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European Management Journal Vol. 22, No. 1, pp.

110122, 2004
2004 Elsevier Ltd. All rights reserved.
Pergamon
Printed in Great Britain
0263-2373 $30.00 doi:10.1016/j.emj.2003.11.010
Assessing Core Intangible
Resources
ABRAHAM CARMELI, Bar-Ilan University, Israel
This study aims at introducing a framework by
which scholars and practitioners may investigate a
rms prole of resources. The framework, labeled
as Strategic Analysis Technique (SAT), is an ende-
avor to better understand the rms core resources
(i.e., most valuable, rare, inimitable and non-
substitutable) that generate sustainable competitive
advantage and lead to superior performance. The
resource prole of growing public rms in Israel
was examined and compared with slow-growing
rms. The results of this examination illustrated the
framework. The study also sheds light on one of
the most difcult challenges that resource-based
strategists face understanding the drivers of sus-
tainable competitive advantage.
2004 Elsevier Ltd. All rights reserved.
Keywords: Strategic analysis technique, Core intan-
gible resources, Sustainable competitive advantage
Introduction
Assessing the prole of core resources and capabili-
ties of rms is one of the most compelling challenges
for strategy scholars and practitioners, especially
those who are interested in the resource-based view
of strategic management (RBV). RBV emphasizes the
internal side of a rm. While only a decade ago cor-
porate strategy mainly viewed the logic of compe-
tition as a war of position, where the guiding factor
was where to compete, resource-based view scholars
and practitioners hold that instead of where to com-
pete, rms should focus their efforts on the way they
are competing (Stalk et al., 1992). The question of how
to compete implies the importance of the internal
side of the rm. A rm is perceived as a bundle of
resources, which is the basis for executing its goals
(Penrose, 1959). As such, resources and capabilities
are essential components of strategic investment
decisions for corporate growth (Canals, 2000). We
need to know what is the resource prole needed to
generate the highest rent for a rm in a particular
industry.
Whereas signicant contributions have been made to
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 110
the theoretical side of the RBV, little has been done,
so far, with respect to its empirical side. Establishing
an empirical platform is, according to Hoskisson et
al. (1999, p. 442), one of the resource-based theorys
great challenges, because it emphasizes the idiosyn-
cratic nature of a rms resources and capabilities.
Most of the methods used were qualitative. For
example, Rouse and Daellenbach (1999) suggested
adopting eldwork-based or ethnographic-type, and
Zahra and Pearce (1990) supported in-depth case
studies as a promising approach for research in stra-
tegic management. Recently Hoskisson et al. (1999)
pointed out that the recent advance of the RBV has
posed new challenges regarding the use of quantitat-
ive methodsand the integration of quantitative and
qualitative methodological tools is likely to be a fruit-
ful course, especially re-emphasising issues inside the
rm through the RBV (p. 447).
The present study is concerned with the development
of a framework, labeled as a Strategic Analysis Tech-
nique (SAT), for identifying the resource prole of
the rm. SAT tries to enhance the ability of
researchers and managers to better understand the
core resources (i.e., most valuable, rare, inimitable
and non-substitutable) possessed by a particular rm
or a group of rms with common characteristics. It
consists of four main steps when analysing the
resource prole of a rm. A preliminary task is to
identify the potential strategic resources within an
industry or populations of industries with common
characteristics. Once this in-depth analysis is com-
pleted, SAT consists of four main steps and one for
re-evaluation. First, it requires selecting the most
valuable resources (up to 7) and ranking them for
their importance to the success of the rm. In all of
the remaining steps, only valuable resources will be
examined. Second, the valuable resources will be
ranked according to the degree of their rarity. Third,
the valuable resources will be ranked according to
the extent to which they are inimitable. Fourth, the
valuable resources will be ranked according to the
extent to which substitutes are not immediately avail-
able. Finally, the evaluator is required to look at the
original list of resources (created in the preliminary
phase) again, and select and score up to seven
ASSESSING CORE INTANGIBLE RECOURCES
resources that meet all the four conditions, namely
the most valuable, rare, difcult to imitate and
non-substitutable.
The study begins with a brief discussion of the
insights and denitions proposed by a resource-
based view of strategic management. The third sec-
tion introduces a framework for identifying the
resource prole of rms. The resource prole of
growing public rms in Israel is examined and com-
pared with slow-growing rms, and serves to illus-
trate the developed framework. The discussion and
conclusion are presented in the nal section.
Resources, Sustainable Competitive
Advantage, and Performance
The resource-based view (RBV) suggests that strategy
researchers should devote more effort to looking at
rms in terms of their resources relative to their pro-
duct market activities (Wernerfelt, 1984). Underlying
this approach is the assumption of resource hetero-
geneity of the competitors in a denite industry
(Amit and Schoemaker, 1993; Barney, 1997; Prahalad
and Hamel, 1990). That is, rms can be thought of as
bundles of productive resources, and different rms
possess different bundles of resources (Barney, 1997;
Peteraf, 1993). Another assumption is resource immo-
bility, according to which some of these resources are
either very costly to copy or inelastic in supply
(Barney, 1997).
