Comparing the resource‐based and market‐based views of the firm: empirical evidence from Czech privatization

Abstract The recent privatization of state‐owned enterprises in the Czech Republic forms a natural experiment to test and compare the predictive ability of the resource‐based view (RBV) against the market‐based view (MBV) under conditions of great change. It has been recognized in the literature that, under normal stable circumstances, a firm's internal resources and its external market power are fundamentally intertwined. Consequently, it is difficult to identify the relative roles of these two theories in explaining expected firm performance and firm value. However, when market conditions are in a state of flux, as in the case of the Czech Republic in 1992, we expect the firm's resources to be the primary determinants of firm value. In order to test this notion, an RBV model was developed, based on a set of firm features reflecting the rare and valuable ability to compete in the emerging capitalistic economy (as opposed to the currently prevailing bureaucratically planned economy). A contrasting MBV model was also developed, highlighting the role of market power in this regard. These models were assessed in a cross‐sectional sample of 988 Czech firms undergoing privatization. The empirical findings show that the RBV‐driven variables are remarkably better at explaining share values of Czech firms in the period of privatization than MBV‐driven variables. These results underscore the role of firm resources as a primary determinant of firm value in rapidly changing environments. Copyright © 2003 John Wiley & Sons, Ltd.