Resource Dependency Theory Essay Example

probably the sense of its development is the adjustment of the structure, management and minor strategy to the overall course towards the decline of its own dependence (Ulrich and Barney, 1984). The theorists also suggest that the increase of others’ dependency upon the organization cannot be viewed as a separated goal, but rather a method of curbing its own dependency (Pfeffer, 1982; Ulrich and Barney, 1984).

Thus, the two basic assumptions of this perspective on business are the establishment of the dependence upon other enterprises and corporations in the search for additional resources and the parallel efforts to minimize this dependence. Another premise is the following opinion: “Organizations are assumed to be comprised of internal and external coalitions which emerge from social exchanges that are formed to influence and control behavior” (Hayward and Boeker, 1998, p. 3). Importantly, organizations need to control the behavior of their potential rivals, so unity and cooperation are vital in certain areas of the world of business.

Furthermore, “the environment is assumed to contain scare and valued resources essential to organizational survival. As such, the environment poses the problem of organizations facing uncertainty in resource acquisition” (Hayward and Boeker, 1998, p. 3). As one can understand, the principle implies the importance of including of a certain percentage of uncertainty when planning business (Teng et al, 1995). Another principle stated in the theory is the dual goal of organizational development, so it is important to combine the attainment of both.

The success in this aspect is likely to bring about the increase of the organization’s power and the positive alteration of exchange with other actors/enterprises (Hayward et al, 1998). The theorists also suggest that

certain organization might choose either way of development and are often forced to develop in only one direction: the establishment of dependence relationships with other organizations or the submission of smaller or less influential organizations through determining the dependence of these organization (Boyd, 1990).

Which of these roads a given organization will follow, and to what extent, depends on external circumstances. The conditions which determine this ere thoroughly listed by Pfeffer and Salancik, but the main issues are there: What is the cost of giving in to external demands, what are the costs of abandoning the use of the resource, and are there the demands in conflict with other demands from the dominant actors? ” (Ulrich and Barney, 1984, p. 471).

The selection of either of these paths was documented by rich evidence, gathered in banks, corporate boards as well as by the reactions of certain organizations to government pressure (Lee and Kim, 1999). As Lee and Kim (1999) state, contemporary organizations employ a two-sided approach to measuring and controlling their dependence upon external resources: buffering and bridging. The first strategy, buffering, is aimed at decreasing the company’s vulnerability to the shortage or sudden deficiency of external sources.

Buffering implies a number of techniques like the improvement of classification of inputs, assisted growth of stock levels (Lee and Kim, 1999), development of strategic prognoses concerning the shortage of certain resource in the future, adjustment of workflow (Teng et al, 1995) in both input and output demands as well as the modification and adaptation of the level of production (Hayward and Boeker, 1998).

As opposed to buffering, bridging techniques are not directed to the increase of the company’s resistibility to

resource decline, but rather to the reduction of the possibility of the resource deficiency, first of all – through the reinforcement of the organization’s relationship with its suppliers (Lee and Kim, 1999). Bridging thus to great extent refers to the field of diplomacy. Bridging can consist of using bargaining to gain information and improve understanding between companies, contracts (standard or hierarchical) to ensure compliance, co-optation – the incorporation of suppliers in the decision-making (for example by the way of board interlocks), the foundational of a mutually owner organization in the form of a joint venture and trade associations where links are nurtured”(Lee and Kim, 1999, p. 34).

In addition, merging two organizations and employing the connections with government institutions also might turn out useful tools in dealing with the shortage of resources anticipated. The major advantage of Resource Dependency perspective is the possibility to tie resources to organizational development very closely, so that it is clear how actually the process of resource exchange occurs. Furthermore, the theory is research-based and is therefore a superstructure upon the earlier organizational theories (Herzberg’s, Vroom’s approaches and so forth).

The theory is also universal, i. e. it can be expanded as well as specified in certain aspects – for instance, it was also used in developing motivation tools (Teng et al, 1995) and determining the appropriate managerial style depending upon the course selected by the company. In general, the perspective is to certain degree edifying, as it ‘prescribes’ flexibility and the ability to negotiate in resource exchange – in fact, before the 1970s, the theoretical views on interorganizational partnership hadn’t been formed yet (Teng et al , 1995; Lee and Kim,

1999).

On the other hand, the theory has certain weaknesses, especially its basic position which contains unclear views on workforce and human resource management, thus, it seems to some extent mechanistic and dehumanized. Furthermore, it has already been proved that manipulations and operations with resources are not always the basic activity of an organization (Hayward and Boeker, 1998), for instance, non-government social agencies are less dependent upon the competition for material resources.

Thus, the application of Resource Dependency Theory is limited. Furthermore, Lee and Kim state: “exchanges are merely the result of individual decision-making, and should not be defined as the starting point for organizational analysis. We also defend the assumption that rationality (at least bounded rationality) is found at all levels of the organization, not just in the buffered core technology” (Lee and Kim, 1999, p. 36).

In order to diminish these disadvantages, the theory should be modernized (this tendency is today very notable in fact) and adjusted to the features of contemporary businesses. In addition, several buffering techniques should be added: for instance, a number of organizations are absolutely tolerant to the shortage of staff with the education in natural sciences, as they have already trained their staff in the most effective way. The theory should include the chapter about human resource management and the use of well-prepared personnel in both buffering and bridgening.

As one can understand, Resource Dependency Theory highlights the importance of resources as a basis for any organizations and develops its argument through describing the establishment of a company’s dependence upon more influential organizations as well as its aspiration to diminish this dependence through raising the similar ‘addiction’ of smaller enterprises to its

resources. Although the perspective is very clear and comprehendible, it lack a discussion of the actual contribution of personnel to the organization’s resource exchange and its view on rationality as necessarily a well-functioning structure of material resource management.