The Knowledge-Based Approach to Sustainable Competitive Advantage

In the twenty-first-century landscape, firms must compete in a complex and challenging context that is being transformed by many factors, from globalization, technological development, and increasingly rapid diffusion of new technology, to the development and use of knowledge (Hitt, Keats, & DeMarie, 1998). This new landscape requires firms to do things differently in order to survive and prosper. Specifically, they must look to new sources of competitive advantage and engage in new forms of competition. This, in turn, requires a clear understanding of the nature of competition and competitive dynamics. One popular approach to understanding competitive dynamics is the resource-based view of the firm. According to this view, the explanation for why some firms ultimately succeed and others fail can be found in understanding their resources and capabilities. A firm’s resources and capabilities influence both the strategic choices that managers make and the implementation of those chosen strategies. (The recent debate over this model suggests there are challenges involved in applying it; see Priem & Butler, 2001; Barney, 2001.)