Question

In VRIO framework of resourse based theory, R stands for Rarity, that is, your resource or capability should be rare to generate sustained competetive advantage. Suppose in health insurance industry there are 100 competitors, of which only 5 of them, employ artifical intelligence technology. The technology resource is:

a.rare for the industry
b.would be rare only if 1 of 10,000 had it.
c.not rare because 5 of them have it

Answer 1

In the VRIO framework, if only 5 out of 100 competitors in the health insurance industry use AI technology, then this resource is considered rare and fulfills the 'Rarity' condition for a sustained competitive advantage.The correct option is A.

Step-by-step explanation:

In the context of the VRIO framework of resource-based theory, 'R' indeed stands for Rarity. A resource or capability must be rare among a firm's competitors to give the firm a sustained competitive advantage. If in the health insurance industry, comprised of 100 competitors, only 5 employ artificial intelligence (AI technology), then this technology resource is considered: a. rare for the industry. Rarity does not mean exclusivity but indicates that the resource is not widely possessed by competitors. Therefore, having only 5 out of 100 competitors utilizing AI technology does make it rare.