Theory in practice: The resource value chain and the objective of the optimally configured firm

Abstract

Drawing on resource-based theory, we develop a resource value chain framework. We then demonstrate how this framework can be used to solve the firm’s various strategic and resource configuration problems. Since it is assumed that managers must constantly consider which new resources their firm needs to acquire, and which of its resources it needs to reinvest in or divest, our resource value chain will be of most use when innovating, embarking upon a major internal change or transformation initiative, or when altering the firm’s boundaries through acquisition or devolution. It can also be used to explain why a firm may have adopted a particular mode of organisation, hierarchy or reward system, and if value has indeed accrued to the firm.