Essay on Theoretical Analysis of Enterprise Development

Essay on the Analysis of Enterprise Development Theory

(I) Transformation from Market Structure Theory to Resource Base Theory

Since the mid-to-late 1980s, the basic logic of enterprise competition has changed significantly. Before that, market competition was in a relatively stable state, corporate strategy could be maintained for a period of time, and the key to obtaining competitive advantage was how to choose the right competitive industry and give the right positioning. With the rise of knowledge-based economy, global economic integration and intensified competition in the international market, the life cycle of the product is getting shorter and shorter, and the success of the enterprise depends on the prediction of the market and the quick response to the change of customer demand. Therefore, the core of corporate strategy is no longer the product and market structure of a company, but its behavioral capabilities; the goal of strategy lies in the identification and development of heterogeneous capabilities, which are the main markers by which consumers distinguish a company from its competitors.

The emergence of the resource-based theory of enterprise is due to the limitations and deficiencies of Porter's theory of industrial structure strategy. According to Porter's theory of industrial structure, it applies to the industrial structure of the industrial economic era is relatively stable stage. And in the era of knowledge economy, the limitations of this theory are gradually exposed. In the era of knowledge economy, new industries emerge one after another, and the relative relationship between industries changes constantly. The difference in profitability between enterprises in the same industry is much larger than the difference between different industries. This difference is obviously not determined by the market structure but by the internal elements of the enterprise.

In this context, since the 1980s, researchers have shifted the focus of exploring the competitive advantage of enterprises to the level of the enterprise, and produced numerous theories: the resource-based theory, the core competence theory, the knowledge-based theory, and the dynamic capabilities of the enterprise. Although their concepts are different, these theories all believe that compared with the external conditions of the enterprise, the internal conditions of the enterprise have a decisive role in the enterprise to obtain competitive advantage in the market, that is, the so-called endogenous theory of enterprise competitive advantage. The theory is collectively referred to as the theory of enterprise ability, which has a static endogenous theory and dynamic endogenous theory.

(2) Resource-Based Theory

Resource-Based Theory is a major breakthrough in the neoclassical economic theory of enterprise. In neoclassical economics, the enterprise is a "black box", there is no difference between enterprises. Porter's theory does not break through the neoclassical economics of enterprise theory, and enterprise resource base theory breaks through this theoretical category. This theory not only breaks the traditional "black box theory of enterprise", and decades of the dominant modern enterprise theory challenges, the organic combination of economics and management, not only from the essence of understanding and analyzing the enterprise, but also rooted in the internal matters of business management.

There are at least the following important differences between the presuppositions of neoclassical economics and the resource-based theory of the firm. Neoclassical economics assumes that the supply of resources and capabilities (i.e., factors of production in neoclassical economics) is perfectly elastic. When the demand for a resource or capability increases, its price rises and the supply in the market increases accordingly. The resource base theory of business, while not denying that the supply of some factors of production is indeed perfectly elastic. However, they argue that the path dependence, causal ambiguity, and social complexity that characterize certain resources and capabilities make the supply of these resources and capabilities inelastic (Barney, Firm, 1991). This means that firms with those resources or capabilities that are inelastic in supply will make excess profits, and the inelasticity of supply becomes a source of sustained competitive advantage for that firm (Peteraf, 1993).Ricardo more than 200 years ago also studied such problems. By analyzing the profitability of farms under conditions of limited supply of fertile land, Ricardo examined how supply inelasticity of factors of production affects farm profits. Only Ricardo argues that only a limited number of factors of production are characterized by inelastic supply, while the resource base theory of the firm argues that all resources and capabilities that satisfy the above characteristics are characterized by inelastic supply, i.e., more factors of production other than land are also characterized by inelastic supply.

Neoclassical economics made a great contribution to the development of RBT, and in 1986, Barney used neoclassical economics as a basis for improving the core content of RBT, resulting in the famous theory of "strategic factor markets". According to this theory, under the condition of perfectly competitive market, the price can reflect all the information; while under the condition of imperfectly competitive market, the supply of inelastic resources and capacity can absorb all the profits. In order to capture economic rents, firms must acquire resources and capabilities in imperfectly competitive strategic factor markets. But neoclassical economics cannot be used to explain all the views of the resource-based theory of the firm, and it may be more helpful to think about the problem in a different way.