In a dynamic and competitive environment, the real
source of competitive advantage is underlined by the
organizations ability to consistently meet environ-
mental changes, as well as to change the industry
structure. The latter could be gained only by identi-
cation, development and preservation of strategic
capabilities (Bartmess and Cerny, 1993). Gaining and
preserving sustainable competitive advantage (SCA)
and superior performance is a function of the core
(strategic) resources and capabilities that each organi-
zation brings to the competition (Aaker, 1989; Barney,
1995; Conner, 1991; Grant, 1991). The inuential
study of Prahalad and Hamel (1990) established this
approach. These authors argued that superiority of
corporations [cf., NEC vs GTE (now Verizon)] over
their competitors is due to a distinction in their core
competencies and the way they are deployed. A year
earlier, Aaker (1989) argued that a rm with superior
performance developed key assets and skills over its
rivals. Hence, a rm should build its own competi-
tive strategy on its core resources and capabilities as
well as in relation to environmental opportunities
and threats (Barney, 1991; Peteraf, 1993; Reed and
DeFillippi, 1990) because those resources and capa-
bilities are the major source of SCA creation (Barney,
1995; Conner, 1991; Grant, 1991; Peteraf, 1993).
Scholars have been using different terms such as
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 111
resources, capabilities, competencies, skills and
assets, as basic constructs of RBV. Differences
between these constructs are well analysed by Javi-
dan (1998). The present study uses the term
resources to simplify the discussion below. Amit
and Schoemaker (1993) dened resources as stocks
of available factors that are owned or controlled by
the rm (organization) (p. 35). Wernerfelt (1984)
describes a resource as anything, which could be
thought of as a strength or weakness of a given rm
(organization) (p. 172). In using the term resource, I
mean a strategic resource, that is, one that differen-
tiates the rm strategically and creates SCA
(Leonard-Barton, 1992). Sustainable Competitive
Advantage occurs only when a rm is implementing
a value-creating strategy that is not simultaneously
being implemented by any current or potential com-
petitors and when these other rms are unable to
duplicate the benets of this strategy (Barney, 1991,
p. 102). Resources are the substance of strategy, the
very essence of SCA (Collis and Montgomery, 1998,
p. 27). They are the substance of strategy because
SCA is a match between the organizations resources
and skills and the environmental opportunities and
risks it faces, and the purposes of the organization
(Hofer and Schendel, 1978, p. 11). Resources are the
very essence of SCA because a rms ability to gain
and preserve its protability depends on its ability to
defend its advantage position, which, basically, relies
on its resources (Conner, 1991).
According to Barney (1991), resources contribute to
SCA creation only if they are valuable (i.e., contribute
to the improvement of the rms performance), rare
(i.e., possessed by a small number of rms relatively
to the number of rms that need it to create a perfect
competition dynamics), inimitable (i.e., costly to copy
by the competitors), and non-substitutable (i.e., no
immediate substitute is available for the competitors
to full the same function). As shown in Table 1, if
a rm possesses resources that do not follow any of
these criteria, we can expect this rm will not possess
a competitive advantage and will earn below normal
performance. If a resource that a rm possesses is
only valuable but not rare, inimitable and non-substi-
tutable, then we can expect that this rm will be in a
competitive parity and earn average return. If a rm
possesses resources, which are following only two
criteria value and rareness then we can expect
that this rm will be in a competitive advantage pos-
ition, but not in a sustained competitive advantage.
Assuming these two criteria are held, and two other
criteria, inimitability and non-substitutability, are
added and exist simultaneously, then we can expect
that these resources will produce a sustainable com-
petitive advantage.
Resources are, basically, classied into two categor-
ies: tangible and intangible. Tangible resources con-
sist of all physical items that the organization pos-
sesses, such as facilities, raw materials and other
equipment. Intangible resources comprise all items
ASSESSING CORE INTANGIBLE RECOURCES
Table 1 Resource Criteria with Respect to Sustainable Competitive Advantage Creation and Performance
a
Resource value Resource rare Resource inimitability Resource non- Advantage position Firms performance
substitutability
Not valuable Not rare Imitable Substitutable Advantage absent Below normal
Valuable Not rare Imitable Substitutable Competitive parity Normal
Valuable Rare Inimitable Substitutable Temporary Above normal
competitive (short-term)
advantage
Valuable Rare Inimitable Non-substitutable Sustainable Superior
competitive
advantage
a
The framework, in part, is based on the works of Barney (1997) and Hitt et al. (2001).
