Testing Resource-Based and Industry Factors in a Multi-Level Model of Competitive Advantage Creation

ABSTRACT This study examined an integrative, multi-level conceptual framework incorporating manufacturing facility practices and performance, factors influencing industry rivalry, and firmlevel creation of economic value in order to partially explain the creation of competitive advantage. Additionally, this article supports work establishing environmental practices and performance as a strategic factor in manufacturing. Data from a cross-sectional sample of 250 corporations with 1762 manufacturing facilities in four industries are analyzed in a structural model. The study results indicate: (1) strategic environmental asset productivity within manufacturing facilities contributes to firm-level value creation; (2) complementary environmental assets within manufacturing facilities strengthen the relationship between asset productivity and firm-level value creation; (3) firm-level value creation mediates the relationship between manufacturing facility asset productivity and a competitive advantage; and (4) firms competing within industries with greater numbers of competitors experience a stronger relationship between firm-level value creation anda competitive advantage. This paper supports the role of the resource-based construct of value creation as a mediating factor between intra-firm productivity and inter-firm competitive advantage creation and the need to further develop a multi-level, resource-based model. INTRODUCTION The development of the resource-based view (RBV) of competitive advantage (Barney 1 99 1) is seen by many management researchers as having the potential to become a theory -based successor to contingency /fit models of strategy if integrated with industry level frameworks (Conner 1991; Helfat & Lieberman, 2002; Levinthal & Myatt, 1994) and intrafirm models of strategy formulation and implementation (Govindarajan and Fisher, 1990; Ramanujam & Wiersema, 1986). However, as outlined by Priem and Butler (2001) and supplemented by Barney (2001), much work still needs to be done before the full theoretical contributions and limitations of the RBV are demonstrated. In particular, efforts to operationalize and test resource-based concepts have tended to draw direct linkages between internal strategic assets and market outcomes (McGrath, MacMillan & Venkatraman 1995) and treated strategic industry factors as influences to be controlled rather than integrated into a multi -level model. Following in the steps of management research attempting to employ both firm-based and industry -based factors (Hawawini, Subramanian, & Verdin, 2003), this study attempts to make four contributions to research related to broadening the RBV as a multi-level model of competitive advantage creation. The first is to add to the understanding of RBV relationships by testing the effect of value creation as a mediator between important strategic assets and a firm's financial performance relative to its competitors. The mediating role of value creation derived from strategic asset deployment or implementation should help to explain why control of strategic assets does not necessarily directly result in the creation of a competitive advantage (Collis, 1994). A second contribution is to test the moderating effect and importance of complementary assets on the relationship between strategic environmental assets and their value-creating efficacy (VicenteLorente, 2001). This should help explain the role of complementary assets that interact with existing strategic assets to produce value for the firm (Barney, 1991). The third contribution of this paper is the testing of the influence of complementary environmental asset rareness within our multi-level model. Few, if any, tests of asset rareness have been explored and this is a key industry-level element of the RBV (Priem and Butler, 2001). Finally, prior studies have demonstrated firm-level resource influence on environmental performance (e.g., pollution abatement investments) and competitive advantage (Sharma and Vredenburg, 1998) and industry -level factors on the contribution of a firm' s environmental reputation to competitive advantage. …