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through which it could ship “millions of different items to millions of different
customers.” Compared with Amazon’s use of combined resources, traditional bricks-
and-mortar companies, such as Toys “R” Us and Borders, found it hard to establish
an effective online presence. These difficulties led them to develop partnerships with

Amazon. Through these arrangements, Amazon now handles online presence and the
shipping of goods for several firms, including Toys “R” Us and Borders, which now
can focus on sales in their stores. Arrangements such as these are useful to the bricks-
and-mortar companies because they are not accustomed to shipping so much diverse
merchandise directly to individuals. [12]
Some of a firm’s resources are tangible while others are intangible. Tangible
resources are assets that can be seen and quantified. Production equipment,
manufacturing plants, and formal reporting structures are examples of tangible
resources. Intangible resources typically include assets that are rooted deeply in the
firm’s history and have accumulated over time. Because they are embedded in unique
patterns of routines, intangible resources are relatively difficult for competitors to
analyze and imitate. Knowledge, trust between managers and employees, ideas, the
capacity for innovation, managerial capabilities, organizational routines (the unique
ways people work together), scientific capabilities, and the firm’s reputation for its
goods or services and how it interacts with people (such as employees, customers,
and suppliers) are all examples of intangible resources. [13] The four types of tangible
resources are financial, organizational, physical, and technological. The three types of
intangible resources are human, innovation, and reputational.
As a manager or entrepreneur, you will be challenged to understand fully the
strategic value of your firm’s tangible and intangible resources. The strategic value of
resources is indicated by the degree to which they can contribute to the development
of core competencies, and, ultimately, competitive advantage. For example, as a
tangible resource, a distribution facility is assigned a monetary value on the firm’s
balance sheet. The real value of the facility, however, is grounded in a variety of
factors, such as its proximity to raw materials and customers, but also in intangible
factors such as the manner in which workers integrate their actions internally and
with other stakeholders, such as suppliers and customers. [14]
Capabilities
Capabilities are the firm’s capacity to deploy resources that have been
purposely integrated to achieve a desired end state. [15] The glue that holds an
organization together, capabilities emerge over time through complex interactions
among tangible and intangible resources. Capabilities can be tangible, like a business
process that is automated, but most of them tend to be tacit and intangible. Critical to
forming competitive advantages, capabilities are often based on developing, carrying,
and exchanging information and knowledge through the firm’s human
capital. [16] Because a knowledge base is grounded in organizational actions that may
not be explicitly understood by all employees, repetition and practice increase the
value of a firm’s capabilities.
The foundation of many capabilities lies in the skills and knowledge of a firm’s
employees and, often, their functional expertise. Hence, the value of human capital in
developing and using capabilities and, ultimately, core competencies cannot be

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