not appearing in the material reports (balance sheets)
such as organizational culture, reputation, and
internal control. Intangible resources are always con-
sidered to play an important role in rms value cre-
ation. Tangible resources are exible, and can be
more easily imitated than intangible resources, which
are, by denition, inexible (Chatterjee and Werner-
felt, 1991). Thus, intangible, more than tangible,
resources have potential for competitive advantage
creation. As pointed out by Canals (2000) as indus-
trial society becomes a services society, where knowl-
edge and information are the mainstays of business
growth, the importance of intangible resources will
come increasingly to the forefront (p. 118). Teece
(2000) showed that a rms superior performance
depends on its ability to innovate, defend intangible
assets (i.e., knowledge), and use those assets. Itami
and Roehl (1987) view intangible resources (they use
the term invisible assets) as the most important factors
in long-term success, and furthermore, as the real
source of competitive power and the key factor in
corporate adaptability (pp. 1213). Their last claim
derives from the premise, according to which those
intangible resources: (a) are hard to accumulate, (b)
have the ability to be in multiple uses simul-
taneously, and (c) are both input and output of cor-
porate activities. Collis and Montgomery (1998)
explain that intangible resources play an important
role in the creation of competitive advantage because
they are not being consumed in usage (p. 28). Porter
(1987) pointed out the importance of the ability to
transfer products into new markets, which relies on
the nature of those resources. Assuming that intan-
gible resources are for multiple uses simultaneously,
then their strategic importance in creating value
increases (Itami and Roehl, 1987). This approach calls
upon diversied rms to invest further effort to
develop core intangible resources.
A Framework for Identifying a Firms
Prole of Core Resources
Given the importance of core (strategic) resources in
creating sustainable competitive advantage and lead-
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 112
ing to superiority, it is important to assess the
resource prole of superior performers, and compare
it to less successful rms. Though there is a strong
call for using quantitative approaches, most of the
studies, thus far, used qualitative methods to assess
a rms prole of resources. This section develops a
framework by which strategy researchers and top
executives will be able to identify their rms prole
of core (strategic) resources. At the end of the section,
the potential contributions of the developed frame-
work are summarized.
The framework is comprised of two phases. The rst
phase consists of a preliminary qualitative analysis.
The second phase consists of ve quantitative-
based steps.
Participants
The research population consisted of ninety Israeli
public companies traded mainly on the Tel-Aviv
Stock Exchange (TASE), but also on the US and Lon-
don stock exchanges. This research population was
justied since these companies are under the perma-
nent review of investors, investment banks, and other
stakeholders around the world. It also accorded with
the design of the study to use both subjective and
secondary data. The list of companies was taken from
the Standard & Poors Directory of Public Compa-
nies & Financial Institutions (S&P) (1999). In order
to encourage companies to participate in the study,
complete condentiality was guaranteed. Hence, all
companies are referred to anonymously.
Questionnaires were mailed directly to the rms
chairmen or CEOs in order to enhance the likelihood
that they or one of the top managers (i.e., Vice Presi-
dent of Business Development or Chief Financial
Ofcer) would complete the questionnaires. Since all
potential participants held high-level managerial
positions, the potential for signicant data biases was
diminished. Participants were required to note their
specic role on the survey (many supplied their busi-
ness card). In addition, some of the participants con-
tacted the researcher to clarify various issues. Over-
ASSESSING CORE INTANGIBLE RECOURCES
all, it is reasonable to conclude that all the
participants were the persons who held the position
indicated in the survey.
Twenty-two questionnaires were returned, a
response rate of 24.4 per cent. Twelve rms were
identied as growing rms (successful rms in terms
of annual growth), and the others as slow-growing
(less successful) rms. The dividing line between
growing and slow-growing rms was taken as 15 per
cent annual growth in US dollars.
The companies surveyed act in a variety of industries
such as diversied holdings, software, pharmaceut-
ical, energy, textile, banking, electronics, real estate
and chemical. To control for industry effects the rms
were grouped by their perception of the degree to
which their industry is uncertain and unstable. Thus,
the rms were classied according to their annual
growth and perceived environmental uncertainty
and instability. Two categories of successful rms
were created: (1) growing rms in a certain and
stable environment (2) growing rms in an uncertain
and unstable environment. In addition, two identical
categories of less successful rms were formed in
order to enable a comparison between growing and
slow-growing rms. A complete list of the rms,
their industries, and classication according to suc-
cessful vs less-successful, and degree of perceived
environmental uncertainty and instability is
presented in Appendix A.
The average age of the rms was 35.67 years. Their
average size in terms of income and number of
employees were US$ 566 million and 2317
employees, respectively. The total annual income of
the participants was US$ 11,901 million. Twelve rms
reported a fundamental restructuring had taken
place in the last three years. The average age and
organization tenure of the respondents (CEOs or
vice presidents) were 44.27 and 50 years, respect-
ively. All the respondents, except one, held at least a
graduate degree.
Phase 1: In-Depth Analysis
A review of the literature was conducted to explore
intangible resources, considered as potential for SCA
creation. The process yielded a list of 22 intangible
resources, presented in Table 2.
One can argue for causal ambiguity in using top
management to identify the resource prole of the
rm. Thus, an in-depth analysis of individual cases
was integrated to support the ndings of the study.
