Differentiate resource stocks from resource flows with the help of the bathtub metaphor.
What will be an ideal response?
A helpful metaphor to explain the differences between resource stocks and resource flows is a bathtub that is being filled with water. The amount of water in the bathtub indicates a company's level of a specific intangible resource stock-such as its dynamic capabilities, new-product development, engineering expertise, innovation capability, reputation for quality, and so on.
Intangible-resource stocks are built through investments over time. These resource flows are represented in the drawing by the different faucets, from which water flows into the tub. These different faucets indicate investments the firm can make in different intangible resources. Investments in building an innovation capability, for example, differ from investments made in marketing expertise. Each investment flow would be represented by a different faucet. How fast a tub fills depends on how much water comes out of the faucets and how long the faucets are left open. Intangible resources are built through continuous investments and experience over time.
How fast the bathtub fills, however, also depends on how much water leaks out of the tub. The outflows represent a reduction in the firm's intangible-resource stocks. Resource leakage might occur through employee turnover, especially if key employees leave. Significant resource leakage can erode a firm's competitive advantage. A reduction in resource stocks can occur if a firm does not engage in a specific activity for some time and forgets how to do this activity well.
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Fill in the blank(s) with the appropriate word(s).
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Answer the following statement true (T) or false (F)
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