‘Reductionistic’ and ‘Holistic’ Views of Resource‐Based Theory: A Review of the Literature

• Date: 01 November 2015
• Published date: 01 November 2015
• DOI: http://doi.org/10.1002/jsc.2037
• Author: Hamid Salimian,Ebrahim Soltani,Mona Rashidirad

RESEARCH ARTICLE

Strat. Change 24: 509–525 (2015)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2037

Copyright © 2015 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2037

‘Reductionistic’ and ‘Holistic’ Views of Resource‐Based

Theory: A Review of the Literature1

Mona Rashidirad

Brighton Business School, University of Brighton, UK

Ebrahim Soltani

Hamdan Bin Mohammed Smart University (HBMSU), Dubai, UAE

Hamid Salimian

Brighton Business School, University of Brighton, UK

In contrast to the ‘reductionistic’ approach, a ‘holistic’ approach to resource‐based

theory has the ability to address the complex interrelationships among multiple

organizational characteristics, competitive strategies, and performance.

Resource‐based theory (RBT) has become an acceptable theory to describe

the importance of resources and capabilities in generating high performance.

Our literature review shows that there are two approaches to RBT: reductionistic

and holistic. Adopting a reductionistic approach has led to an inconsistency in

ndings on the relationship between RBT constructs (i.e., resources and capabili-

ties) and their impact on performance. is article proposes that a holistic approach

to RBT has a greater power to explain the complex interrelationships between

dynamic capabilities, a rm’s resources, and competitive strategies. rough a

critical review of both views, this study highlights areas in which future research

is needed for greater understanding of the co‐impact of a rm’s internal factors

and competitive strategies on performance.

RBT builds its intellectual foundations on the theory of imperfect competi-

tion (Robinson, 1933), the theory of monopolistic competition (Chamberlin,

1933, 1937), the theory of rm growth (Penrose, 1959), and the studies of

Wernerfelt (1984). Since the 1980s, RBT has been the dominant paradigm

(Lockett et al., 2009), emphasizing the idea that organizations must be seen as a

bundle of resources and capabilities to create value and therefore gain competitive

advantage (Barney, 1991). RBT has also been extended by Grant (1991) to encom-

pass competitive strategy. According to Grant, RBT links competitive strategies,

resources, and capabilities to organizational performance.

1 JEL classication codes: L10, L25, L190.

The predominant reductionisitic

approach may not be appropriate

to capture the reality of a rm’s

performance regarding their

resources, capabilities, and

strategies.

Concurrence of RBT constructs

with competitive strategies is not

universal but contingent, and may

vary in different contexts.

Further research is required to

understand the performance

impact of the alignment of

dynamic capabilities with a rm’s

resources and competitive

strategies.

510 Mona Rashidirad, Ebrahim Soltani, and Hamid Salimian

Copyright © 2015 John Wiley & Sons, Ltd. Strategic Change

DOI: 10.1002/jsc

A review of the extant literature on RBT highlights

two main approaches to its theorizing and application.

e rst, which is the traditional one, is called the reduc-

tionistic approach (Meyer et al., 1993), in which a linear,

often bivariate association between resources and/or capa-

bilities and performance has been suggested. Meyer et al.

(1993, p. 1177) view ‘reductionistic’ as ‘an approach

whereby researchers seek to understand the behaviour of

a social entity by separately analysing its constituent parts.’

In fact, much of the research on RBT has adopted a

reductionistic approach to the study of organizational

resources, capabilities, and their implications for organi-

zational performance (Fink, 2011). For instance, several

studies have empirically explored the positive contribu-

tion of resources (e.g., Galbreath, 2005; Ndofor et al.,

2011) and capabilities (e.g., Mithas et al., 2011; Parmi-

giani and Holloway, 2011) on performance.

However, adopting the reductionistic approach has

led to an inconsistency in the ndings. One of the main

critiques of a traditional view of RBT relates to its tauto-

logical nature (Lockett et al., 2009). is critique implies

that a traditional or reductionistic approach lacks norma-

tive implications for practicing managers with regard to

making informed decisions about the likelihood of a rm’s

resources and capabilities as a basis for strategy formula-

tion and gaining competitive advantage. Although there

is little research on examining the role of competitive

strategies based on a rm’s capabilities and their impact

on organizational performance (e.g., Parnell, 2011), the

existing account has failed to examine the conguration

among these constellations for the goal of obtaining supe-

rior performance. As a result of reductionism, the ‘co‐vary’

among the organizational resources, capabilities, and per-

formance which captures their interactions in a compre-

hensive view (Yarbrough et al., 2011) has been ignored in

past research.

In response to the inherent limitations of a reduction-

istic approach, the holistic approach has a greater power

to explain the complex interrelationship between organi-

zational resources, capabilities, and competitive strategies

on the one hand and organizational performance on the

other (Fink, 2011; Venkatraman and Prescott, 1990). is

approach has been developed based on conguration

theory (Miles and Snow, 1978). Conguration refers to

common alignments among elements (Miller, 1996).

From a holistic perspective, RBT argues that superior

performance may stem from strategic t, when it presents

a complex selection and conguration of resources and

capabilities (Brik et al., 2011) that are heterogeneous

across rms and imperfectly imitable (Barney, 1991).

us, organizations may generate value and, therefore,

enhance their performance if there is a match between

their resources and capabilities and their competitive strat-

egies. Our literature review shows that only a few studies

have adopted a holistic approach to the study of RBT.

An understanding of the current research pertinent to

theorizing and application of RBT is therefore of para-

mount importance to provide a venue for future research

as well as a direction for practicing managers. In fact,

previous studies of RBT failed to utilize a systematic review

to shed light on the relationship between dierent RBT

constructs (i.e., resources, capabilities, and competitive

strategies) and a rm performance based on each of the

two major approaches of reductionistic and holistic.

Hence, this study makes an attempt to attend to these

limitations in the current research by presenting a critical

review of both the reductionistic and holistic views of RBT.

Approach to the review

To undertake this review, we adopted Traneld et al.’s

(2003) systematic review methodology in the manage-

ment eld. is approach has three stages: planning the

review (objective and protocol); conducting the review

(identication of research, selection of studies, assessment

of article quality, data extraction, and data synthesis);

reporting and dissemination (descriptive analysis and sys-

tematic analysis).

In planning the review, the objective of this article

is to examine the relationship between RBT constructs