The paper explores the usefulness of analysing firms from the resource side rather than from the product side. In analogy to entry barriers and growth‐share matrices, the concepts of resource position barrier and resource‐product matrices are suggested. These tools are then used to highlight the new strategic options which naturally emerge from the resource perspective.

The article reflects on the diffusion of the ‘resource‐based view of the firm’ into academic and practitioner thought. The contributions of many people are noted. In closing, I offer some speculations about the future use of these ideas.

In this paper we theoreticully arid rrnpiricully itivestigmte the idea that firnis diversify in part to irtilire prodirctive resources which are sirrplirs to cirrrent operutions. Knowledge of these resources allows 11s to rnuke predictions uboirt the direction of u firm's expansion. In particirlur, we suggest that excess physicul resoirrces, niost knowledge-based resources. und externul firianciiil resources ure ussociuted with rmre reluted diversif cution, while ititernul finunciul resoirrces ure ussociuted with inore wireluted diversificutiori.

We decompose the inter‐firm variance in profit rates into economic and organizational components. Using a representative model from each paradigm we find that both sets of factors are significant determinants of firm performance. Further findings are that the two effects are roughly independent and that organizational factors explain about twice as much variance in profit rates as economic factors.

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