Beyond RBV and KBV to an innovation-based view of the firm

Abstract

The quest to understand sources of sustained competitive advantage is still a major area of interest to both researchers and practitioners. The central thesis of this paper is that the resource-based view of the firm and the knowledge-based view of the firm require updating to an innovation-based view. This novel hypothesis of the firm is informed by a review of relevant literature and an empirical study of innovation management. The ICT revolution has a major impact on business and society resulting in an opening of the firm’s boundaries and increasing the digitalization of organizations. We utilize a grounded theory approach to the case study based in the Irish subsidiary of a multi-national corporation where innovation emerged as a key differentiator. Five empirical indicators of a firm’s propensity to harness innovation in order to generate sustained competitive advantage are proposed: management of paradox, degree of openness, the dilemma of initiation and implementation, nontechnological nature and technological nature. The paper contributes to advancing theory by advocating and developing an innovation-based view of the firm. Such a view is needed as innovation is now regarded by scholars and practitioners as being the driver of competitive advantage for the modern organization.