This in-depth analysis was conducted to explore the
core intangible resources possessed by the examined
rms. The information was collected from several
sources such as annual nancial reports, analysis of
announcements made by the company, and analysis
reports on the company. It is worth noting that
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 113
resource heterogeneity can be identied across the
rms. For example, one rm, that competes in the
real estate industry, gains above-normal performance
which can be attributed to resources such as planning
capability, ability to raise funds, relationships with
local and central government, and organizational
reputation. Another example is a rm that competes
in the software industry. Its success is attributed to
core resources such as intellectual property, know-
how, marketing and selling, and product/services
reputation.
Phase 2: A Strategic Analysis Technique (SAT)
This study is drawn, in part, on the typology of Hall
(1992, 1993) and extends, using different terminology,
the categorization suggested by Coyne (1986) regard-
ing four types of capability differentials. In Halls
typology, intangible resources are classied into two
main categories: people-dependent and people-inde-
pendent, and on the system approach (Katz and
Kahn, 1978) which was formerly used by Lado and
Wilson (1994). This approach classied resources into
three categories: input-based, conversion-based, and
output-based. The proposed typology, which consists
of 22 resources, is presented in Table 2. These
resources are broad-based and were chosen based
from a broad literature, which suggested that they
may have potential for SCA creation (Aaker, 1989;
Hall, 1992; Teece, 2000) The Core Intangible
Resources (CIRs) will be discussed later in the
Results section.
Barney (1991) suggested four tests for considering
resources as a source of SCA. These four steps were
developed to identify the CIRs that each rm pos-
sesses, and groups of rms were created according
to the degree to which their task environment
(industry) was uncertain and unstable. A fth step
aimed at re-evaluating the CIRs that a rm possesses
according to the four conditions of SCA creation in
combination. Before turning to a detailed discussion
of the four steps, we asked participants to look care-
fully at a list of 22 intangible resources depicted in
Table 2.
Step 1. The Value of the Resources
Participants were told that rms may possess valu-
able resources, which are the source of their superior-
ity. Participants were asked to choose up to seven
valuable intangible resources their rms possessed,
and distribute up to 105 points among them, accord-
ing to the value of each resource with respect to its
contribution to the rms success. An example was
given to clarify this point. Participants were asked to
avoid giving all resources the same score, and to
score each resource they chose once they elected
a resource, it had to have a certain value, but not
zero. Participants were asked to write the name or
ASSESSING CORE INTANGIBLE RECOURCES
Table 2 Typology of Intangible Resources
Resources differentiation
Input-based resources Conversion-based resources Output-based resources
People- Know-how; Ability to learn;
dependent Managerial competence; Human
capital.
People- Planning capability; Databases. Internal Control; Ability to raise funds; Organizational reputation;
independent Environmental t; Industrial relation; Product/Service reputation;
Ability to manage changes; R&D; Intellectual property.
Relationship with the community;
Relationship with local and central
government; Marketing and selling;
Business development and planning;
Organizing; Organizational
communication; Organizational
culture.
Table 3 The Five Most Valuable, Rare, Inimitable, and Non-Substitutable Intangible Resources of
Successful and Less-Successful Firms Competing in an Industry of a Low Level of Uncertainty and
Instability
a
Fast-growing rms Slow-growing rms
Value Rare Inimitable Non- Value Rare Inimitable Non-
substitute substitute
1. Planning capability 133 117 99 117
2. Internal control
3. Ability to raise funds 126 95 100 97 100
4. Environmental t
5. Know-how 109 116 106 162
6. Industrial relations 91
7. Ability to learn 96
8. Ability to manage changes 99
9. Managerial competence 108 121 101 111 97 94 99
10. Organizational reputation 107 133 111
11. Product/Service reputation 101 126 162 162
12. R&D
13. Databases
14. Human capital 99 96 101
15. Intellectual property
16. Relationship with the community
17. Relationship with local and central
government
18. Marketing and selling 126 99 104
19. Business development and planning 99
20. Organizing
21. Organizational communication
22. Organizational culture 91 104 99
a
See note 2 for a separate explanation of the scoring values calculation for Tables 3 and 4.
the number of the resources they had selected, and
to score them according to the instructions.
Step 2. The Rareness of the Resources
The fact that rms may also possess rare resources
was explained to participants, and they were asked to
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 114
refer to the seven (or fewer) valuable resources selec-
ted in step one, and again to distribute 105 new points
among the seven resources, according to their rareness
A resource may have received a high or low score for
its value; but may also have received a high or low
score for the extent of its rarity, or even zero as it was
not rare at all. Again, the participants were asked to
avoid giving the resources selected the same scores.