There are many similarities between evolutionary economic theory and the resource-based theory of the firm. For example, the rules in evolutionary economics are themselves a resource or capability. If capabilities are defined as a firm's talent for using resources to produce a competitive advantage, then there is little difference between rules and capabilities. Moreover, both agree that heterogeneity of resources and capabilities is the source of excess performance and sustained competitive advantage. In both theories, it is fundamentally the firm's dependence path, i.e., the firm's knowledge possession status, that distinguishes a firm from other firms from each other in many ways and allows it to develop strategies for capturing rents that differ from those of other firms. Moreover, both the resource-based theory of the firm and the theory of evolutionary economics have an underlying theory of firm performance.

Unlike Porter's strategic management theory, the resource-based theory opens the "black box" of the firm, arguing that firms are made up of a unique set of resources, most of which cannot be rapidly accumulated in the short term, and that this is why firms differ from each other; and suggests that a firm's competitive advantage is derived from the resources it owns or has at its disposal. comes from the resources it owns or has at its disposal.

Wernerfeldt, in his classic paper, "The Resource Base of the Firm," suggests that resources generally include the brand name, the firm's own technical knowledge, skilled employees, trade contracts, and efficient work processes. According to Collis and Montgomery (Collis&Montgomery, 1997), resources can exist in many forms; they can be general factor inputs that are widely available and easily purchased in competitive transactions, or they can be highly differentiated resources that take years to accumulate and are difficult to replicate, such as brands. He classifies resources into three categories: tangible assets, intangible assets and organizational capabilities. According to the resource base theory, these resources must "be strategic", and only strategic resources are a realistic source of sustained competitive advantage. Strategic resources must have four basic characteristics: value, scarcity, inimitability, and irreplaceability.

There are two assumptions in the resource base theory: one is that a certain enterprise within an industry is heterogeneous according to the resources it controls; the second is that the resources controlled by the enterprise cannot be completely mobile, and the heterogeneity of the resources can be maintained for a longer period of time. Barney argues that firms' resources and capabilities are important for the creation and maintenance of competitive advantage if they are valuable, scarce, and difficult to imitate. Therefore, there are some representatives of the resource base theory who believe that in order to further acquire sustained "heterogeneous resources", the enterprise must "isolate" "or insulate" the possible imitation behavior of its competitors. or insulate". That is, the formation of "isolation mechanism", through the establishment of various forms of time lag, information asymmetry and barriers that can organize or mitigate market competition and can effectively protect scarce resources, in order to obtain a static competitive advantage.

American scholar Jay Barney is one of the most famous representatives of the resource-based theory, who defines resources as the enterprise's assets, knowledge, information, capabilities, characteristics and organizational procedures, and divides them into several categories of financial, physical, personnel and organizational resources. Barney believes that the enterprise's resources and capabilities are important for the creation and maintenance of competitive advantage if they have: value, scarcity, and difficulty in imitation: the value of resources is determined by the opportunities available to develop them, and these opportunities sometimes change, making the resources go from valuable to worthless; the important resources related to the competition have scarcity, and if the competitors also have the same or similar resources and capabilities, the firm loses its competitive advantage; another criterion for competitively important resources is that they are difficult to imitate; according to Barney, while many physical resources are easy to imitate, resources and capabilities based on teamwork, culture, and organizational processes are difficult to imitate, and these are usually the result of the firm's own complex history over time and uncountable small decisions that contribute to the development of endemic capabilities .

(iii) Core Competency Theory

Core Competency Theory was developed on the basis of Resource-Based Theory.... Core competence theory that the resource-based view of the enterprise from the definition of the source of competitive advantage in the specific as the material resources, completely detached from the human factor in the enterprise, resulting in the separation between resources and resource allocation. In fact, the objective existence of the material resources can play how much utility depends entirely on the use of its people, resources behind the heterogeneity of the heterogeneity of people. The root cause of the enterprise's competitive advantage by the specific, objective existence of resources into resource allocation, development and protection of resource capacity.

