This is both because firms have different initial resourceendowments and because managerial decisions affect resource accumulationand the direction of firm growth as well as resource utilization (Lwendahl,2000).The resource-based theory of the firm holds that, in order to generate sustainablecompetitive advantage, a resource must provide economic valueand must be presently scarce, difficult to imitate, nonsubstitutable, and notreadily obtainable in factor markets. This theory rests on two key points.First, that resources are the determinants of firm performance and second,that resources must be rare, valuable, difficult to imitate and nonsubstitutableby other rare resources. When the latter occurs, a competitive advantage hasbeen created. Resources can simultaneously be characterized as valuable, rare,nonsubstitutable, and inimitable. To the extent that an organizations physicalassets, infrastructure, and workforce satisfy these criteria, they qualifyas resources. A firms performance depends fundamentally on its ability tohave a distinctive, sustainable competitive advantage, which derives fromthe possession of firm-specific resources (Priem & Butler, 2001).The resource-based theory is a useful perspective in strategic management.


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Research on the competitive implications of such firm resources as knowledge,learning, culture, teamwork, and human capital, was given a significantboost by resource-based theorya theory that indicated it was these kindsof resources that were most likely to be sources of sustainable competitiveadvantage for firms (Barney, 2001).

Firms resource endowments, particularly intangible resources, are difficultto change except over the long term. For example, although human resourcesmay be mobile to some extent, capabilities may not be valuable for all firmsor even for their competitors. Some capabilities are based on firm-specificknowledge, and others are valuable when integrated with additional individualcapabilities and specific firm resources. Therefore, intangible resources aremore likely than tangible resources to produce a competitive advantage. Inparticular, intangible firm-specific resources such as knowledge allow firmsto add value to incoming factors of production (Hitt, Bierman, Shumizu, &Kochhar, 2001).Resource-based theory attributes advantage in an industry to a firms controlover bundles of unique materialhuman, organizational, and local resourcesand skills that enable unique value-creating strategies. A firms resourcesare said to be a source of competitive advantage to the degree that they arescarce, specialized, appropriable, valuable, rare, and difficult to imitate orsubstitute.

Capabilities and ResourcesA fundamental idea in resource-based theory is that a firm must continuallyenhance its resources and capabilities to take advantage of changing conditions.Optimal growth involves a balance between the exploitation of existingresource positions and the development of new resource positions. Thus, afirm would be expected to develop new resources after its existing resource

base has been fully utilized. Building new resource positions is important ifthe firm is to achieve sustained growth. When unused productive resourcesare coupled with changing managerial knowledge, unique opportunities forgrowth are created (Pettus, 2001).The term resource is derived from the Latin word resurgere, which hasthe meaning to rise and implies an aid or expedient for reaching an end. Aresource implies a potential means to achieve an end, or as something thatcan be used to create value. The first strategy textbooks outlining a holisticperspective focused on how resources needed to be allocated or deployedto earn rents. The interest in the term was for a long time linked to the efficiencyof resource allocation, but this focus has later been expanded to

issues such as resource accumulation, resource stocks, and resource flows(Haanaes, 1997).Firms develop firm-specific resources and then renew these to respond to shiftsin the business environment. Firms develop dynamic capabilities to adaptto changing environments. According to Pettus (2001), the term dynamicrefers to the capacity to renew resource positions to achieve congruence withchanging environmental conditions. A capability refers to the key role ofstrategic management in appropriately adapting, integrating, and reconfiguring


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internal and external organizational skills, resources, and functional capabilitiesto match the requirements of a changing environment. If firms are todevelop dynamic capabilities, learning is crucial. Change is costly; therefore,the ability of firms to make necessary adjustments depends upon their abilityto scan the environment to evaluate markets and competitors and to quickly

accomplish reconfiguration and transformation ahead of competition. However,history matters. Thus, opportunities for growth will involve dynamiccapabilities closely related to existing capabilities. As such, opportunitieswill be most effective when they are close to previous resource use.

According to Johnson and Scholes (2002), successful strategies are dependenton the organization having the strategic capability to perform at the level thatis required for success. So the first reason why an understanding of strategiccapability is important is concerned with whether an organizations strategiescontinue to fit the environment in which the organization is operatingand the opportunities and threats that exist. Many of the issues of strategydevelopment are concerned with changing strategic capability better to fit achanging environment. Understanding strategic capability is also importantfrom another perspective. The organizations capability may be the leadingedge of strategic developments, in the sense that new opportunities may becreated by stretching and exploiting the organizations capability either inways competitors find difficult to match, or in genuinely new directions, orboth. This requires organizations to be innovative in the way they developand exploit their capability. In this perspective, strategic capability is aboutproviding products or services to customers who are valued, or might be valuedin the future. An understanding of what customers value is the starting point.The discussion then moves to whether an organization has the resources toprovide products and services that meet these customer requirements.

A resource is anything that could be thought of as a strength or weakness of agiven firm. More formally, a firms resources at a given time can be defined asthose (tangible and intangible) assets that are tied to the firm over a substantialperiod of time. Examples of resources are brand names, in-house knowledgeof technology, employment of skilled personnel, trade contracts, machinery,efficient procedures, capital, and so forth. According to the economic school,resources include human capital, structural capital, relational capital, andfinancial capital. Priem and Butler (2001) find it problematic that virtuallyanything associated with a firm can be a resource, because this notion suggeststhat prescriptions for dealing in certain ways with certain categories ofresources might be operationally valid, whereas other categories of resourcesmight be inherently difficult for practitioners to measure and manipulate. Oneexample of a resource that might be difficult to measure and manipulate istacit knowledge. Some have argued for tacit knowledgethat understandinggained from experience sometimes cannot be expressed to another personand is unknown to oneselfas a source of competitive advantage. Anotherexample is the chief executive officer (CEO) resource. Prescriptions havebeen made to top managers of poorly performing firms that they are the causeof the problem and should think about voluntarily exiting the firm. This isa case where viewing a CEO as a resource would have more prescriptive


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implications for boards of directors than for the CEO.Heijden (2001) measured IT core capabilities for electronic commerce.Capabilities include organization-specific routines, processes, skills, andresources. They need to be built through learning processes and cannot bereadily bought. Heijden listed a total of nine core capabilities for the IS

function: IS/IT governance, business systems thinking, relationship building,designing technical architecture, making technology work, informed buying,contract facilitation, contract monitoring, and vendor development.