ASSESSING CORE INTANGIBLE RECOURCES
Table 4 The Five Most Valuable, Rare, Inimitable, and Non-Substitutable Intangible Resources of
Successful And Less-Successful Firms Competing in an Industry of High Levels of Uncertainty and
Instability
Fast-growing rms Slow-growing rms
Value Rare Inimitable Non- Value Rare Inimitable Non-
substitute substitute
1. Planning capability 114 94
2. Internal control
3. Ability to raise funds 111 97 97 98 94 101 105 105
4. Environmental t
5. Know-how 104 99 98 99
6. Industrial relations
7. Ability to learn
8. Ability to manage changes 98 107 111 94 94
9. Managerial competence 106 162 130 162
10. Organizational reputation 90 93
11. Product/Service reputation 96 96 94
12. R&D 95
13. Databases
14. Human capital 110 162 162 114 114 101 90
15. Intellectual property 109 99 94
16. Relationship with the community
17. Relationship with local and central
government
18. Marketing and selling 126 99 104 101
19. Business development and planning
20. Organizing
21. Organizational communication
22. Organizational culture 91 104 99
Step 3. The Difculty of Imitating Resources
Participants were told that rms may also possess
resources that are difcult for competitors to imitate.
Participants were asked to refer to the seven (or
fewer) valuable resources they selected in step one,
and to again distribute 105 new points among the
seven resources, according to how difcult they are
to imitate. A resource may have received a high or
low score for its value; may also have received a high
or low score according to how difcult it is to imitate,
or even a score of zero if no limit for imitation exists.
Again, the participants were asked to avoid giving
the selected resources the same scores.
Step 4. The Non-Substitutability of the Resources
The importance of core resources also depends on
how easily and immediately a substitute can be
established by competitors. The more easily and
immediately a substitute can be found, the less the
resource contributes to SCA. The participants were
asked to refer to the seven valuable resources they
selected in step one, and to again divide 105 new
points among the seven resources, according to the
substitute test mentioned above. A resource may
have received a high or low score for its value; may
also have received a high or low score for the extent
of its rareness, or even zero if it is not rare at all. It
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 115
may have received a high or low score according to
the degree of inimitability, or zero score if no limit
for imitation exists. The resource might have received
a high or low score according to how easily and
immediately it can be replaced by another substitute,
or even a score of zero if no substitute exists. Again,
the participants were asked to avoid giving the selec-
ted resources the same scores.
Step 5. The Core Resources in Retrospect
In the fth step, participants were asked to look over
the list of the 22 resources in the beginning of the
questionnaire, and to think in retrospect about the
resources they selected and scored. Next, they were
asked to select up to seven resources and distribute
up to 105 points among them, with the condition that
they consider and weigh the four tests together for
SCA. In other words, they were asked to select up
to seven resources that are the most valuable, rare,
difcult to imitate, and non-substitutable. Again,
participants were asked to avoid giving the selected
resources the same scores.
The Contribution of the Strategic Analysis
Technique
The Strategic Analysis Technique (SAT) was
developed and proposed in order to create a more
ASSESSING CORE INTANGIBLE RECOURCES
solid infrastructure for empirical examination of the
insights of the RBV. More specically, its purpose is
to provide a framework for strategy scholars and
practitioners to follow while striving for an under-
standing of the rms core resources.
There are at least ve benets provided by the pro-
posed framework. First, identication of the most
valuable core resources, and determination of most
critical resource for value creation for a rm (Collis
and Montgomery, 1995). Second, according to RBV,
resources should meet several criteria in order to
account for a strategic role (Barney, 1991). Thus, it is
important to subject the resource to four tests. The
superior core resource will be the one that achieves
the highest score in the four tests examined here.
Third, SAT is a more appropriate procedure than the
standard original rating, as it suggests estimation of
the interval between resources. Let us take, for
instance, a list of three intangible resources
(reputation, culture and know-how). Under standard
rating procedure, these resources would be rated as
number one, two and three. In SAT, however, we will
score resources by intervals; let us assume a total of
30 scores in a basket, and the requirement is to dis-
tribute them among those three resources. The one
which is considered the most valuable resource
would get, say, a score of 18, while the others receive
less (7 and 5). This variability needs remedy, namely
using normalized data as explained in the Results
section.
Fourth, rms that identify their core intangible
resources could concentrate efforts on understanding
their strengths and weaknesses. For example, a
resource may be considered highly valuable, but it
may also suffer from a weakness, since competitors
can easily imitate it. In this case, the rm should not
just protect the resource, but also, even more
importantly, cultivate it by making the resource more
difcult to imitate by competitors. Finally, this pro-
cess enables a rm to develop a more profound
understanding about the resources needed to be
developed in order to compete successfully in a
denite industry.
Results
This section illustrates the framework developed. A
sample of 12 growing and 10 slow-growing public
rms serves as an illustration of the proposed Stra-
tegic Analysis Technique (SAT).
Key Valuable, Rare, Inimitable, and Non-
substitute Intangible Resources
As explained above, rms were grouped by their per-
formance (above and below 15 per cent annual
growth, and degree of perceived industry uncer-
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 116
tainty and instability). This process produces four
groups as follows: (1) Growing rms in an uncertain
and unstable environment, (2) Growing rms in a
certain and stable environment, (3) Slow-growing
rms in an uncertain and unstable environment, and
(4) Slow-growing rms in a certain and stable
environment.
Scores of the four groups of rms were totalled
according to the four tests of SCA creation: value,
rareness, inimitability, and non-substitutability. From
each test, only the ve most important, those with
the highest scores, are reported and discussed on the
presumption that however successful a rm may be,
it possesses only a narrow bundle of core resources.
