Resource-Based View Revisited: Why Buy-and-Build Is About Reconfiguration, Not Assets
Why acquisitions create advantage only when resources can be recombined under constraint
Buy-and-build is usually described in operational terms, such as deal cadence, integration playbooks, and synergy targets. Those mechanics matter, but they obscure a more fundamental question: what is actually being accumulated through repeated acquisition, and why should those accumulations generate advantage that persists once competitors can see the same roll-up opportunity?
The Resource-Based View (RBV) of the firm offers the most rigorous available answer. It conceptualises acquisitions not as market-entry moves or scale plays but as the deliberate accumulation of heterogeneous, imperfectly mobile resource bundles under uncertainty. That framing fits buy-and-build unusually well, because in a platform assembled through a sequence of deals, advantage depends far less on any single transaction than on the construction of a resource base over time.
This note positions RBV as the primary analytical lens for value creation in buy-and-build. It also takes the lens seriously enough to test it: to ask where its assumptions hold, where the evidence is thinner than its advocates suggest, and where its sharpest critics are right. Dynamic Capabilities enters later as a disciplined extension rather than a competing framework, and the note’s central claims are stated as explicit propositions at the end. A lens worth using is a lens worth holding to account.
Origins of the Resource-Based View
The intellectual roots of RBV trace to Edith Penrose (1959), who argued that a firm is best understood as a collection of productive resources whose deployment both constrains and enables growth. Growth, in her account, is bounded not by the market but by the firm’s own capacity to absorb and direct new resources, the limit later writers called the “Penrose effect.” That idea is the seed of everything this note argues: a platform can only acquire as fast as it can absorb.
Wernerfelt (1984) formalised the insight, proposing that analysing a firm through its resource positions, rather than its product-market positions, yields different and often sharper strategic conclusions. Four of his propositions bear directly on buy-and-build:
Firms differ systematically in the resources they control.
Those differences persist because factor markets are imperfect.
Acquisitions are purchases of resource bundles, not just businesses.
Strategy is the balance between exploiting existing resources and developing new ones.
Barney (1986, 1991) then specified the conditions under which resources generate sustained advantage, and later folded in the organisational dimension: the “O” of the VRIO test, meaning the firm’s capacity to actually exploit what it holds (Barney, 1995).
Core assumptions
RBV rests on two foundational assumptions (Barney, 1991). The first is resource heterogeneity: firms in the same industry control different bundles of assets, capabilities, and knowledge. The second is resource immobility: some of those resources are costly to trade, imitate, or redeploy across firms. From these follows the central proposition: sustained competitive advantage arises when a firm controls resources that are valuable, rare, imperfectly imitable, and non-substitutable (the VRIN criteria) and has the organisational capacity to deploy them.
Resources are defined broadly: tangible assets, intangible assets such as reputation and relationships, organisational processes, and embedded knowledge and routines. That breadth matters for buy-and-build, because much of what creates value in a platform sits in non-codified, tacit, or relational assets that are not easily visible in a data room. A target’s management depth, its installed-base relationships, its tacit operating know-how: these rarely appear cleanly on a quality-of-earnings schedule, yet they are often what determines whether an add-on compounds or disappoints.
Acquisitions as resource transactions, and the problem of efficient factor markets
RBV’s most underappreciated contribution is its treatment of acquisitions. Barney (1986) argued that resources are bought and sold in strategic factor markets, the markets for the inputs needed to execute a strategy, and that these markets price resources according to buyers’ expectations of the value they will create. The same target may be worth materially different amounts to different buyers; synergy is not intrinsic to the target but buyer-specific; and overpayment is common when expectations converge or optimism dominates.
This framing aligns closely with observed buy-and-build dynamics. Platforms repeatedly acquire similar firms; value depends on how well a target’s resources complement the existing base; and sequencing matters because earlier acquisitions shape the platform’s capacity to absorb the next one. Read through RBV, a successful buy-and-build assembles complementary resource positions that competitors cannot easily replicate; it is not simply buying cheap assets.
But Barney’s own argument contains the sharpest objection to the whole enterprise. If a strategic factor market is efficient, the price of a resource already impounds its expected value, and the acquirer earns only a normal return: the advantage is competed away at the auction. This is not an abstract worry for buy-and-build. Most targets are sold through organised processes rather than surfacing at random (Boone & Mulherin, 2007), and the more intermediated and competitive the process, the more fully the price should capture the value any disciplined buyer expects to extract. So how can a platform earn excess returns at all?