Strategic ResourcesBarney (2002) discussed how value, rarity, organization, and othercharacteristicsmightbe brought together into a single framework to understandthe return potential associated with exploiting any of a firms resources andcapabilities. The framework consists of the following five steps:1. If a resource or capability controlled by a firm is not valuable, thatresource will not enable a firm to choose or implement strategies that

exploit environmental opportunities or neutralize environmental threats.Organizing to exploit this resource will increase a firms costs or decreaseits revenues. These types of resources are weaknesses. Firms will eitherhave to fix these weaknesses or avoid using them when choosing andimplementing strategies. If firms do exploit these kinds of resources andcapabilities, they can expect to put themselves at a competitive disadvantagecompared to firms that either do not possess these nonvaluableresources or do not use them in conceiving and implementing strategies.Firms at a competitive disadvantage are likely to earn below-normaleconomic profits.2. If a resource or capability is valuable but not rare, exploiting this resource

in conceiving and implementing strategies will generate competitiveparity and normal economic performance. Exploiting these valuablebut-not-rare resources will generally not create above-normal economicperformance for a firm, but failure to exploit them can put a firm at acompetitive disadvantage. In this sense, valuable-but-not-rare resourcescan be thought of as organizational strengths.3. If a resource or capability is valuable and rare but not costly to imitate,exploiting this resource will generate a temporary competitive advantagefor a firm and above-normal economic profits. A firm that exploitsthis kind of resource is, in an important sense, gaining a first-moveradvantage, because it is the first firm that is able to exploit a particular

resource. However, once competing firms observe this competitive advantage,they will be able to acquire or develop the resources neededto implement this strategy through direct duplication or substitution atno cost disadvantage compared to the first-moving firm. Over time, anycompetitive advantage that the first mover obtained would be competedaway as other firms imitate the resources needed to compete. However,between the time a firm gains a competitive advantage by exploiting avaluable and rare but imitable resource or capability, and the time that


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competitive advantage is competed away through imitation, the first-movingfirm can earn above-normal economic performance. Consequently,this type of resource or capability can be thought of as an organizationalstrength and distinctive competence.4. If a resource is valuable, rare, and costly to imitate, exploiting this resource

will generate a sustained competitive advantage and above-normaleconomic profits. In this case, competing firms face a significant costdisadvantage in imitating a successful firms resources and capabilities,and thus cannot imitate this firms strategies. This advantage may reflectthe unique history of the successful firm, causal ambiguity about whichresources to imitate, or the socially complex nature of these resourcesand capabilities. In any case, attempts to compete away the advantagesof firms that exploit these resources will not generate above-normal oreven normal performance for imitating firms. Even if these firms wereable to acquire or develop the resources and capabilities in question, thevery high costs of doing so would put them at a competitive disadvantagecompared to the firm that already possessed the valuable, rare, andcostly to imitate resources. These kinds of resources and capabilitiesare organizational strengths and sustainable distinctive competencies.5. The question of organization operates as an adjustment factor in theframework. If a firm with a resource that is valuable, rare, and costly toimitate, is disorganized, some of its potential above-normal return couldbe lost. If the firm completely fails to organize itself to take advantageof this resource, it could actually lead the firm that has the potentialfor above-normal performance to earn normal or even below-normalperformance.Barney (2001) discussed how value and rarity of resources might be determined.Value is a question of conditions under which resources will and willnot be valuable. Models of the competitive environment within which a firmcompetes can determine value. Such models fall into two large categories: (1)efforts to use structure-conduct-performance-based models to specify conditionsunder which different firm resources will be valuable, and (2) efforts todetermine the value of firm resources that apply other models derived fromindustrial organization models of perfect and imperfect competition. As anexample of resource value determination, Barney discusses the ability of costleadership strategy to generate sustained competitive advantage. Several firmattributes may be associated with cost leadership, such as volume-derivedeconomies of scale, cumulative volume-derived learning curve economies,and policy choices. These firm attributes can be shown to generate economicvalue in at least some market settings. The logic used to demonstrate the valueof these attributes is a market structure logic that is consistent with traditionalmicroeconomics. After identifying the conditions under which cost leadershipcan generate economic value, it is possible to turn to the conditions underwhich cost leadership can be a source of competitive advantage (i.e., rare)and sustained competitive advantage (i.e., rare and costly to imitate).The resource-based theory postulates that some resources will have a highervalue for one firm than for other firms. The reasons why the value of resources


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may be firm-specific are multiple and include (Haanaes, 1997): the experience of working together as a team, the firm possessing superior knowledge aboutits resources, the bundling of the resources, and the existence of cospecializedor complementary assets. The value of a given resource may changeover time as the market conditions change, such as in terms of technology,

customer preferences, or industry structure. Thus, it is often argued that firmsneed to maintain a dynamic, as opposed to static, evaluation of the value ofdifferent resources.Rarityis a question of how many competing firms possess a particular valuableresource. If only one competing firm possesses a particular valuable resource,then that firm can gain a competitive advantage, that is, it can improve itsefficiency and effectiveness in ways that competing firms cannot. One exampleof this form of testable assertion is mentioned by Barney (2001). Theexample is concerned with organizational culture as a source of competitiveadvantage. If only one competing firm possesses a valuable organizationalculture (where the value of that culture is determined in ways that are exogenousto the firm), then that firm can gain a competitive advantage, that is,it can improve its efficiency and effectiveness in ways that competing firmscannot. Both these assertions are testable. If a firm uniquely possesses a valuableresource and cannot improve its efficiency and effectiveness in ways thatgenerate competitive advantages, then these assertions are contradicted. Onecould test these assertions by measuring the extent to which a firm uniquelypossesses valuable resources, such as valuable organizational culture, measuringthe activities that different firms engage in to improve their efficiencyand effectiveness, and then seeing if there are some activities a firm with theunique culture engages in to improve its effectiveness and efficiencyactivitiesnot engaged in by other competing firms. In general, the rarity of aresource is present as long as the number of firms that possess a particularvaluable resource is less than the number of firms needed to generate perfectcompetition dynamics. Of course, there are difficult measurement problemsassociated with testing assertions of this form. Barney (2001) points outthat additional research work is needed to complete the parameterization ofthe concept of rarity. Efficient firms can sustain their competitive advantageonly if their resources can neither be extended freely nor imitated by otherfirms. Hence, in order for resources to have the potential to generate rents,they must be rare. Valuable, but common, resources cannot by themselvesrepresent sources of competitive advantage because competitors can accessthem. Nobody needs to pay extra for obtaining a resource that is not held inlimited supply.In addition to value and rarity, inimitability has to be determined. Inimitabilitycan be determined through barriers to imitation and replication. The extent ofbarriers and impediments against direct and indirect imitation determine theextent of inimitability. One effective barrier to imitation is that competitorsfail to understand the firms sources of advantage. The lack of understandingcan be caused by tacitness, complexity, and specificity, which form bases forcompetitive advantage (Haanaes, 1997). Several authors have categorizedresources. A common categorization is tangibles versus intangibles. Tangibles


