What if rent from a competitive advantage is appropriated so it cannot be observed in performance measures? The resource-based view was not formulated to examine who will get the rent. Yet, this essay argues that the factors leading to a resource-based advantage also predict who will appropriate rent. Knowledge-based assets are promising because firm-specificity, social complexity, and causal ambiguity make them hard to imitate. However, the roles of internal stakeholders may grant them a great deal of bargaining power especially relative to investors. This essay integrates the resource-based view with the bargaining power literature by defining the firm as a nexus of contracts. This new lens can help to explain when rent will be generated and, simultaneously, who will appropriate it. In doing so, it provides a more robust theory of firm performance than the resource-based view alone. It is also suggested that this lens might be useful for examining other theories of firm performance.

The strategy literature often emphasizes firm-specific human capital as a source of competitive advantage based on the assumption that it constrains employee mobility. This paper first identifies three boundary conditions that limit the applicability of this logic. It then offers a more comprehensive framework of human capital-based advantage that explores both demand-and supply-side mobility constraints. The critical insight is that these mobility constraints have more explanatory power than the firm-specificity of human capital.

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From the origins of resource-based theory, scholars have emphasized the importance of human capital as a source of sustained competitive advantage, and recently there has been great interest in gaining a better understanding of the micro-foundations of strategic capabilities. Along these lines, there is little doubt that heterogeneous human capital is often a critical underlying mechanism for capabilities. Here, the authors explore how individual-level phenomena underpin isolating mechanisms that sustain human capital-based advantages but also create management dilemmas that must be resolved in order to create value. The solutions to these challenges cannot be found purely in generic human resource policies that reflect best practices. These are not designed to mitigate idiosyncratic dilemmas that arise from the very attributes that hinder imitation (e.g., specificity, social complexity, and causal ambiguity). The authors drill down deeper to identify individual-and firm-level components that interact to grant some firms unique capabilities in attracting, retaining, and motivating human capital. This cospecialization of idiosyncratic individuals and organizational systems may be among the most powerful isolating mechanism. The authors conclude by outlining a research agenda for exploring cross-level components of human capital-based advantages.