A Resource-Based Theory of the Firm:
Knowledge Versus Opportunism

Kathleen R Conner
C K Prahalad

University of Michigan
School of Business

Abstract

(Conner K, C K Prahalad. 1996. A Resource-Based Theory of the Firm: Knowledge Versus Opportunism. Organization Science 7, no. 5: 477-501.)

A resource-based (knowledge-based) theory of the firm is developed. Its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity. The research focuses on the polar cases of organization within a firm as compared to market contracting. The research predicts choice of organizational mode, identifying whether firm organization of market contracting will result in the more valuable knowledge being applied to business activity. The resource-based predictions of organizational mode are compared and contrasted with corresponding opportunism-based, transaction-cost ones. A principal point is that knowledge-based considerations can outweigh opportunism-related ones. The research establishes the relation of a theory of the firm to a theory of performance differences between competing firms.

To appear in "Strategic Management of Intellectual Capital and Organizational Knowledge" edited by Nick Bontis & Chun Wei Choo (Oxford University Press).