RBV offers three answers, and buy-and-build relies on all of them. First, value is buyer-specific because the platform can do something with the target that other bidders cannot: a target’s worth depends on the acquirer’s capacity to deploy its own complementary resources against it (Kaul & Wu, 2016). Second, the platform reduces the competition it faces, through proprietary origination and through private targets, which trade at a discount that compensates for greater information asymmetry (Capron & Shen, 2007). Third, and most importantly, the resources that matter most are not for sale in the factor market at all.
Resource accumulation and time
Dierickx and Cool (1989) supplied the refinement that makes RBV usable for buy-and-build. They challenged the assumption that strategically valuable assets can simply be purchased, arguing that the resources that matter most, such as reputation, culture, routines, and integration know-how, are stocks accumulated over time through path-dependent flows. As they put it:
“Strategic asset stocks are accumulated by choosing appropriate time paths of flows over a period of time.”
Three of their mechanisms travel directly into the platform setting. Time-compression diseconomies mean a capability built over five years cannot be bought in one; asset-mass efficiencies mean those who already hold a stock accumulate further stock more cheaply; and interconnectedness means stocks reinforce one another, so an integration capability and a reputation for being a good acquirer grow together. The implication is blunt: not all resources are tradable, acquisition alone does not confer capability, and the order and pacing of deals matter as much as selection itself.
This is why integration capability is, in a buy-and-build platform, a strategic asset in its own right. It cannot be acquired wholesale; it is built through repeated execution, and it is learned deliberately, since firms that codify and accumulate integration experience develop a capability that measurably improves later acquisitions (Zollo & Singh, 2004). The same logic governs what a platform can even recognise as a good target: its capacity to absorb new resources depends on the related knowledge it already holds (Cohen & Levinthal, 1990). Because these accumulated stocks are exactly the resources a competitor cannot buy at auction, they are also the ones the efficient-factor-market objection cannot erode.
A worked illustration: two platforms, one thesis
The mechanism is easier to see in a concrete case. The following is stylised, a composite rather than a specific company, but every move in it is drawn from the dynamics above.
Consider two private-equity platforms pursuing the same thesis: consolidate a fragmented regional market of building-products distributors and installers. Both target the same fundamentals, namely recurring renovation demand, sub-scale independents with no succession plan, and purchasing fragmentation that promises procurement synergy. On paper, their pipelines are nearly identical, and they often bid for the same assets at similar multiples.
Platform A treats its first two acquisitions as capability-building exercises rather than scale plays. It uses them to construct a repeatable template: a shared procurement function, a common branch-operating model, and a standardised onboarding sequence for acquired management. It deliberately holds cadence below what its capital could support until that template works. By the time it accelerates, each new add-on is worth more to A than to any other bidder, because A can drop it onto an operating system that already exists. The same target, valued by a financial buyer with no template, is worth less, because the synergy lives in A’s resource base, not in the target.
Platform B front-loads cadence to put capital to work and show early momentum. Each acquisition is integrated ad hoc, by whichever executive is free. Integration debt compounds: systems never converge, acquired managers leave, and the procurement synergy that justified the premiums is only partly captured. B is not buying worse companies or paying materially more; it is failing to accumulate the capability that converts a target into value. Three years in, the two platforms hold similar assets bought at similar prices and have diverged sharply in performance.
RBV explains that divergence in a way operational accounts cannot. The difference is not asset quality, price discipline, or market timing, since those were comparable. It is the stock of integration capability A accumulated and B did not, and the buyer-specific value that capability created. The advantage was built, not bought.
What the evidence actually says
The illustration is consistent with the empirical record, though that record is more qualified than RBV’s advocates sometimes imply. Capron (1999), studying horizontal acquisitions, found that the redeployment of resources between acquirer and target, in both directions, improves long-term performance, which is the redeployment-and-recombination logic at the centre of this note. Whether acquirers should prefer targets whose resources are similar to their own or complementary to them is contingent on strategic aim (Yu et al., 2016), and a target’s value depends on the acquirer’s capacity to deploy resources against it rather than on standalone quality (Kaul & Wu, 2016).
Honesty requires a caveat the earlier version of this note glossed. The broader claim that resource or strategic “fit” reliably predicts acquisition performance is not settled; the relatedness literature is genuinely mixed, with effects that vary by measure, period, and context. The defensible version is narrower, and is stated as a proposition below: fit matters when it is operationalised as the acquirer’s demonstrated capacity to deploy complementary resources, not as abstract industry similarity.