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are relatively clearly defined and easy to identify. Tangible resources includeplants, technology, land, and geographical location, access to raw materials,capital, equipment, and legal resources. Tangible resources tend to bepropertybasedand may also include databases, licenses, patents, registered designs

and trademarks, as well as other property rights that are easily bought andsold. Intangibles are more difficult to define and also to study empirically.Intangible resources encompass skills, knowledge, organizational capital,relationships, capabilities, and human capital, as well as brands, companyand product reputation, networks, competencies, perceptions of quality, andthe ability to manage change. Intangible resources are generally less easyto transfer than tangible resources, as the value of an intangible resource isdifficult to measure.Based on this discussion, we might add to the framework by Barney (2002)four more steps:6. If our firm with a resource that is valuable, rare, costly to imitate, andorganized is easy to substitute, some of its potential above-normal returncould be lost. If a competing firm is able to do the same task as ourfirm by applying a different resource which can substitute our resourcefor the same task, it could actually lead our firm that has the potentialfor above-normal performance to earn normal or even below-normalperformance.7. If our firm with a resource that is valuable, rare, costly to imitate, organizedand difficult to substitute is easy to move, then again we might bein trouble in terms of not gaining sustained competitive advantage. Inthis case, a resource might leave the firm and join a competing firm.8. If our firm with a resource that is valuable, rare, costly to imitate, organized,difficult to substitute and difficult to move, is difficult to combine,then some potential benefits from the resource is lost. This is becausemany resources are of little value except when they are combined withother resources.9. If our firm with a resource that is valuable, rare, costly to imitate, organized,difficult to substitute, difficult to move and easy to combineis difficult to transfer, then we might have difficulty in transferring toclients the value that they are paying for. Here we make a distinctionbetween moving (undesired action) and transferring (desired action).

Slack ResourcesAng (1993) studied the etiology of IT outsourcing. Any analysis of outsourcing

will typically incorporate the effects of managerial discretionary poweron substantive administrative choices. Inclusion of managerial-behavioralfactors to understanding outsourcing is consistent with the view of managerialchoices to be the primary link between an organization and its environment.The importance of managerial discretion in the operations of thefirm has been widely acknowledged in organization theory. In general, theseparation of ownership from control of the firm gives rise to problems ofcontrolling managerial behavior. It can be emphasized that when ownership


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is thinly spread over a large number of shareholders in a firm, control liesin the hands of the managers who themselves own only a tiny fraction ofthe firms equity. These circumstances permit managers a greater discretionand decision latitude over substantive domains such as resource allocation,administrative choices, and product market selection.

Organizations with abundant slack tend to induce greater managerial discretion.Slack is defined as the difference between total resources and totalnecessary payments. It refers to the excess that remains once a firm has paidits various internal and external constituencies to maintain their cooperation.Slack can further be defined as a cushion of excess resources available in anorganization that will either solve many organization problems or facilitate thepursuit of goals outside the realm of those dictated by optimization principles.

An organizations slack reflects its ability to adapt to unknown or uncertainfuture changes in its environment. Accordingly, uncommitted or transferableslack resources would expand the array of options available to management.Instead of distributing slack resources back to shareholders, managers tendto retain and invest slack resources in new employees, new equipment, andother assets to promote asset capitalization. One primary reason for retainingearnings within the organization is that increased asset capitalization,the primary indicator of firm size, enhances the social prominence, publicprestige, and political power of senior executives.Investments in IT represent a major approach to asset capitalization inorganizations.Information technology may symbolize firm growth, advancement,and progress. Because investments in IT can promote social prominence andpublic prestige, managers are induced to utilize slack resources to internalizeIS services. Inducements toward investments in in-house IS servicesare further reinforced by well-publicized case studies that demonstrate thecompetitive advantage and new business opportunities afforded by IT. Theabove reasoning suggests that managers may exhibit a penchant for buildingup internal IT resources such as IS employees, equipment, and computercapacity when organizations possess slack resources. In contrast, when slackresources are low, managers tend to conserve resources in response to theanxiety provoked by loss of financial resources. Anxiety is provoked becausethe loss of financial resources is often attributed to managerial incompetenceand organizational ineffectiveness. As a result, leaders are more likely to beblamed and replaced when financial performance is poor. In response to theanxiety provoked by loss of financial resources, decision makers have beenobserved to reduce costs through downsizing the company by selling offphysical assets and laying off workers.Companies may even sell IT assets at inflated rates to external service providersto generate short-term financial slack. The companies then reimburse theservice provider by paying higher annual fees for a long-term outsourcingcontract lasting eight to ten years. In other words, long-term facilities managementcontracts can be drawn where the service providers agree to purchasecorporate assets, such as computer equipment, at prices substantially higherthan the market value, and to provide capital to the company by purchasing


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stock from the company. Arrangements such as these permit companies tomaintain capital, defer losses on the disposition of assets, and at the sametime, show an increase in financial value on the balance sheet. But, becausethese arrangements also involve companies paying higher fees over the lifeof the contract, company financial statements are thus artificially inflated and

do not reflect the true financial picture of the institution.According to Ang (1993), when slack resources are low, we would expectfirms to downsize internal IS services by selling off IT assets and reducing ISpersonnel and occupancy expensesin effect, outsourcing IS services. Thus,we would expect that firms are less likely to outsource when slack resourcesare high and more likely to outsource when slack resources are low.Besides managerial discretion over slack resources, top managementsperception of the criticality of IT may differ. According to the dependenceavoidanceperspective of the firm, organizations will avoid compromisingtheir autonomy, particularly when the resource is vital for the organizationssurvival. The strength of an organizations aversion to loss of autonomy is thusa function of the criticality of the resource. The organization will proactivelystruggle to avoid external dependency, that is, outsourcing, regardless of efficiencyconsiderations as long as it depends on IT for survival. The value ofIT for competitive advantage intensifies the pressure on firms to internalizesophisticated IS services to avoid leakage of competitive information.

