Can competitive advantage be predicted?

PurposeThe fundamental problem of the resource‐based view (RBV) of the firm is its lack of predictive ability and its inability to identify, ex ante, those resources and capabilities leading to competitive advantage and superior profitability. This paper aims to propose an extension of the RBV model that incorporates the demand‐based variables of customer needs and size of addressable market segment in the definition of the resources and capabilities that enable competitive advantage and superior profitability.Design/methodology/approachThe paper's approach is to use a literature review and two case studies.FindingsIn this model a company has a competitive advantage if its resources and capabilities are valuable, rare, non‐imitable, organized, and if these resources and capabilities address unmet customer needs in market segments large enough to cover organizational fixed costs.Research limitations/implicationsThe proposed extension of the RBV is based on current literature and two qualitative case studies. Future longitudinal studies should establish causal links between current resources and capabilities meeting the proposed criteria and future performance.Practical implicationsThe model appears to be able to guide decisions about investment in resources and capabilities to further develop existing competitive advantages and to build new ones. The benefit of this model lies in its ability to identify, ex ante, those resources and capabilities leading to competitive advantage and superior firm profitability.Social implicationsAn improved ability to predict future firm performance based on more rigorous tests of current resources and capabilities improves the resource allocation process in firms and thus benefits society.Originality/valueThe benefit of this model lies in its ability to identify, ex ante, those resources and capabilities leading to competitive advantage and superior firm profitability.