The results are presented in Tables 3 and 4. Note that
more than ve resources are presented in the Tables
3 and 4, because of differences among the four tests.
Namely, a resource might be highly scored for its
value but was not scored for any other tests. The con-
tribution of the resources to SCA creation is illus-
trated in Tables 58.
The procedure of distributing up to 105 points among
seven resources for each one of the conditions for
SCA creation may produce a great variance in the
responses. In order to adjust this variation, nor-
malized scores were used. The percentile rank was
transformed and is presented as standardized scores
with a mean of 100 and a standard deviation of 20
(cf. Ghiselli et al., 1981) in Tables 3, 4 and 9.
Fast-growing Firms that Compete at Low Level of
Industry Uncertainty and Instability
Fast-growing rms that compete at a low degree of
industry uncertainty and instability perceive plan-
ning capability as a core resource that may produce
SAC and lead to superiority as it withstood all of the
four tests for SCA creation. Both managerial com-
petence and marketing and selling were perceived as
ones that account for competitive advantage and
above-normal return. Industrial relations, human
capital and organizational culture account for com-
petitive parity and normal return.
Slow-growing Firms that Compete at Low Level
of Industry Uncertainty and Instability
Slow-growing rms that compete at low degree of
industry uncertainty and instability perceive four
resources as a source of SCA creation. These are
ability to raise funds, know-how, managerial com-
petence, and product/service reputation. Interest-
ingly, only managerial competence was perceived as
critical for both high- and slow-growing rms that
compete at low level of industry uncertainty and
instability. It indicates different perceptions as to
which resource prole (and what specic resources)
ASSESSING CORE INTANGIBLE RECOURCES
Table 5 Core Resources with Respect to Sustainable Competitive Advantage Creation and Performance:
Fast-growing Firms that Perceive their Industry as one of Low Level of Uncertainty and Instability
Value Rareness Inimitable Non-substitutable Advantage Firms
position performance
Planning capability Yes Yes Yes Yes Sustainable Superior
competitive
advantage
Industrial relations Yes No No No Competitive parity Normal return
(short-term)
Managerial competence Yes Yes No Yes Competitive Above normal
advantage return
Human capital Yes No No No Competitive parity Normal return
(short-term)
Marketing and selling Yes Yes Yes No Competitive Above normal
advantage return
Organizational culture Yes No No No Competitive parity Normal return
(short-term)
Table 6 Core Resources with Respect to Sustainable Competitive Advantage Creation and Performance:
Slow-growing Successful Firms that Perceive their Industry as one of Low Level of Uncertainty and
Instability
Value Rareness Inimitable Non-substitutable Advantage Firms
position performance
Ability to raise funds Yes Yes Yes Yes Sustainable Superior
competitive
advantage
Know-how Yes Yes Yes Yes Sustainable Superior
competitive
advantage
Managerial competence Yes Yes Yes Yes Sustainable Superior
competitive
advantage
Product/Service Yes Yes Yes Yes Sustainable Superior
reputation competitive
advantage
Business development Yes No No No Competitive parity Normal return
and planning (short-term)
Table 7 Core Resources with Respect to Sustainable Competitive Advantage Creation and Performance:
Fast-growing Firms that Perceive their Industry as one of High Level of Uncertainty and Instability
Value Rareness Inimitable Non-substitutable Advantage Firms
position performance
Planning capability Yes No No No Competitive parity Normal return
(short-term)
Ability to raise funds Yes Yes Yes Yes Sustainable Superior
competitive
advantage
Managerial competence Yes Yes Yes Yes Sustainable Superior
competitive
advantage
Human capital Yes Yes Yes Yes Sustainable Superior
competitive
advantage
Business development Yes No No No Competitive parity Normal return
and planning (short-term)
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 117
ASSESSING CORE INTANGIBLE RECOURCES
Table 8 Core Resources with Respect to Sustainable Competitive Advantage Creation and Performance:
Slow-growing Successful Firms that Perceive their Industry as one of High Level of Uncertainty and
Instability
Value Rareness Inimitable Non-substitutable Advantage Firms
position performance
Planning capability Yes No No No Competitive parity Normal return
(short-term)
Ability to raise funds Yes Yes Yes Yes Sustainable Superior
competitive
advantage
Ability to manage Yes Yes No No Competitive Above-normal
changes advantage return
Product/Service Yes No Yes Yes Competitive Above-normal
reputation advantage return
Human capital Yes Yes No Yes Competitive Above-normal
advantage return
Marketing and selling Yes No No No Competitive parity Normal return
(short-term)
Table 9 The Five Core Intangible Resources in Retrospect According to the Degree of Perceived Industry
Uncertainty and Instability
a
Growing rms Slow-growing rms
Low level of industry High level of industry Low level of industry High level of industry
uncertainty and uncertainty and uncertainty and uncertainty and
instability instability instability instability
Planning capability 103 116
Internal control
Ability to raise funds 104
Environmental t
Know-how 116 101 100 93
Industrial relations
Ability to learn
Ability to manage changes 98 101
Managerial competence 104 96 106 162
Organizational reputation 104
Product/Service reputation 117
R&D
Data bases
Human capital 108 127
Intellectual property 96
Relationship with the community
Relationship with local and
central government
Marketing and selling 110
Business development and
planning
Organizing
Organizational communication
Organizational culture 103
a
See note 3 for a separate explanation of how the score values are calculated.
has the potential for being a source of SCA. One
resource business development was perceived as
valuable, but did not follow other conditions, and,
thus, accounts only for competitive parity and nor-
mal return.
