Bringing a Resource and Capability Lens to Resource Allocation

Abstract

This article highlights a perspective that has been underexplored in resource allocation research. By viewing resource allocation through a resource and capability lens, three connections are developed between resource-based theories of strategy and strategy research on resource allocation. First, the lens is applied to frame capital investments as investing in capabilities. This framing provides a theoretical path connecting the strategic purpose of investments, through value creation from resource commitments, to the creation of competitive advantage. Second, resource allocation for the purpose of capability development is related to a resource-based model of asset accumulation. Placing resource allocation decisions in the context of capability development suggests that key features of the asset accumulation process can usefully inform research on the resource allocation process. Last, corporate capital allocation is connected to resource redeployment in multibusiness firms. This connection explicates ways in which corporate headquarters can add to firm value. These connections illustrate the potential that resource-based theories have to contribute insights to resource allocation research.

Can Firms Be Both Broad and Deep? Exploring Interdependencies Between Horizontal and Vertical Firm Scope

“…Fungibility is an attribute of a capability that facilitates its application to different organizational and market settings (Levinthal & Wu, 2010). Few, if any, capabilities are perfectly fungible, but we would expect greater fungibility in more closely related applications (Maritan & Lee, 2017). If the firm's horizontal capabilities are more easily devoted to other product markets rather than to vertical activities, that means they have greater within-scope than across-scope fungibility.…”

Resource Allocation and Strategy

“…Differences in learning ability lead to different resource allocation decisions and, potentially, competitive advantage. Maritan and Lee's (2017) commentary applies a resource and capability lens and offers illustrations of the potential that resource-based theories have for contributing to resource allocation research. First, framing resource allocation as investing in capabilities provides a theoretical path connecting the strategic purpose of investments, through value creation from resource commitments, to the creation of competitive advantage.…”

“…The other area of study is the outcomes of resource allocation. Future research can more closely link resource allocation decisions to intermediate and firm-level outcomes resulting from allocations such as corporate value creation (Maritan & Lee, 2017), competitive advantage (Leiblein et al, 2017; Maritan & Lee, 2017), firm performance (Busenbark et al, 2017), and overinvestment in activities such as R&D (Ahuja & Novelli, 2017).…”

Application Of Std - Methodology In Swot – Analysis

“…In addition, the lack of quantitative indicators makes it almost impossible to analyze the socio -economic system in dynamics. The importance of solving this problem has been repeatedly emphasized by leading economists (Anand & Gray, 2017;Arend et al, 2017;Crilly, 2017;Maritan & Lee, 2017;McIntyre & Srinivasan, 2017;Wolf & Floyd, 2017).…”