Although it is generally accepted that IT is critical for information-intensivefirms, not all members of top management teams attach the same degree ofcriticality to IT. Perceptions of the CIOs and CEOs of IT importance tend tobe misaligned. While CIOs recognize IT as vital to an organizations strategy,CEOs with little background in IT tend to regard IS services as back-roomoperations, an expense to be controlled rather than a strategic investment tobe capitalized. Generally, CEOs perceptions of IT criticality are as importantas, if not more important than, those of the CIOs with respect to IS sourcingdecisions because IS investments represent a significant financial outlay forcorporations. Sometimes management policies and direction of IT use aredictated by the CEOs psychological involvement and participation in IS.Thus, we would expect that the greater the perceived criticality of IT to thefirm, the less likely the firm will outsource its IS services (Ang, 1993).

Firm BoundariesFor many years researchers have sought to better understand why companiesadopt different modes of governance. The resource-based view of thefirm focuses on the opportunity for gain from transactions. A technologys

potential for rendering a sustained competitive advantage will influencegovernance modes for external technology sourcing. The fundamental tenetsof a resource-based perspective suggest a positive relationship between the


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perceived opportunity for sustainable advantage and the probability that acompany will source technology with an acquisition from external sources(Steensma & Corley, 2001).Sourcing technology from outside the organization changes company boundarybetween the firm that desires the know-how (the sourcing firm), and the

firm that has the technology (the source firm). Managers must assess thegovernance alternatives for procuring desired technological know-how. Accordingto classical decision theory, strategic decisions such as these entaila trade-off between risk and expected return, where risk is conceptualizedas the variance of the probability distribution of the gains and losses of aparticular alternative.Steensma and Corley (2001) investigated organizational context as a moderatorof theories on firm boundaries for technology sourcing. They found that theresource-based rationale, grounded on the opportunity to develop sustainableadvantages, plays a larger role in explaining firm boundaries when a firm haslower levels of recoverable slack and a risk-seeking orientation than whena firm has higher slack and risk aversion. Organizational slack is defined asan organizations excess resources, while firm risk orientation is defined asexpected outcome uncertainty.

Activity-Based Theory of the FirmThe resource-based theory of the firm grew out of efforts to explain thegrowth of firms. Although its origins lay primarily in economics, researchersin strategy have developed the resource-based theory. The main attractionof the resource-based theory is that it focuses on explaining why firms aredifferent and its effect on profitability. The main tenets of the resource-basedtheory are that firms differ in their resource endowments, that these differencesare persistent, and that firm-level performance differentials can be explained

by analyzing a firms resource position. Differences in resources are seen tolead to nonreplicable efficiency rents.Sheehan (2002) discussed comparing and contrasting the resource-basedtheory with the activity-based theory, and his discussion is presented inthe following. The activity-based theory conceives the firm as a bundle ofactivities, while the resource-based theory conceives the firm as a bundleof resources. The resource-based theory focuses on explaining why firmscreate more value than others by examining differences in resource stocks.However, the resource-based theory places little or no emphasis on resourceflows. The role of the production function in transforming inputs into endproducts (other than having the latent ability to transform) is underconceptualized

in the resource-based theory. On the other hand, the activity-basedtheory focuses on flows of resources in activities. It emphasizes the impactof the firms production function on creating value, while placing little attentionon differences in stocks of resources. It is implicitly assumed that allnecessary inputs (resources) can be acquired from the market.The goal of strategy formulation in the resource-based theory is to identifyand increase those resources that allow a firm to gain and sustain superiorrents. Firms owning strategic resources are predicted to earn superior rents,


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while firms possessing no or few strategic resources are thought to earnindustry-average rents or below-average rents. The goal of strategy formulationin the activity-based theory is to identify and explore drivers that allowa firm to gain and sustain superior rents. Drivers are a central concept in theactivity-based theory. To be considered drivers, firm-level factors must meet

three criteria: They are structural factors at the level of activities, they aremore or less controllable by management, and they impact the cost and/ordifferentiation position of the firm. The definition of drivers is primarily basedon what drivers do. Drivers are abstract, relative, and relational properties ofactivities. For example, the scale of an activity is a driver, as the size of theactivity relative to competitors may represent a competitive advantage.The analytical focus of the resource-based theory is potentially narrowerthan that of the activity-based theory. While the activity-based theory takesthe firms entire activity set as its unit of analysis, the resource-based theoryfocuses on individual resources or bundles of resources. Having a narrowerfocus means that the resource-based theory may not take into account thenegative impact of resources, how a resources value may change as theenvironment changes, or the role of non-core resources in achieving competitiveadvantage.The activity-based and resource-based theories are similar, as they bothattempt to explain how firms attain superior positions through factors thatincrease firm differentiation or lower firm cost. While drivers and resourcesshare a common goal of achieving and sustaining superior positions, themanner by which they are seen to reach a profitable position is different.With the resource-based theory, it is the possession or control of strategicresources that allow a firm to gain a profitable position. On the other hand,drivers within the activity-based theory are not unique to the firm. They aregeneric, structural factors, which are available to all firms in the industry, inthe sense that they are conceptualized as properties of the firms activities.

A firm gains a profitable position by configuring its activities using drivers.It is this position that a firm may own, but only if it is difficult for rivals tocopy the firms configuration.The sustainability of superior positions created by configuring drivers orowning resources is based on barriers to imitation. The sustainability ofcompetitive advantage as per the activity-based theory is through barriers toimitation at the activity level. If the firm has a competitive advantage, as longas competitors are unable to copy the way activities are performed and configuredthrough the drivers, the firm should be able to achieve above-averageearnings over an extended period. The sustainability of superior profitabilityin the resource-based theory is through barriers to imitation of resources andimmobility of resources. If resources are easily copied or substituted, thenthe sustainability of the position is suspect.Sheehan (2002) concludes his discussion by finding similarities betweenthe resource-based theory and the activity-based theory. Resources in theresource-based theory are similar to drivers in the activity-based theory, asboth are based on earning efficiency rents. Furthermore, capabilities in theresource-based theory are similar to activities in the activity-based theory,


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as both imply action.

