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Research shows that a greater percentage of a firm's profitability is explained by the I/O rather than the resource-based model.

a) True
b) False

1 Answer

3 votes

Final answer:

The statement that I/O models explain a greater percentage of a firm's profitability over the resource-based model is false. Both I/O and RBV models are important for understanding a firm's profitability, and their relevance may vary based on context and industry. The correct option is B.

Step-by-step explanation:

The statement that a greater percentage of a firm's profitability is explained by the Industrial Organization (I/O) model rather than the resource-based model is false. While I/O models, which focus on industry forces, offer valuable insights into competition and market dynamics, the resource-based view (RBV) is also incredibly influential.

The RBV suggests that a firm's unique resources and capabilities are crucial for achieving competitive advantage and, therefore, profitability. In reality, both models provide valuable perspectives, and there is no consensus that one explains a greater percentage of a firm's profitability over the other.

The choice between these models often depends on the specific context in which a firm is operating, including industry characteristics and internal capabilities.

Many organizations are indeed interested in I/O to understand their workers' psychology, which helps them achieve higher productivity and efficiency. The global competition and workforce diversity make the psychological aspects even more critical.

However, resources continue to be a significant factor in economic prosperity, as per the enduring correlation between economic scale and energy use highlighted in Figure 2.1.

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