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

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 the findings about the relationship between RBT constructs (i.e. resources and capabilities), and their impact on performance. This paper proposes that a holistic approach to RBT has a greater power to explain the complex interrelationships between dynamic capabilities, firm’s resources and competitive strategies. Through a critical review on both views, this study highlights areas in which future research is needed for greater understanding of the co-impact of a firm’s internal factors and competitive strategies on performance.