Information Technology ResourcesThe resource-based view started to appear in IT research one decade ago.Now IT resources can be compared to one another and, perhaps more importantly,can be compared with non-IT resources. Thus, the resource-based

view promotes cross-functional studies through comparisons with other firmresources.In the beginning of resource-based studies of IT resources, IT was dividedinto three assets, which together with processes contribute to business value.These three IT assets were labeled human assets (e.g., technical skills, businessunderstanding, problem-solving orientation), technology assets (e.g.,physical IT assets, technical platforms, databases, architectures, standards),and relationship assets (e.g., partnerships with other divisions, client relationships,top management sponsorship, shared risk and responsibility). ITprocesses were defined as planning ability, cost-effective operations andsupport, and fast delivery. This categorization was later modified to include

IT infrastructure, human IT resources, and IT-enabled intangibles.Wade and Hulland (2004) presented a typology of IT resources, where the ITresources held by a firm can be sorted into three types of processes: insideout,outside-in, and spanning. Inside-out resources are deployed from insidethe firm in response to market requirements and opportunities, and tend to beinternally focused. In contrast, outside-in resources are externally oriented,placing an emphasis on anticipated market requirements, creating durablecustomer relationships, and understanding competitors. Finally, spanningresources, which involve both internal and external analysis, are needed tointegrate the firms inside-out and outside-in resources.Inside-out resources include IS infrastructure, IS technical skills, IS development,

and cost-effective IS operations: IT infrastructure: Many components of the IT infrastructure (such asoff-the-shelf computer hardware and software) convey no particular strategicbenefit due to lack of rarity, ease of imitation, and ready mobility.Thus, the types of IT infrastructure of importance are either proprietaryor complex and hard to imitate. Despite research attempts to focus ontheinimitable aspects of IT infrastructure, the IT infrastructure resourcehas generally not been found to be a source of sustained competitiveadvantage for firms. IT technical skills: IT technical skills are a result of the appropriate,updated technology skills, relating to both systems hardware and software

that are held by the IS/IT employees of a firm. Such skills do not includeonly current technical knowledge, but also the ability to deploy, use, andmanage that knowledge. Thus, this resource is focused on technical skillsthat are advanced, complex, and therefore difficult to imitate. Althoughthe relative mobility of IS/IT personnel tends to be high, some IS skillscannot be easily transferred, such as corporate-level knowledge assetsand technology integration skills, and thus these resources can becomea source of sustained competitive advantage.


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IT development: IT development refers to the capability to develop orexperiment with new technologies, as well as a general level of alertnessto emerging technologies and trends that allow a firm to quickly takeadvantage of new advances. Thus, IT development includes capabilitiesassociated with managing a systems development life-cycle that is

capable of supporting competitive advantage, and should therefore leadto superior firm performance. Cost-effective IT operations: This resource encompasses the abilityto provide efficient and cost-effective IS operations on an ongoing basis.Firms with greater efficiency can develop a long-term competitiveadvantage by using this capability to reduce costs and develop a costleadership position in their industry. In the context of IS operations, theability to avoid large, persistent cost overruns, unnecessary downtime,and system failure is likely to be an important precursor to superior performance.Furthermore, the ability to develop and manage IT systemsof appropriate quality that function effectively can be expected to havea positive impact on performance.Outside-in resources include external relationship management and marketresponsiveness: External relationship management: This resource represents the firmsability to manage linkages between the IT function and stakeholdersoutside the firm. It can manifest itself as an ability to work with suppliersto develop appropriate systems and infrastructure requirementsfor the firm, to manage relationships with outsourcing partners, or tomanage customer relationships by providing solutions, support, and/orcustomer service. Many large IT departments rely on external partnersfor a significant portion of their work. The ability to work with and managethese relationships is an important organizational resource leadingto competitive advantage and superior firm performance. Market responsiveness: Market responsiveness involves both the collectionof information from sources external to the firm, as well as thedissemination of a firms market intelligence across departments andthe organizations response to that learning. It includes the abilities todevelop and manage projects rapidly and to react quickly to changes inmarket conditions. A key aspect of market responsiveness is strategicflexibility, which allows the organization to undertake strategic changewhen necessary.Spanning resources include IS-business partnerships, IS planning and changemanagement: IS-business partnerships: This capability represents the processes ofintegration and alignment between the IS function and other functionalareas or departments of the firm. The importance of IS alignment,particularly with business strategy, has been well documented. Thisresource has variously been referred to as synergy, assimilation, andpartnerships. All of these studies recognize the importance of buildingrelationships internally within the firm among the IS function and otherareas or departments. Such relationships help to span the traditional


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gaps that exist between functions and departments, resulting in superiorcompetitive position and firm performance. An element of this resourceis the support for collaboration within the firm. IS planning and change management: The capability to plan, manage,and use appropriate technology architectures and standards also helps

to span these gaps. Key aspects of this resource include the ability toanticipate future changes and growth, to choose platforms (includinghardware, network, and software standards) that can accommodate thischange, and to effectively manage the resulting technology change andgrowth. This resource has been defined variously in previous research asunderstanding the business case, problem solving orientation, andcapacity to manage IT change. It includes the ability of IS managersto understand how technologies can and should be used, as well as howto motivate and manage IS personnel through the change process.In order to explore the usefulness of the resource-based theory for IT resources,it is necessary to explicitly recognize the characteristics and attributes ofresources that lead them to become strategically important. Although firmspossess many resources, only a few of these have the potential to lead thefirm to a position of sustained competitive advantage. What is it, then, thatseparates regular resources form those that confer a sustainable strategicbenefit?