Although the resource-based theory makes up for the shortcomings of the traditional theory of competitive strategy to a certain extent, however, not all resources can be the source of corporate competitive advantage and high profits, and there cannot be a causal relationship between competitive advantage and most resources. In response to the inadequacy of the resource-based theory, some scholars have begun to analyze the source of competitive advantage from the aspect of the enterprise's ability to configure and utilize resources through the surface phenomenon of resources, and have found that the core ability to develop, utilize, and protect the resources hidden behind the resources is the deep source of the enterprise's competitive advantage. The source of enterprise competitive advantage from the specific resources into the abstract core competence, that is, the theory of enterprise core competence.

In 1990, Prahalad and Hamel published the article "Corporate Core Competencies" in the Harvard Business Review, which set off a wave of research around corporate core competencies (PrahaladandHamel, 1990). It is believed that there are three main characteristics of core competencies: first, core competencies have sufficient user value to create value and reduce costs; second, core competencies are unique and difficult to be imitated by competitors; and third, core competencies have a certain degree of extensibility, which can provide support for the enterprise to access multiple markets. In the process of achieving competitive advantage, the cultivation of internal capabilities and the comprehensive use of various capabilities are the most critical factors.

According to the theory of core competence, the accumulation, maintenance and utilization of core competence is the decisive factor for enterprises to develop product markets. The difference in core competence creates differences in efficiency between enterprises, and such differences make different enterprises produce different benefits; the key to obtaining competitive advantage is core competence, which comes from the organic integration of various skills accumulated and formed by enterprises in the long-term development process.

The general logical reasoning of the resource base theory of the enterprise can also be used to formulate the analysis of core competencies related to sustained competitive advantage. Core competencies should have:

(1) value. Core competencies should be able to improve the efficiency of the firm, or core competencies that enable the firm to do better than its competitors in creating value and reducing costs, thereby adding value or providing fundamental benefits to end users. Changes in the business environment can threaten the value of core capabilities.

(2) Heterogeneity. Core competencies are not a sufficient condition for value creation, which is also based on the fact that firms use different kinds of other resources more effectively than their competitors.

(3) Non-imitation. Core competencies prevent imitation through two independent mechanisms, one is related to the special nature of the resource (such as social complexity, causality fuzzy, etc.); the other is to protect its valuable resources through the adoption of a variety of strategic measures (such as patents, branding, protective contractual clauses, trade secrets, etc.). Once a core competency is imitated, the competitive advantage of the firm associated with it will diminish until it disappears.

(4) difficult to replace. Substitutes often threaten core competencies and reposition competitive advantage among firms.

(4) Knowledge Base Theory

Core rigidity occurs when firms have core competencies (LeonardBarton, 1992). Core rigidity refers to rapid environmental change, core competencies often can not be changed, the original core competencies of the enterprise not only can not become the competitive advantage of the enterprise, but also become the shackles of the development of enterprise competition. Therefore, many scholars have further researched the evolution of the integration of enterprise capabilities and the environment, on the basis of which the theory of the knowledge base of the enterprise arose.

The core competencies referred to in the competency-based theory mainly refer to the ability of enterprises to configure, develop and protect resources. These capabilities can be summarized as the ability to continuously innovate. The difference in the degree of utility of various resources, the difference in innovation ability is determined by the existing knowledge stock of the enterprise, behind the difference in ability is actually the difference in knowledge stock, the ability is the manifestation of knowledge stock.

Knowledge base theory suggests that the knowledge that an enterprise has should be difficult to imitate, i.e., the tacit knowledge of the enterprise (tacitknowledge), which has three characteristics: one is process, if competitors are not involved in the process, it is difficult to experience the existence of such knowledge, and it is even more difficult to imitate; the second is the completeness of the enterprise, the explicit knowledge is combined with tacit knowledge to **** together with the role of the knowledge, and it is difficult to imitate. Together *** with the role of competitors can only imitate the explicit knowledge, but did not recognize the tacit knowledge; Third is not clear, in the process of imitation, competitors always want to find and imitate the core factors, but the tacit knowledge is often a key factor in those who want to imitate the enterprise can not know exactly what to imitate, how to imitate. The knowledge base theory of the enterprise also argues that knowledge is path-dependent or history-dependent.