The private-equity literature adds the setting-specific evidence. Operational engineering, the industry and operating expertise a sponsor applies to its portfolio, is the capability that distinguishes leading firms (Kaplan & Strömberg, 2009), and inorganic growth through add-ons has become central to the PE business model (Hammer et al., 2017). Sponsors can earn above-average returns despite paying premiums for add-ons, through a combination of top-line growth and multiple expansion (Hammer et al., 2022), and the strategy creates value under identifiable industry and platform conditions (Bansraj & Smit, 2017). Recent theory casts private equity as a specialised intermediary in the market for corporate assets, whose selection logic differs systematically from that of strategic acquirers (Nary & Kaul, 2023), which is precisely why a resource-deployment account, rather than a generic synergy account, is the right lens.
The limits of the lens, taken seriously
RBV has real critics, and the strongest of them deserve a hearing rather than a footnote. The most damaging charge is near-tautology: if valuable resources are those that produce advantage, and advantage is the evidence that resources were valuable, the theory risks explaining outcomes by relabelling them (Priem & Butler, 2001). Reviews of the empirical literature reinforce the worry from a different angle, since intangible resources are hard to operationalise, the expected duration of advantage is left vague, and overall empirical support is modest and uneven (Armstrong & Shimizu, 2007; Newbert, 2007). And the efficient-factor-market objection, raised above, never fully goes away.
These critiques bite hardest against predictive uses of RBV, attempts to forecast which firm will win from a checklist of resources. They bite far less against explanatory use, where the goal is to understand the mechanism by which advantage is constructed across a sequence of deals. The defence is not to wave the critiques away but to accept the discipline they imply: specify the resource and the deployment mechanism in advance, rather than inferring them from the outcome. That is the point of stating propositions before observing cases, and it is the standard the rest of this Notebook tries to hold to.
RBV and Dynamic Capabilities: a disciplined extension
Dynamic Capabilities theory (Teece et al., 1997) extends RBV by emphasising a firm’s ability to sense opportunities, seize them, and reconfigure its resource base as the environment changes. Applied carefully it adds genuine explanatory power; applied loosely it becomes an all-purpose hand-wave for “the platform is good at adapting.” Even its proponents worry about this: Eisenhardt and Martin (2000) recast dynamic capabilities as specific, identifiable processes precisely to rescue the concept from tautology, while Helfat and Peteraf (2003) offered the RBV-compatible notion of capability lifecycles to describe how capabilities are founded, developed, and mature over time.
In a buy-and-build context the framework is best held narrowly: as a second-order capability that conditions the effectiveness of resource accumulation, and as the explanation for why some platforms integrate repeatedly while others stall after the first add-on. RBV explains which resources matter and why they may generate advantage; Dynamic Capabilities explains whether the firm can keep redeploying them as complexity rises. Both lenses are needed; neither alone is sufficient; and the second should not be stretched past its evidence to cover gaps in the first.
Four propositions
Stated plainly, so they can be argued with and tested against cases:
Buyer-specific value. In buy-and-build, a target’s value is buyer-specific and rises with the platform’s capacity to deploy complementary resources against it, not with the target’s standalone quality.
Accumulation, not purchase. The resources most decisive for platform advantage, such as integration capability, reputation, and operating routines, are accumulated through path-dependent execution and cannot be acquired wholesale; they are therefore not competed away in factor markets.
Sequencing as a constraint. The order and pacing of acquisitions shape future feasibility; early deals expand or narrow the set of targets a platform can later absorb.
Heterogeneity from capability. Performance differences across platforms pursuing nominally identical theses are explained primarily by differences in accumulated capability, not by differences in asset quality, price paid, or market timing.
Why this lens matters
Positioning RBV as the primary lens clarifies several things operational framings tend to obscure: acquisitions are resource bets, not growth events; value creation is buyer-specific and path-dependent; sequencing shapes future optionality; and integration capacity is itself a strategic asset (a claim Integration Capacity Is the Binding Constraintdevelops from the platform side, and Why We Acquire: Motives Before Targets takes forward into how targets are actually chosen).
Used carefully, as an explanatory lens disciplined by propositions rather than a predictive checklist, RBV makes buy-and-build legible as a systematic process of building advantage under constraint. That legibility is what the rest of the Thesis Notebook builds on: Real Options, where the lens strains and reversibility is overstated; Absorptive Capacity, where learning becomes the binding mechanism; and the pre-deal research, where the resource-bundle framing meets selection in practice. My own view, stated once and plainly, is that the resource-based account is the most honest description we have of why two platforms running the same playbook end up so far apart, and that its looseness is a fair price for getting the mechanism right.
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