Chrisman, James J.

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Sum zEGFBOOK REVIEWCREATING VALUE THROUGH SKILL-BASED STRATEGYAND ENTREPRENEURIAL LEADERSHIPBy William C. Schulz HI and Charles W. HoferAmsterdam: Pergamon, 1999Reviewed by: James J.Chrisman, University of CalgarychrismantLt)mgmt.ucalgary.caSchulz and Hofer's book, Creating Value Through Skill-Based Strategy and EntrepreneurialLeadership (1999), is an ambitious effort to develop a process-oriented, resource-based theoryof the firm. The authors suggest that their objective is to provide an improved understandingof skill-based strategy and entrepreneurial leadership through a detailed review of theliterature on resources and strategy and in-depth field research of four firms that used skill-based strategies to improve their performance and create sustainable competitive advantages.From this improved understanding, the authors present a quite detailed theory and processmodel of the resource-based determinants of competitive advantage.The core of the authors'ontributions rest on three research findings that appear to explain thesuccess of the firms studied (p. 219): "(1) Meeting the customers'eeds is a function ofknowing what the customers want and need. (2) Resources in and of themselves are not asimportant as what management does in assembling them and developing integrative systemsthat can allow the company to produce quality products and be flexible, fast and cost eAicient.(3) The challenge for general managers is to keep the company 'in the hunt'y knowing bothwhat the customers want and what the company is capable of doing with its resources andskills."At first glance one might be tempted to ask "so what?" since these three findings really justrepresent the strategy problem of matching opportunity and resources as defined by authorssuch as Hofer and Schendel (1978) over 20 years ago. However, if anyone were to assumethat this reiteration of the fundamental premises of strategic management otTers no new value,they would be wrong. For one thing, in this reviewer's mind the field of strategicmanagement, to its detriment, has lost sight of these fundamentals, in favor of a search formeasurement rigor and methodological elegance. Therefore, Schulz and Hofer's return to thebasics is welcome. More importantly, this important book gives new meaning to the match ofopportunity and resources.Schulz and Hofer make it clear that the entrepreneurial process of identifying opportunity isone of the three most important competencies of an organization and its management. This91Journu/ ofSmull Bu»me»» Sirulegv Vol. /2, bio. I Spring/Summer 200/competence, which depends on a firm's absorptive capacity, interpretive systems, andleadership, might not normally be associated with a resource-based view of the firm but it isimportant nonetheless. For example, the entrepreneurial search process can be the basis forfirst mover advantage.'I'hc authors also effectively argue that an organization's 'institutional competence", thebuilding of a distinctive organizational character that makes it peculiarly suited to performcertain types of work, is equally important. Schulz and Hofer borrow and adapt this conceptfroin Selznick (1957) concepts of institutionalization, character, and distinctive competence.While I agree with the end result of their efforts, I disagreed with the inference of the authorsin Chapter 3 (pp. 53-55) that the concepts of organizational character and distinctivecompetence are essentially synonymous. Although interrelated, I have always vieweddistinctive compeience as that more measurable aspect of character, i.e., the particular task-related orientations of the organization, rather than its ephemeral features such as culture or'personality". Regardless of this small disagreement, the point is that organizations,successful ones at least, dri appear to take on a special character and do seem to become adeptat performing certain types of work. Furthermore. as the authors suggest, it may prove to bemore effective in the long run to measure such competencies in a more holistic way, nero»»functions, than b» functional areas such as marketing, production, and so on (Snow &Hrebiniak. 1980).Finally, Schulz and Hofer introduce the competence of "dynamic capability". This importantdeterminant of competitive advantage is a measure of an organization's ability to develop andmaintain systems and structures to support learning, and flexibly utilize its systemic resourcesto meet changing strategic requirements. In other words, dynamic capability allows theor anization to exploit its entrepreneurial and institutional competences more effectively.When all is said and done, what the authors propose are three competencies, developed byentrepreneurial leadership and given meaning through the formulation of a skill-basedstrategy, that define the long run productive opportunity of a firm and determine its potentialto create sustainable competitive advantage. Because these competencies depend upon amixture and configuration of a variety of individual skills and basic resources, they will berare, difficult to imitate, and have no substitutes, per Barney's seminal expositions (1991,1997). However, because the competencies are important to the organization in itsidentification and provision of value to customers, rather than of direct value to customers inand of themselve~, Schulz and Hofer's theoretical model avoids the tautological problems thathave tended to plague the development of the resource-based view of the firm (Priem &Butler, 200 la; Priem & Butler, 200 lb). Finally, although somewhat cumbersome in its style,the detailed development of the literature, the longitudinal nature of the data collected, theturnaround situations of the Iirms studied, and painstaking presentation of the theory, providesomething that is often missing in theoretical works: evidence of a cause-effect relationshipbetween skill-based strategy and entrepreneurial leadership on the one hand and sustainablecompetitive advantage on the other. Simply put, what the authors have accomplished may bethe most important advancement of strategic management theory since Porter's (1980)seminal work on competitive strategy.As noted at the outset of this review, Schulz and Hofer have undertaken an ambitious project.As suggested throughout this review their book is one of ideas, and they are important ideas.However, despite its many strengths, the book has some limitations