According to Wade and Hulland (2004), resource-based theorists have approachedthis question by identifying sets of resource attributes that mightconceptually influence a firms competitive position. Under this view, onlyresources exhibiting all of these attributes can lead to a sustained competitive advantage for the firm. We have already mentioned Barneys (2001)attributes of value, rareness, inimitability, nonsubstitutability, combination,and exploration.In addition, an important seventh attribute is immobility. Once a firm establishesa competitive advantage through the strategic use of resources, competitorswill likely attempt to amass comparable resources in order to share in theadvantage. A primary source of resources is factor markets. If firms are ableto acquire the resources necessary to imitate a rivals advantage, the rivalsadvantage will be short-lived. Thus, a requirement for sustained competitiveadvantage is that resources be imperfectly mobile or nontradable.To govern IT resources efficiently and effectively, it is necessary to understandthe strategic attributes of each resource. In Figure 1.1, the table showsan example of how strategic IT resources can be identified. The scale from1 (little extent) to 5 (great extent) is applied.In this example, we see that IT infrastructure is the IT resource with thegreatest potential to lead to sustained competitive advantage, which wouldcontradict that the IT infrastructure resource has generally not been found tobe a source of sustained competitive advantage for firms. On the other hand,cost-effective IT operations have the least potential.Wade and Hulland (2004) suggest that some of the resources create competitiveadvantage, while others sustain that advantage. A distinction is made betweenresources that help the firm attain a competitive advantage and those that help


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the firm to sustain the advantage. These two types of resource attributes canbe thought of as, respectively, ex ante and ex post limits to competition.Ex ante limits to competition suggest that prior to any firms establishing asuperior resource position, there must be limited competition for that posi-AttributesResourcesValuable Rare Exploitable Inimitable NonsubstitutableCombinable Immobile TOTALITinfrastructure4 2 5 5 2 5 4 27IT technicalskills4 2 3 3 4 4 3 23ITdevelopment4 3 3 3 4 3 2 22CosteffectiveIToperations4 2 3 2 4 3 1 19

Figure 1.1. IT resources in terms of strategic importance based on attributes

tion. If any firm wishing to do so can acquire and deploy resources to achievethe position, it cannot by definition be superior. Attributes in this categoryinclude value, rarity, and appropriability.Ex post limits to competition mean that subsequent to a firms gaining a superiorposition and earning rents, there must be forces that limit competitionfor those rents. Attributes in this category include imitability, substitutability,and mobility.Damianides (2005) applied a different approach to identify resources. Hedefined the following naturally grouped processes of IT resources: plan andorganize, acquire and implement, deliver and support, and monitor and evaluate.

He also developed an IT governance checklist, listing questions to ask touncover IT issues, questions to ask to find out how management addressesthe IT issues, and questions to self-assess IT governance practices.

Characteristics of Value ConfigurationsTo comprehend the value that information technology provides to organizations,we must first understand the way a particular organization conductsbusiness and how information systems affect the performance of variouscomponent activities within the organization. Understanding how firms differis a central challenge for both theory and practice of management. For a longtime, Porters (1985) value chain was the only value configuration known tomanagers. Stabell and Fjeldstad (1998) have identified two alternative value

configurations. A value shop schedules activities and applies resources ina fashion that is dimensioned and appropriate to the needs of the clientsproblem, while a value chain performs a fixed set of activities that enablesit to produce a standard product in large numbers. Examples of value shopsare professional service firms, as found in medicine, law, architecture, andengineering. A value network links clients or customers who are or wish tobe interdependent. Examples of value networks are telephone companies,retail banks, and insurance companies.


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A value configuration describes how value is created in a company for itscustomers. A value configuration shows how the most important businessprocesses function to create value for customers. A value configuration representsthe way a particular organization conducts business.

The Organization as Value ChainThe best-known value configuration is the value chain. In the value chain,value is created through efficient production of goods and services basedon a variety of resources. The company is perceived as a series or chain ofactivities. Primary activities in the value chain include inbound logistics,production, outbound logistics, marketing and sales, and service. Supportactivities include infrastructure, human resources, technology development,and procurement. Attention is on performing these activities in the chain inefficient and effective ways. In Figure 1.2, examples of IS/IT are assigned toprimary and support activities. This figure can be used to describe the current

IS/IT situation in the organization, as it illustrates the extent of coverage ofIS/IT for each activity.The knowledge intensity of systems in the different activities can be illustratedby different shading, where dark shading indicates high knowledge intensity.In this example, it is assumed that the most knowledge-intensive activitiesare computer-aided design and customer relationship management.

The Organization as Value ShopValue cannot only be created in value chains. Value can also be created intwo alternative value configurations: value shop and value network (StabellFigure 1.2. Examples of IS/IT in the value chainInfrastructure: Use of corporate intranet for internal communicationsHuman resources: Use of corporate intranet for competence building

Technology: Computer-Aided Design (CAD)Procurement: Use of electronic marketplacesInbound Production: Outbound Marketing Service:logistics: Computerlogistics: and sales: SystemElectronic Integrated Web-based Customer forData Manufacturing order- Relationship localInterchange (CIM) tracking Management troubleshooting(EDI) system (CRM)

& Fjeldstad, 1998). In the value shop, activities are scheduled and resourcesare applied in a fashion that is dimensioned and appropriate to the needs ofthe clients problem, while a value chain performs a fixed set of activities thatenables it to produce a standard product in large numbers. The value shop is

a company that creates value by solving unique problems for customers andclients. Knowledge is the most important resource, and reputation is criticalto firm success.While typical examples of value chains are manufacturing industries such aspaper and car production, typical examples of value shops are law firms andmedical hospitals. Often, such companies are called professional service firmsor knowledge-intensive service firms. Just as the medical hospital is a wayto practice medicine, the law firm provides a standard format for delivering


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complex legal services. Many features of its stylespecialization, teamwork,continuous monitoring on behalf of clients (patients), and representation inmany forumshave been emulated in other vehicles for delivering professionalservices (Galanter & Palay, 1991).Knowledge-intensive service firms are typical value shops. Sheehan (2002)