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 118
Fast-growing Firms that Compete at High Level of
Industry Uncertainty and Instability
Fast-growing rms that compete at a high level of
industry uncertainty and instability perceive three
ASSESSING CORE INTANGIBLE RECOURCES
core resources for they withstood all of the four con-
ditions for SCA creation. These are ability to raise
funds, managerial competence, and human capital.
Two others planning capability and business
development - are valuable, but they did not comply
with the conditions of rarity, inimitability and non-
substitutability. Hence, they account for a competi-
tive parity and normal return.
Slow-growing Firms that Compete at High Level
of Industry Uncertainty and Instability
Slow-growing rms that compete at a high level of
industry uncertainty and instability perceive only
one core resource ability to raise funds as it
withstood the four tests for SCA creation. Interest-
ingly, the latter was perceived as a source for SCA
creation by both fast and slow-growing rms that
perceive their industry as highly uncertain and
unstable, as well as by slow-growing rms that per-
ceive their industry as relatively certain and stable.
Slow-growing rms that compete at a high level of
industry uncertainty and instability perceive both
planning capability and marketing and selling as
valuable resources, but not the kind that may only
produce competitive parity and normal return.
Ability to manage changes, product/service repu-
tation, and human capital account for competitive
advantage and above-normal return in the short
term.
Core Intangible Resources in Retrospect
In order to conclude the resources that populations
of rms perceived as most important with respect to
SCA creation, participants were asked to start the
process again. They were asked to look at the list of
22 resources in the beginning of the questionnaire,
and to select up to seven and distribute up to 105
scores among them, with the condition that they con-
sider all the four tests for SCA together. That is, score
resources when considering their value, rareness,
inimitability, and non-substitutability together.
Again, only the ve most important resources are
reported.
In order to simplify the discussion, the results for
each group, which are presented in Table 9, reveal
an interesting nding. Although some similarities
could be identied, we can identify resource hetero-
geneity across populations of rms. In addition,
though all four populations of rms consider know-
how and managerial competence as sources of SCA
creation, it is important to indicate the weight differ-
ences that each group attributed. For example, grow-
ing and slow-growing rms that compete at rela-
tively certain and stable task environment granted
116 and 100 scores to know-how.
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 119
Furthermore, looking into the results of each rm
leads to a conclusion that each rm has its own pro-
le of core intangible resources.
1
This argument holds
as well for populations of rms as they emphasize
different combinations of resources required for SCA
creation. It supports one of the most important prem-
ises of RBV, regarding resource heterogeneity across
rms as well as across populations of rms.
Discussion
The assessment of core resources, which account for
SCA creation, is one of the most difcult challenges
of resource-based view strategists. This study is an
attempt to cope with this challenge by developing a
framework by which researchers and managers may
analyse the core resources of a rm as well as popu-
lations of rms. Data collected from 12 growing and
10 slow-growing public rms in Israel served to illus-
trate the framework.
Contributions, Limitations and Suggestion for
Future Research
The study has made three major contributions. The
rst major contribution is a framework for analysing
and identifying core resources of a rm and popu-
lations of rms, and their real roles with respect to
the creation of SCA and the generation of superior
performance. The Strategic Analysis Techniques
(SAT) enable an understanding of the real state of
resources with respect to the four tests for SCA cre-
ation, and can be a useful framework for researchers
and managers to follow. In other words, the frame-
work enables us to identify the resources prole of a
rm as well as the resource prole of rms across
related industries which have similar characteristics.
In identifying differences among resources with
respect to their contribution to SCA, the framework
allows us to better confront the information problem
of multicollinearity, while analysing a strategic
resource prole.
The second major contribution of this study is that
the framework allows us to overcome the complexity
of exploring a rms resource prole or populations
of rms with common characteristics. It allows us to
better understand the relative importance of
resources with respect to SCA creation by using an
interval rating method. Instead of using ordinal rat-
ing methods such as Likert-type or simple ranking,
that may not tell us much about the relative impor-
tance of the resources (and therefore make it very dif-
cult to explore the core resources possessed by the
rm), we suggest using an interval rating method
that enhances the accuracy of measuring core
resources and provides a better understanding of the
role that resources play in SCA creation.
ASSESSING CORE INTANGIBLE RECOURCES
This study also indicates the importance of using
both qualitative and quantitative approaches.