that should be discussed.While it may sound trite, a major limitation for me was the writing style. I admit to a greatdifficulty in preparing a review that I hope does justice to this book. Part of the difliculty isundoubtedly due to my own limitations as a scholar; nevertheless, I did not find the bookparticularly reader-friendly despite the authors'bvious attempts to make it so. There were so92Journal ofSmall Business Strategy Vol. 12, No. 1 Spmng/Summer 2001many ideas, so many new terms. The relationships among them were not always clear. Therewas also a distracting tendency of the authors to repeat themselves, sometimes using therepetition as part of their explanations.There also was somewhat of a disconnection between the sections prior to and following thepresentation of the four case studies from which the authors'kill-based strategy andentrepreneurial leadership theory was derived. For example, in Chapter 3 (pp. 35-56) theauthors present a very interesting and compelling 'typology" of resource levels: (I) basic, (2)systemic, (3) organizational services, and (4) stock assets. Unfortunately, this potentialcontribution to the literature is then more or less abandoned in the remainder of the book. Noattempt is made to explain what the four levels of resources are for the companies studied, nordo the four levels appear in a distinct, consistent fashion later in the development of thetheory.Given the authors'ropensity to develop deliniuons for their terms, I was surprised that theydid not provide more attention to the definitions of two very key terms: entrepreneurship andcompetitive advantage. Certainly there were allusions from which one could make inferences.However, I would have wished for more concrete definitions. For example, Schulz andHofer's research and theory is clearly about corporate entrepreneurship, not new venturecreation. Indeed, one of the compelling features of their book is the presentation of a theorythat explains why entrepreneurial leadership and managerial direction are integral andintertwined parts of the formulation and implementation of skill-based strategies.Unfortunately, all the authors'ffer is vague suggestions that entrepreneurship has somethingto do with opportunity recognition and creative destruction (Schumpeter, 1934), the latterallusion provided in a context (see p. 237) that made the definition of entrepreneurshipdifficult to distinguish from the definition of strategy (Hofer gr Schendel, 1978). Some furtherattention and discussion of entrepreneurship vis-a-vis mainstream definitions (e.g., Gartner,1988; Schumpeter, 1934) would have been useful. The need for greater definitional precisionis also true for the concept of sustainable competitive advantage.As noted above the book is primarily process, not content oriented. Still I wish the authorswould have come to grips with some of the fundamental content issues that must be resolvedif the resource-based view of the firm is to tlourish rather than fade. The recent interchangesof Priem and Butler (2001a, 2001b) and Barney (2001) highlight some of these concerns. Thefirst is whether sustainable competitive advantage should be, because the question is in whatway the field should develop its language and theories to better frame business problems, afimciion of valuable, rare, inimitable, unsubstitutable resources or whether sustainablecompetitive advantage should be defined by such resources? Likewise, should firmperformance (e.g., profitability) be considered a fimcrion of the presence or extent ofsustainable competitive advantage, and other factors, or should sustainable competitiveadvantage be assumed to equal (lead automatically to) above normal firm performance? Asnoted earlier, I believe that Schulz and Hofer have effectively avoided tautology in theirtheoretical model; however, they have also avoided tackling those two fundamental issues.Finally, Schulz and Hofer have neglected one other factor: the way the academic marketplaces value on ideas. Whether one likes it or not, measurement is of primary value in theacademic marketplace. I fear that the ideas presented in this book will prove extremelydifficult to measure. Consequently, the problem of measurement must be tackled at somepoint if the full potential of the theory presented in this book is to be realized.In conclusion, this important book is neither an easy read nor a cookbook for a host ofquantitative studies. Nevertheless, it is rich in valuable ideas that must be carefully digested.As possibly one of the most important books on strategy from a resource-based perspective93Journal ofSfnall Business Strateg) Vol. /2, No l Spring/Summer 200/ever written, it deserves to be read and re-read by all serious scholars in the fields ofentrepreneurship and strategic management.REFERENCESBarney, J. B. (1991). Firm resources and sustained competitive advantage. Journal ofManagement 17(I), 99-120.Barney, J. B. (1997). Gainin and sustainin com etitive advanta e. Reading, MA: Addison-Wesley.Barney, J. B. (2001). Is the resource-based 'view" a useful perspective for strategicmanagement research? Yes. Academ of Mana ement Review 26(l),41-56.Gartner, W. B. (1988). Who is an "entrepreneur?" is the wrong question. American Journal ofSmall Business 12(4), 11-32.Hofer, C. W., & Schendel, D. (1978). Stratef formulation: Anal tical conce ts. St. Paul,MN: West Publishing Company.9 .M.E.)1989).~Cii mk ~ Y R.NY:F 9Priem, R. L., & Butler, J. E. (200la). Is the resource-based "view" a useful perspective forstrategic management research? Academ of Mana ement Review 26(l ), 22-40.Priem, R. L., & Butler, J. E. (200lb). Tautology in the resource-based view and theFII ) f* llfd«ad I:FE.A~dfMm R i 26)l).8)-66.Schumpeter, J. A. (1934). The theor of economic develo ment. Cambridge, MA: HarvardUniversity Press.Selznick, P. (1957). I.eadershi in administration. Berkeley. CA: University of CaliforniaPress.Snow, C. C., and Hrebiniak, L. G. (1980). Strategy, distinctive competence, andorganizational performance. Administrative Science uarterl . 25, 317-335.James J. Cltrismuni» a Professor in the Entrepreneurship and Innovation Area, holder oftheEndow cd Professorship in Fafnily Bufiness Entrepreneurship, and the Director of the Centrefi)r Fafnily Busmess Management and Entrepreneurship in the Faculty ofManagement of theUniverfitv ofCaltfary.94

Creating Value Through Skill-Based Strategy and Entrepreneurial Leadership

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