defines knowledge-intensive service firms as entities that sell problem-solvingservices, where the solution chosen by the expert is based on real-timefeedback from the client. Clients retain knowledge-intensive service firmsto reduce their uncertainty. Clients hire knowledge-intensive service firmsprecisely because the client believes the firm knows something that the clientdoes not and believes it is necessary to solve their problems.While expertise plays a role in all firms, its role is distinctive in knowledgeintensiveservice firms. Expert, often professional, knowledge is at the coreof the service provided by the type of firm.Knowledge-intensive service firms not only sell a problem-solving service,but equally a problem-finding, problem-defining, solution-execution, andmonitoring service. Problem finding is often a key for acquiring new clients.Once the client is acquired and their problem is defined, not all problems willbe solved by the firm. Rather, the firm may only clarify that there is no problem(i.e., the patient does not have a heart condition) or that the problem shouldbe referred to another specialist (i.e., the patient needs a heart specialist).If a problem is treated within the firm, then the firm needs to follow up theimplementation to assure that the problem in fact has been solved (i.e., is thepatients heart now working properly?). This follows from the fact that thereis often uncertainty in both problem diagnosis and problem resolution.Sheehan (2002) has created a typology of knowledge-intensive service firmsconsisting of the following three types. First, knowledge-intensive searchfirms search for opportunities. The amount of value they create depends onthe size of the finding or discovery, where size is measured by quality ratherthan quantity. Examples of search firms include petroleum and mineral exploration,drug discovery in the pharmaceutical industry, and research in thebiotechnology industry. Second, knowledge-intensive diagnosis firms createvalue by clarifying problems. Once the problem has been identified, the suggestedremedy usually follows directly. Examples of diagnosis firms includedoctors, surgeons, psychotherapists, veterinarians, lawyers, auditors and taxaccountants, and software support. Finally, knowledge-intensive design firmscreate value by conceiving new ways of constructing material or immaterialartifacts. Examples of design firms include architecture, advertising, researchand development, engineering design, and strategy consulting.Knowledge-intensive service firms create value through problem acquisitionand definition, alternative generation and selection, implementation of analternative, and follow up to see if the solution selected resolves the problem.To reflect this process, Stabell and Fjeldstad (1998) have outlined the valueconfiguration of a value shop.

A value shop is characterized by five primary activities: problem finding andacquisition, problem solving, choice, execution, and control and evaluation,as illustrated in Figure 1.3. Problem finding and acquisition involves working


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with the customer to determine the exact nature of the problem or need. Itinvolves deciding on the overall plan of approaching the problem. Problemsolving is the actual generation of ideas and action (or treatment) plans.Choice represents the decision of choosing among alternatives. While it isthe least important primary activity of the value shop in terms of time and

effort, it is also the most important in terms of customer value. Executionrepresents communicating, organizing, and implementing the decision, orperforming the treatment. Control and evaluation activities involve monitoringand measurement of how well the solution solved the original problemor met the original need.This may feed back into the first activity, problem finding and acquisition, fortwo reasons. First, if the proposed solution is inadequate or did not work, itfeeds back into learning why it was inadequate and begins the problem-solvingphase anew. Second, if the problem solution was successful, the firm mightenlarge the scope of the problem-solving process to solve a bigger problemrelated to or dependent upon the first problem being solved.Figure 1.3 can be used to identify current IS/IT in the organization. We leta law firm serve as example in Figure 1.4. Within each of the five activities,there are many tasks in a law firm. For each task, there may be IS/ITsupport. For example, problem solving may consist of the two tasks of caseanalysis and reference search. Lawyers will be eager to discuss the case andto search more information on similar cases. A system for case-based reasoningmay be installed, where the current case can be compared to similarcases handled by the law firm. Also, intelligent search engines with thesaurimay be available in the law firm to find relevant information on the Internetand in legal databases.Figure 1.3 . Examples of IS/IT in the value shopProblem finding

and acquisition:Client databaseProblemsolving:Best practice databaseChoice of solutionto problem:Simulation systemExecution ofsolution:Document systemControl andevaluation:Accounting systemInfrastructure: Use of corporate intranet for internal communicationsHuman resources: Use of corporate intranet for competence buildingTechnology: Image processing

Procurement: Use of electronic marketplaces

Knowledge-intensive service firms are typical value shops, and such firmsdepend on reputation for success, as reputation is a key driver of firm valuecreation. Reputation is a relational concept, in the sense that firms are judgedby their stakeholders relative to their competitors. Reputation is what is generallysaid or believed about an entity by someone, it is the net perceptionof a firm held by stakeholders judged relative to other firms. According to


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Sheehan (2002), there are four conditions that must be present for reputationto work. Firstly, rents earned from maintaining a good reputation mustbe greater than not. Secondly, there must be a minimum of contact amongstakeholders to allow for the changes in reputation to be communicated.Thirdly, there needs to be a possibility of repeat business. And lastly, there

must be some uncertainty regarding the firms type and/or behavior.Reputation is related to the asymmetry of information, which is a typicalfeature of knowledge intensive service firms. Asymmetry is present whenclients believe the firm knows something that the clients do not and believeit is necessary to know to solve their problems.Reputation can be classified as a strategic resource in knowledge-intensivefirms. To be a strategic resource, it has to be valuable, rare, costly to imitate,and possible to organize. Reputation is valuable, as it increases the valuereceived by the client. Reputation is rare, as by definition only a few firmscan be considered best in the industry. Reputation is costly to imitate, as itActivities Tasks IS/ITProblem finding andacquisition

Register client informationRegister case informationFinancial systemCase databaseProblem solving Do case analysisDo reference searchCase-basedreasoningLibrary searchengineChoice Evaluate alternativesMake recommendation toclientCase-basedreasoningOffice systemsExecution Participate at meetings

Revise recommendationOffice systemsOffice systemsControl and evaluation Register recommendationCheck client satisfactionCase databaseFinancial system

Figure 1.4. Examples of IS/IT in the value shop

is difficult to build a reputation in the short term. Reputation is possible toorganize in the general sense of controllability, which implies that a firm canbe organized to take advantage of reputation as a resource.

The Organization as Value NetworkThe third and final value configuration is the value network. A value network

is a company that creates value by connecting clients and customers that are,or want to be, dependent on each other. These companies distribute information,money, products, and services. While activities in both value chainsand value shops are done sequentially, activities in value networks occur inparallel. The number and combination of customers and access points in thenetwork are important value drivers in the value network. More customersand more connections create higher value to customers.Stabell and Fjeldstad (1998) suggest that managing a value network can


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be compared to managing a club. The mediating firm admits members thatcomplement each other, and in some cases exclude those that dont. The firmestablishes, monitors, and terminates direct or indirect relationships amongmembers. Supplier-customer relationships may exist among the members ofthe club, but to the mediating firm they are all customers.

Examples of value networks include telecommunication companies, financialinstitutions such as banks and insurance companies, and stockbrokers. Valuenetworks perform three activities (see Figure 1.5): Development of customer network through marketing and recruiting ofnew customers, to enable increased value for both existing customersand new customers. Development of new services and improvement in existing services. Development of infrastructure so that customer services can be providedmore efficiently and effectively.The current IS/IT situation in a value network will mainly be describedthrough the infrastructure that typically will consist of information technology.In addition, many of the new services may be information systems thatwill be used by customers in their communication and business transactions with other customers. The knowledge component will mainly be found inthe services of a value network, as information systems are made availableto customers to exchange relevant information.

