Business

Much of the business literature on competitive advantage investigates corporate effort at the strategic level, and tends to focus on key success factors that sustain advantage. Porter (1980), for instance, used "value chain" analysis as a tool for inter-functional linkage. Alternately, Chamberlin (1933) introduced the notion that assets can be exploited to create value, not only through inter-functional linkages (as in value chains) but also through unique processes, knowledge and cultural values. We have extended resource-based theory (RBT) to include a concept called complementary resource combinations (CRCs). CRCs are not factor inputs (in an economic sense) like tangible and intangible assets; they are complex combinations of assets, people, and processes that firms use to transform somewhat inert resources and assets into unique outputs such as products and services. Through our study of the top four assurance firms in South Africa, we have developed a model called a "Framework for Sustainability" that shows how these firms use CRCs to marketplace advantage. Our research focuses on how information technology (IT) enables CRCs, and indicates that IT hardware and software do not per se possess properties of "rarity"; it is through combinations with an array of processes, actions , strategic intentions and programs within the firm that IT enables the creation of CRCs to sustain a firm's competitive advantage over time.

In the broadest sense, the purpose of corporate governance is to ensure that listed companies are fair and honest with their range of stakeholders. These stakeholders include shareholders, employees, customers and society at large.

A corporate governance framework, from this perspective, would be a wide-ranging system of internal and external checks and balances which polices and advises organisations to different degrees depending on their levels of engagement with, and relationship to, the company.

In reality, attempts to look at corporate governance from this broad perspective are few and far between. Instead, corporate government legislation and corporate governance thought, encompassed in the popular and academic literature, focuses predominantly on a very narrow view of corporate governance. This view is concerned with the rights of shareholders in corporations, and within that group, primarily with the rights of institutional investors.

This view of corporate governance defines its primary task as addressing the agency problem whereby a firm’s ownership is separated from a firm’s management. By taking this stance, the underlying assumption is that the prime stakeholder in a company is the provider of capital.

This article seeks to rebalance the debate around corporate governance by attempting to expand the definition of the corporate governance from a narrow focus on shareholder protection to include the broader range of stakeholders, and to map what such an internal and external scrutiny framework may look like.

Firstly, a review will be provided of the shareholder view in a variety of countries around the world, including both industrialised and emerging markets. Thereafter, the shareholder view will be considered as one element within the broader framework of scrutiny. We believe that a purely financial, institutional approach does not do justice to the needs of society. Some small steps are being taken to redress this imbalance. In the corporate social responsibility field, there are initiatives to take a triple-bottom line- and social process perspective to take account of involved financial, social and environmental responsibilities. What has not been developed in that area is a diverse view of what scrutiny could look like, both formally and informally, should a real stakeholder view be taken.

Much of the business literature on competitive advantage investigates corporate effort at the strategic level and tends to focus on key success factors that sustain advantage.  Porter (1980), one of the first researchers to explore within-firm dynamics of how advantage is created, used “value chain” analysis as a tool for inter-functional linkage.  Our research contributes to intra-firm exploration, using resource-based theory first conceived by Chamberlain (1933), Selznick (1957) and Penrose (1959). Resource-Based Theory (RBT) introduces the notion that assets can be exploited to create value, not only through inter-functional linkages (as in value chains) but also through idiosyncratic processes, knowledge, and cultural values. 

We have extended RBT to include a concept called complementary resource combinations (CRCs).  CRCs are not factor inputs (in an economic sense) like tangible and intangible assets; they are complex combinations of assets, people, and processes that firms use to transform somewhat inert resources and assets into unique outputs such as products and services.  Through our study of four assurance firms in South Africa, we have developed a “Framework for Sustainability” that shows how these firms use CRCs, especially combined with IT assets, to marketplace advantage. 

Because of space requirements, this paper focuses only on one of the firms CRCs, as well as identified enabling social complexity attributes.  CRCs exist in a complex web of social interactions and may even depend critically on particular individuals. Our research findings indicated that assets and resources such as IT hardware and software do not per se possess properties of “rarity”; but, it is through idiosyncratic combinations with an array of processes, actions, strategic intentions and programmes within each firm, i.e., CRCs, that enable the firm to build socially complex and unique barriers to imitation that support core capabilities sustaining a firm’s competitive advantage over time.

Much of the business literature on competitive advantage investigates corporate effort at the strategic level, and tends to focus on key success factors that sustain advantage. Porter (1980), for instance, used “value chain” analysis as a tool for inter-functional linkage. Alternately, Chamberlin (1933) introduced the notion that assets can be exploited to create value, not only through inter-functional linkages (as in value chains) but also through unique processes, knowledge and cultural values. We have extended resource-based theory (RBT) to include a concept called complementary resource combinations (CRCs). CRCs are not factor inputs (in an economic sense) like tangible and intangible assets; they are complex combinations of assets, people, and processes that firms use to transform somewhat inert resources and assets into unique outputs such as products and services. Through our study of the top four assurance firms in South Africa, we have developed a model called a “Framework...