Sustainable Development and Sustainability of Competitive Advantage: A Dynamic and Sustainable View of the Firm

Does the need for sustainable development hinder businesses’ ability to create value? Is firm’s competitiveness negatively affected by considering that need? After quickly reviewing the main literature contributions on the relationship between business and society, and drawing from resource-based view of the firm and sustainable development literature, this paper presents a proposal for a dynamic and sustainable view of the firm. It shows how considering the changes introduced into the competitive landscape by sustainable development influences the way in which companies develop their resources, capabilities and activities, fostering the persistence of competitive advantages based on knowledge and innovation. Introduction: views of the relationship between the firm and society The relationship between businesses and society has been extensively treated in management literature. From the efficiency view, the social responsibility of businesses is to increase their profits (Friedman, 70) with no other limits than those established by law and common decency (Sternberg, 99, working paper; Jensen, 01). There are other strands of literature that consider that there is or should be a closer relationship between businesses and society. The most important of these refer to corporate social responsibility (CSR1), which basically states why corporations should be socially responsible or not; corporate social responsiveness (CSR2), the purpose of which is to describe firms’ responses to social demands; corporate social performance (CSP), which started as a way to embrace the main contributions of CSR1 and CSR2 and later focused on the outcome of corporate behavior; and stakeholder theory (ST), the aim of which is to determine to whom firms are responsible and how and why companies should manage their relationships with them. INSERT FIGURE 1 HERE Figure 1. Business and society relationship views As figure 1 shows, all the above theories take one or more of the following approaches: the normative approach states what firms should or should not do; the descriptive approach explores what firms in fact do; and, finally, the instrumental approach posits that companies will obtain specific outcomes if they adopt specific behaviors. There have also been fruitful attempts to blend these approaches into what we have called an integrative approach. Considering that the sustainable development concept involves economic, social and environmental factors (Gladwin et al., 95), and how the dynamic view of the firm (Ghemawat, 99) explains the sustainability of competitive advantages, the theory developed in this paper nicely fits into what could be labeled a dynamic and sustainable view of the firm. Before introducing our proposal of a dynamic and sustainable view of