Individual Cognition and the Resource-Based View: Investigating the Way Entrepreneurs Conceptualize, Categorize, and Judge Resources

Abstract

The resource-based view (RBV) has been a dominant perspective for explaining superior firm performance in recent years. This dissertation introduces a distinction between three types of RBV with distinct foci and assumptions. First, the traditional outcome RBV focuses on explaining performance outcomes. Second, the prescriptive RBV uses outcome RBV theories to help managers improve performance. Finally, the process RBV concentrates on explaining resource-related behavior and choice. We argue that a process RBV is crucial to understanding real-world behavior and to fill gaps in the outcome RBV. Aiming to build an empirical foundation for a process RBV (and for RBV education), we investigate how decision makers conceptualize and categorize resources, and how they judge which resources are important to the success of their business. We examine these questions in a large-sample study of entrepreneurs involved in the Kauffman Foundation’s FastTrac Planning program.

Our findings indicate that entrepreneurs’ conceptualizations of resources are largely compatible with academic definitions. However, significant differences also exist, notably in the relative emphasis on resource use and the level of control over a given resource.

We also find that entrepreneurs have very heterogeneous resource categorization criteria. Additionally, they categorize resources not just by resource attributes but equally by the uses and goals associated with a resource.

With respect to resource importance judgments we find that entrepreneurs do not conform to RBV prescriptions, relying on only some of the standard RBV criteria. A Bayesian network analysis reveals that complex dependencies exist between some resource evaluation criteria, indicating the need for conceptual clarification and redundancy reduction in resource assessment frameworks. Entrepreneurs’ judgments along the ‘valuable’ dimension are affected by both strategic / economic as well as institutional considerations.

Three themes run throughout our empirical findings: One, the salience of complementary operational (vs. strategic) resources. Second, the salience and importance of resource use considerations. Finally, the utility of a separate process RBV that investigates actual behavior rather than assuming conformity to economic prescriptions.

This dissertation represents the first large-scale investigation of individual cognitions directly related to RBV constructs. Its findings have implications for developing process RBV theory and for RBV education.

Keywords: Resource Based View, Strategy Process, Cognition, Entrepreneurship