The resource-based view and economics

This paper analyzes the link between economics and the resource-based view (RBV) of the firm. Although, historically there has been a strong link between the disciplines of strategy and economics, explicit citations of key RBV works has been disappointingly low in mainstream economics journals. However, there are substantial bodies of works that build implicitly on the ideas of the RBV, in particular the consequences of path dependency on firm behavior, to explain a number of different economic issues. The issues we review in the paper are all influenced by path dependency and include: (1) diversification and market entry, (2) corporate refocusing, and market exit, (3) explaining innovative activity among firms, (4) diversification and performance and (5) industry evolution with rapidly changing products. Furthermore, we identify a number of reasons that may have limited the explicit use of the RBV in economics, which include the problems of causal ambiguity, tautology and firm heterogeneity. Finally, potential areas for future research are identified, which include the interaction of the RBV and Agency Theory, the RBV as a dynamic theory, using the RBV to explain radical change and the application of the RBV to issues of antitrust.