Though the focus of this study was on developing
a quantitative framework of analysing a rms core
resources, it should be stated that qualitative and
quantitative approaches are complimentary and
strengthen one another. For example, a rst step may
be identifying resources in a denite industry or
related industries that may have a potential of SCA
creation followed by a quantitative method that mea-
sures the core resources possessed or should be
developed by the rm.
Firms all around the world are aware of the impor-
tance of core resources in attaining SCA, but are still
looking for ways to understand where the competi-
tive position originates and what should be done to
create and capture value. The resource-based view
is an approach that is concerned explicitly with the
creation of competitive advantage. Yet, it is still not
clear how to identify the drivers of competitive
advantage. The framework proposed makes it clearer
to researchers and managers that the process of
identifying the sources of value creation is complex
in nature. This study involved only a Chairperson or
CEO, but this may be extended to other levels of
management. For example, another direction may
involve stakeholders.
Several limitations of this research should be men-
tioned. First, as the ground of this study is somewhat
new, the data must be interpreted cautiously. Causal
inference is constrained by the relatively small data.
Second, the empirical method proposed here needs
further investigation, and should be considered a
Appendix A
A Description of Firms that Participated in the Study
Growing rms in an uncertain and unstable environment Growing rms in a certain and stable environment
Firm Industry Firm Industry
1 Holdings and investment 1 Software
2 Investments 2 Chemicals
3 Holdings and investment 3 Real estate
4 Software 4 Banking
5 Electronics 5 Textile
6 Pharmaceuticals 6 Energy
Slow-growing rms in an uncertain and unstable environment Slow-growing rms in a certain and stable environment
Firm Industry Firm Industry
1 Telecommunication 1 Communication
2 Defense 2 Retail
3 Software 3 Diversied holding
4 Electricity 4 Power equipment
5 Chemicals 5 Medical equipment
The classication was made according to CEO perceptions of environmental uncertainty and instability.
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 120
preliminary framework only. Third, the study
includes a list of 22 intangible resources, which parti-
cipants were asked to select and rank. Firms could
have had other resources, which were not on the list.
Furthermore, the study focuses on intangible
resources only. Finally, though the study considered
two aspects of industry effects (industry uncertainty
and instability), it did not consider the importance of
other important industry effects (see Porter, 1987).
The study has several implications for future
research. The premises of the resource-based view
need a more empirical platform with respect to the
resources heterogeneity of high, average and low-
performing rms. This argument calls for research
such as conducted by Aaker (1989) in order to pro-
duce solid empirical foundations of the core insights
of RBV. Research effort that has been devoted to
exploring the evolution of core elements (Helfat and
Lieberman, 2002; Siggelkow, 2002) may benet from
this framework. Future research local and inter-
national using similar methods may lead us to a
better understanding of the nature of SCA and com-
petitive strategy. Fifth, exploring the relationship
between core resources and strategic decisions in spe-
cic markets is a very challenging task. Finally, a gen-
eral linear model may serve as a method for analys-
ing large datasets.
Acknowledgements
I wish to thank the editor and an anonymous reviewer of this
journal. I am grateful to Jeffrey H. Greenhaus, Frank Linne-
han, V.K. Naranayan, John M. Schaubroeck and Asher Tishler
ASSESSING CORE INTANGIBLE RECOURCES
who provided me with many helpful comments and sugges-
tions.
Notes
1. The results for each rm are not presented in order to sim-
plify the presentation of the data.
2. The values were received from steps 14 and represent the
relative importance of core intangible resources of fast vs
slow-growing rms. The ranking procedure asked the
respondents to follow four steps as follows: (1) to choose
up to seven valuable intangible resources their rms pos-
sess, and to distribute up to 105 points among them accord-
ing to their value; (2) to again distribute 105 new points
among the seven or less resources, according to their rarity;
(3) to again distribute 105 new points among the seven or
less resources, according to their inimitability; and (4) to
again distribute 105 new points among the seven or less
resources, according to their sustainability. For a full
description see section headed A Strategic Analysis Tech-
nique (SAT).
3. The values were received through Stage 5 and represent
the core intangible resources of rms that compete in a low
vs high level of industry uncertainty and instability. In this
stage, the participants were asked to start the ranking pro-
cess again. Specically, the respondents were asked to look
at the list of 22 resources at the beginning of the question-
naire, and to select up to seven resources and distribute up
to 105 points among them, with the condition that they
consider all the four tests for SCA together. That is, score
resources when considering their value, rarity, inimita-
bility, and non-sustainability together.
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ASSESSING CORE INTANGIBLE RECOURCES
ABRAHAM
CARMELI, Graduate
School of Business
Administration, Bar-Ilan
University, Ramat-Gan,
52900, Israel. E-mail:
carmela@biu.ac.il
Abraham Carmeli is a
faculty member of the
Graduate School of Busi-
ness Administration and
the Department of Political Science (joint
appointment) at Bar-Ilan University. His current
research interests include the effect of intangible
elements on performance, managerial skills, prestige,
organizational failures and aspects of individual
behaviour at work.
European Management Journal Vol. 22, No. 1, pp. 110122, February 2004 122

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