Comparison of Value ConfigurationsValue chain, value shop and value network are alternative value configurationsthat impact the use of information technology in the company, as illustratedin Figure 1.6. While the role of IT is to make production more efficient in avalue chain, IT creates added value in the value shop, while IT in the form ofinfrastructure is the main value in the value network. Some companies have

more than one value configuration, but most companies have one dominatingconfiguration.Figure 1.5. Examples of IS/IT in the value networkCustomer Network

Customer Relationship Management(CRM)CustomerServices

Value Added Services SystemOperational InfrastructureSecurity SystemInfrastructure: Use of corporate intranet for internal communicationsHuman resources: Use of corporate intranet for competence buildingTechnology: Network efficiency monitoring systemProcurement: Use of electronic marketplaces

In the long term, business organizations can choose to change their value

configurations. A bank, for example can be a value shop when it focuses onconverting inputs to outputs. The value resides in the output and once youhave the output, you can remove the production organization. This removaldoes not impact the value of the output. The value shop is a solution provider.Its somebody who solves problems. The input is a problem. The output is asolution to the problem. A bank that does this would view itself as a financialservice operator, a financial advisor that also has the ability to providethe money. But what it would do is identify client problems, address those


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problems, select a solution together with the client, and help to implementit. It would have stringent quality controls. As part of its offering, it wouldprobably supply the client with some cash as a loan or accept some of theclients cash for investment (Chatzkel, 2002).Or, the bank can be a value network, which is basically the logic of the

marketplace.The bank would define its role as a conduit between people who donot have money and those people who do have money. What the bank doesis arrange the flow of cash between them. The bank will attract people withmoney to make deposits and investments. The bank will also attract peoplewithout money to take out loans. As a value network, the bank will connectpeople with opposite financial needs. The network consists of people withdifferent financial needs. Over time, persons in the network may change statusfrom money needer to money provider, and vice versa (Chatzkel, 2002).Both as a value shop and as a value network, the business organization canbe identified as a bank. But it would have completely different consequencesfor what it will focus on doing well, what it will focus on doing itself, versuswhat it would not want to do itself. This provides a kind of strategic systemslogic. It asks, Which strategic system in terms of value configuration areFigure 1.6. Characteristics of value configurationsCharacteristics Value Chain Value Shop Value NetworkValue creation Transformation ofinput to outputSolving clientsand customersproblemsConnecting clientsand customers toeach otherWork form SequentialproductionIntegrated and

cyclical problemsolvingMonitored andsimultaneousconnectionsInformationsystemsMaking productionmore efficientAdding value to theknowledge workMain value by useof IT infrastructureExample Paper factory Law firm Telecom company

we going to operate in? Choosing an appropriate value configuration is along-term decision with long-term consequences.

ReferencesAng, S. (1993). The etiology of information systems outsourcing. Unpublisheddoctoral dissertation, University of Minnesota.Barney, J. B. (2001). Is the resourced-based view a useful perspective forstrategic management research? Yes.Academy of ManagementReview,26(1), 41-56.Barney, J. B. (2002). Gaining and sustaining competitive advantage. Upper


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Saddle River, NJ: Prentice Hall.Chatzkel, J. (2002). A conversation with Gran Roos. Journal of IntellectualCapital, 3(2), 96-117.Collis, D. J., & Montgomery, C. A. (1997). Corporate strategy: Resourcesand the scope of the firm. Chicago: McGraw-Hill.

Damianides, M. (2005). Sarbanse-Oxley and IT governance: New guidanceon IT control and compliance. Information Systems Management, 22(1),77-85.Galanter, M., & Palay, T. (1991). Tournament of lawyers: The transformationof the big law firms. Chicago: University of Chicago Press.Garud, R., & Kumaraswamy, A. (2005). Vicious and virtuous circles in themanagement of knowledge: The case of Infosys Technologies. MISQuarterly, 29(1), 9-33.Johnson, G., & Scholes, K. (2002). Exploring corporate strategy. Harlow:Financial Times/Prentice Hall.Haanes, K. B. (1997). Managing resource mobilization: Case studies of Dynal,Fiat Auto Poland and Alcatel Telecom Norway. Unpublished doctoraldissertation, Copenhagen Business School, Copenhagen, Denmark.Heijden, H. V. D. (2001). Measuring IT core capabilities for electronic commerce.Journal of Information Technology, 16, 13-22.Hitt, M. A., Bierman, L., Shumizu, K., & Kochhar, R. (2001). Direct andmoderating effects of human capital on strategy and performance inprofessional service firms: A resource-based perspective.Academy ofManagementJournal, 44(1), 13-28.Lwendahl, B. R. (2000). Strategic management of professional servicefirms (2nd ed.). Copenhagen, Denmark: Copenhagen Business SchoolPress.Maister, D. H. (1993). Managing the professional service firm. New York:Free Press.Peppard, J., Lambert, R., & Edwards, C. (2000). Whose job is it anyway?Organizational information competencies for value creation. InformationSystems Journal, 10(4), 291-322.Pettus, M. L. (2001). The resourced-based view as a development growthprocess: Evidence from the deregulated trucking industry.Academy ofManagementJournal, 44(4), 878-896.Porter, M. E. (1985). Competitive advantage: Creating and sustaining competitivePerformance. New York: Free Press.Priem, R. L., & Butler, J. E. (2001). Is the resourced-based view a usefulperspective for strategic management research?Academy of ManagementReview, 26(1), 22-40.Sheehan, N. T. (2002). Reputation as a driver in knowledge-intensive servicefirms. Unpublished doctoral dissertation, Norwegian School of Management,Sandvika.Stabell, C. B., & Fjeldstad , . D. (1998). Configuring value for competitiveadvantage: On chains, shops, and networks. Strategic ManagementJournal, 19, 413-437.Steensma, H. K., & Corley, K. G. (2001). Organizational context as moderator


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of theories on firm boundaries for technology sourcing.Academy ofManagementJournal, 44(2), 271-291.Wade, M., & Hulland, J. (2004). The resource-based view and informationsystems research: Review, extension, and suggestions for future research.MIS Quarterly, 28(1), 107-142.

Zack, M. H. (1999). Developing a knowledge strategy. California ManagementReview, 41(3), 125-145.

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