What must be true for a firm's resources to contribute towards a sustainable competitive advantage?

A firm's resources must be valuable, rare, and nonsubstitutable to effectively contribute to a sustainable competitive advantage. These characteristics ensure that the resources provide unique benefits that competitors cannot easily replicate or replace, which is essential for maintaining a leading position in the market.

Valuable resources enhance a firm's ability to create value for customers, whether by improving efficiency, reducing costs, or enabling differentiation. Rare resources do not just add value; they are not widely available to competitors, which allows the firm to stand out in the marketplace. Nonsubstitutable resources cannot be easily replaced with other resources that fulfill the same function. This uniqueness creates barriers for competitors, making it difficult for them to obtain similar advantages.

In contrast, resources that are low-cost and commutable do not hold the same potential for creating an enduring competitive edge, as they can be obtained by multiple firms. Resources controlled by competitors would not contribute positively to a firm's own advantage. Perfectly imitable resources would imply that others can mirror a firm’s strategies without barriers, thus undermining any potential competitive advantage. Hence, the combination of being valuable, rare, and nonsubstitutable forms the cornerstone of a sustainable competitive advantage.