Non-imitability

In order to protect a CA over a current or potential competitor the scarcity of a resource or its limited availability is not enough. If a potential competitor has no options to get access to the strategic resource, he can try to build or to imitate it in his own firm (Dierickx and Cool, 1989: 1507). Whether an advantageous position of a firm is permanent or not also depends on the resources of the competitors to compensate this position, by trying to imitate this strategic resource within the firm. The easier this can be achieved, the riskier is the CA of the firm that owns the advantageous position (Amit and Schoemaker, 1993: 39; Williams, 1992: 32).

The mere imitation of a strategic resource is possibly not sufficient to compensate an advantageous position of a firm by its competitors, as the experience and learning curve (e.g. the development of organizational and technological capabilities and routines) that a firm has developed over time and on the basis of the entrepreneurial decisions that led to the establishment and use of the resource, thereby justifying the advantageous position, cannot be easily imitated (Barney, 1991: 107-108; Zimmer, 1999: 113-114; Nelson, 1991:

69-70). To build these strategic resources in an accelerated way may only be possible by time compression diseconomies, e.g. increased expenses by shortening the build-up time (Dierickx and Cool, 1989: 1507).

This is reinforced by the consideration that less successful competitors will incur sunk costs, which, in combination with their own view of the firm and its environment and an anchor in the organizational routines, complicate a strategic change of direction or an adaptation to changing environmental

conditions (Ghemawat, 1986: 57; Zimmer, 1999: 114-115). Therefore, it is useful for the owners of an advantageous position to protect themselves against imitation of its strategic resources by competitors. This could be achieved by decisions to establish strategic resources as discreetly as possible, which are not visible or traceable by the competition, making them difficult to imitate and to compensate the advantageous position.

Another difficulty in the imitation of strategically relevant resources occurs when the owner of the advantage does not owe this position due to single, but a combination of resources and these are responsible in their combination for the CA of the firm. Because of their social complexity (Dierickx and Cool, 1989: 1508; Barney, 1991: 110-111), such a combination of strategically relevant resources (e.g. technical production processes in conjunction with the skills of employees, etc.) and in conjunction with organizational routines can be difficult to imitate (Zimmer, 1999: 115-116). If components of this combination of resources are not visible or not observable (e.g. tacit knowledge, organizational routines) for the competition, a special protection against imitation is given, because the higher the proportion, the stronger the protection against imitation (Godfrey and Hill, 1995: 523). Barney (1991: 110) mentions relations, corporate culture or corporate tradition as possible reasons that some firms are able to use certain other hard resources (e.g. technology, etc.) more effectively or efficiently than other firms.

Also, the lack of knowledge about causal relationships and interactions of resources and their combinations may result in an imitation being almost impossible, because the resources were not or cannot be observed at the occurrence of the advantage (Reed and DeFillippi, 1990: 91). If the firm owning the advantageous position knows the causal relationship, and the competition does not, it can influence its protection against imitation. However, the situation is critical when neither the firm in the advantageous position nor the competition are clear about what causal interactions justify the position,

because then neither safeguards against imitation can be made nor can a more sustainable preservation of the advantageous position be guaranteed (Peteraf, 1993: 187). A change in behavior, based on changes in the environment, may cause the holder of the advantageous position to lose it, due to the disoriented situation.

If the advantageous position is based on investments in idiosyncratic (specific or special) goods and investments, the focus in this asset specificity¹⁴⁷ can be another obstacle to the imitation of strategically relevant resources (zu Knyphausen, 1993: 777).

A possible example of this is the selection of the appropriate electronic control systems and components in a material handling system (e.g. like in a BHS) of an airport. If the customer has once specified a system as part of the tendering procedure, the customer may face difficulties or is restricted to use control systems or components from other manufacturers if he wants to extend or renew the system at a later stage, if the airport does not want to face interface or compatibility problems and thus to risk an interruption of the system’s handling and processing.

Therefore, the commitment to a transaction partner leads to a lock-in- relationship of the airport. To solve that would inevitably lead to sunk costs for the airport as a transaction partner. Zimmer (1999: 118) argues that idiosyncratic goods can be used as resources in the RBV for the following transaction relationships: (a) for relationships between firms and their

147 The term asset specificity originates from the transaction cost theory (Williamson, 1979) and describes that the parties make a transaction-specific investment in order to reduce the transaction costs, which however is barely available for any other alternative use. These constitute sunk costs for investors, and therefore the customer is "Effectively ‘locked into’, the transaction to a certain degree" (Williamson, 1979: 240); (Zimmer, 1999: 118).

supplies, (b) for relations between firms and their employees and (c) for relationships between firms and their customers.

Related to case (a) Zimmer (1999: 118) describes that this particularly applies if certain goals must be secured. These may be special coordination mechanisms, specific quality standards or low costs, etc. Zimmer (1999: 118) argues with reference to (Williamson, 1979: 255-257) that case (b) is given, if the employees have acquired, for example, special implicit knowledge and specialized skills, or have a positive influence on the characteristics of the product, the price or the innovative capacity of the firm. In case (c) relations between the firm and its customers are in the center of consideration, which is when corresponding advantages arise from the definition of a transaction partner. There, for example, brand loyalty, manufacturer reputation and trust play a role. Trust, for example, is a strategic intangible resource whose generation requires time, but the investment of which does not always automatically lead to a positive feedback response of the transaction partner, and is therefore connected to a unilateral risk. Once an advantageous position in the form of a trust-based relationship is established, its imitation can be considered as virtually impossible or only to be realized at substantially higher cost.