The theory of core competencies suggests that a company's competitive advantage comes from its ability to allocate, utilize, and protect resources. But what lies behind a firm's capabilities? Research shows that hidden behind the ability to determine the ability of the enterprise is the knowledge of the enterprise. With the development of knowledge-based economy and society, the position of knowledge in enterprise development has become more and more prominent. Knowledge-based theory holds that an enterprise is a knowledge-accumulating organization or an aggregate of knowledge, and that differences in performance among enterprises come from asymmetries in knowledge and differences in enterprise capabilities. Knowledge base theory believes that the realization of the scale effect of the enterprise depends on the knowledge and management ability possessed by the enterprise managers, so the knowledge of the organization and the corresponding enterprise ability are the important factors for the enterprise to obtain the competitive advantage. The knowledge stock of the enterprise determines the ability of the enterprise to cultivate resources and other innovative activities, thus reflecting the competitive advantage in the final output of the enterprise and market power. Knowledge is also difficult to imitate and has a strong path dependence. Therefore, knowledge is an important reason for enterprise competitive advantage to be sustained, and is the root of competitive advantage. The cognitive learning ability of the enterprise determined by the enterprise knowledge is the inexhaustible source of the enterprise to develop new competitive advantages.

(E) Dynamic Capability Theory

When the core competence is defined as "accumulated knowledge in the organization", it also emphasizes that the core competence is the formation of the enterprise in the process of long-term development, and once formed, it is relatively stable, and the knowledge of the enterprise is the same. The same applies to corporate knowledge. However, the environment faced by enterprises is dynamic, and the core competencies and knowledge they possess now may not be suitable for their future competitive needs. Changes in the environment and the emergence of new technologies may make the carefully cultivated core competencies become worthless overnight. The stability of core competence and the contradiction between the rigidity of enterprise resources and knowledge and the dynamics of the environment have led to the dilemma of core competence and knowledge theory.

In this context, Tice, Pizarro and Schoen proposed the concept of dynamic capabilities. Dynamic capabilities are defined as "the ability to integrate, structure, and reset a company's internal and external capabilities to adapt to rapid environmental change". "Dynamic" refers to the continuous updating of one's own capabilities, internal and external organizational skills, resources, and functional competencies to adapt, integrate, and reset them to keep up with the changing needs of the environment. Dynamic capability theory aims to cultivate the ability of the enterprise at the same time, more emphasis on attention to the changes in the business environment, so as to create competitive advantage for the enterprise resources and ability to create competitive advantage with the changes in the business environment and continue to improve, update, is a competitive advantage "dynamic endogenous theory".

Dynamic capabilities theory that the enterprise to obtain sustained competitive advantage lies in: one is to develop the enterprise's existing capabilities; the second is to develop new capabilities. The existing unique capabilities of the enterprise are implicit, existing in the enterprise's technical and knowledge advantages, daily business processes, business practices. Such implicit capabilities are difficult to copy and imitate. The development of new capabilities requires an enterprise to be able to rapidly integrate and reconfigure its internal and external resources and capabilities to form new competitive advantages in the face of a changing market environment.

Throughout the various viewpoints of the resource-based theory, they are all centered on resources to study the enterprise, and fully pay attention to the position of the enterprise as a dynamic subject in the competitive system. The four schools of thought - enterprise resource theory, core competence theory, knowledge-based theory and enterprise power competence theory - are relatively independent and complementary to each other, and all believe that enterprise growth is closely related to the accumulation of knowledge and competence that make it possible for enterprises to expand the field of production. Abstract: Numerous schools of theory about business development form a theoretical jungle. Clearly sorting out these theories using the thread of developmental changes in the business environment allows one to recognize the pattern of evolution of business development theories. From the market structure theory to the resource base theory, from the resource base theory to the core competence theory, and later on, the knowledge base theory and the dynamic competence theory, all of them are evolved with the changes of the business environment.