Objective: This article analyse the conditions under which firm resources can be sources of SCA”, with the internal accumulation of assets, capabilities, organizational processes, firm attributes, information, knowledge, etc; controlled by a firm that enable the firm to conceive and implement strategies that improve its efficiency and effectiveness. In case of Barney (1991) “strategic management suggests that firms obtain sustainable CA by implementing strategies that exploit internal strengths, while neutralising external threats and avoiding internal weaknesses” . Assumption: The primary task of a resource-based approach to strategy formulation is maximizing rents over time. Strategy formulation are straightforward. The firm's most important resources and capabilities …show more content…
After synthesizing more than three decades of research, Porter (1988) indicates an important answer: the linkage is inverted-U shaped, with differences in diversification and performance of perationalizationisn fluencing how this relationship presents itself in empirical research. Diversification exhibits an inverted-U relationship with firm performance: positively related - from low to moderate range and negatively related - from moderate to high range. Authors advocating inverted-U models argue that there is an optimal level of diversification— that is, that moderately diversified firms outperform both single-business firms and limited diversifiers on one hand and highly diversified corporations on the other. In particular, some argue that there is a trade-off between benefits and costs of diversification. Value-enhancing models propose a consistently positive relationship between diversification and corporate performance. They draw mainly on arguments from market power theory, internal capital market efficiency reasoning, transaction costs theory, portfolio theory, industry or product life cycles, and taxation advantages (Grant,