Question

Although True Ion Inc. and One Electro Inc. operate in the same consumer electronic industry, True Ion Inc. has better sales and brand equity. This is attributed to True Ion Inc.'s commitment to innovation. The company has adequate financial and human capital to invest in research and development, an area in which One Electro Inc. lags behind. In this scenario, which of the following critical assumptions of the resource-based view of a firm has been illustrated?

Answer 1

Answer:

B) resource heterogeneity.

Explanation:

The theory of resources and capabilities is based on the idea that strategic resources can help a company gain competitive advantages over their competitors. This happens because some resources are rare, difficult to imitate and valuable. This is the base for the assumption of resource heterogeneity, which means that a company will have different resources than its competition and those resources are not easily imitated by others.  

In this case, True Ion's commitment to innovation is not something that One Electro can imitate. True Ion's financial and human capital is committed to research and development, while their competitor isn't.

It is not always about the money a company can have, some resources cannot be bought. E.g. every town has a successful restaurant, that many people enjoy and it's considered the best of town. A competitor might build a nicer restaurant in front of it, with fancier decoration, chairs, etc., but that doesn't mean that the new restaurant will be considered the best in town. It might eventually take away a few clients, but generally they return. Human capital and the company's culture are things that cannot be purchased or imitated.