Introduction

In Chapter 6, we began with a discussion of why social strategy must account not only for industry structure and the nonmarket environment, but also firm resources. Despite the frequently vexing debate in strategic management over the influence of industry (external) and firm resources (internal) on corporate performance, there is little question that a theory of the firm must account for both (Barney, 1991), just as a theory of human behavior must account for environmental and individual factors.

Social strategy must then answer the question: how do these factors, separately and in their interaction, influence corporate success and under what conditions? In Chapter 6, we defined a framework for industry structure, and set out propositions for creating competitive advantage via generic social strategies in differing industry contexts. In this chapter, we define firm resources (and capabilities), describe the features of social-action-based resources, and explain the development of dynamic capabilities for social innovation (Russo and Fouts, 1997; Sharma and Vredenberg, 1998).