Resource dependence theory (RDT) 

Resource dependence theory (RDT) is the study of how getting resources affects the actions of an organization. It is based on the idea that to acquire resources, an organization must interact with other organizations and individuals in its environment. These interactions and transactions provide benefits but also have the potential to hinder the organization by creating reliance on specific partners. Control of resources provides power, and organizations must devise plans to prevent them from being affected by an unequal balance of power that might inhibit resource acquisition. These strategies may include fostering business relationships with other partners and potential suppliers or diversifying the organization's products.

Resources may include raw materials, as well as capital, information, technology, labor, and leadership. Some experts include customers as resources that may be plentiful or scarce at times, and this availability will affect organizations.

Resource dependence theory has been highly influential in management of organizations. Many studies have evaluated it in terms of organizational theory and economic effects. Although its influence may have waned during the closing years of the twentieth century, scholarly interest in the theory has remained high.

Background

Theories about organizations largely developed through organization studies, also called organization science. This field attempts to apply scientific methods and analysis to the study of organizations, such as businesses, and how group members such as managers and workers operate and interact.

Organizations may be classified as having open-systems frameworks or closed-systems frameworks. Closed-systems frameworks focus on factors within the organization, such as the resources and skills, and attribute success or failure largely to these internal elements. Open-systems frameworks emphasize the ways the environment, including other organizations and government, affect the organization. The open-systems approach focuses on ensuring the organization adapts to outside forces.

In 1978, Jeffrey Pfeffer and Gerald Salancik published The External Control of Organizations: A Resource Dependence Perspective. At that time, the influence of the external factors that affect a business was gaining prominence in organization science. This open-systems approach led researchers to question the importance of internal factors, in particular leadership, and conclude that external factors have a strong influence on organizations. They found that resource control equals power, and can be achieved through having the resource (having a reliable supply), owning it, controlling who can get it and use it, and influencing regulations concerning the resource.

Overview

Pfeffer and Salancik offered five options for organizations to reduce resource dependence on their environment:

• mergers and vertical integration
• interorganizational relationships, such as joint ventures
• boards of directors
• political action
• executive succession

Many of these factors work toward developing a created environment. This is an environment molded by actions of the organization to benefit it, especially in reducing dependency for resources.

Mergers and acquisitions can be an efficient way to ensure an organization has access to resources. Such actions can reduce competition for resources, solidify a source of resources, and diversify an organization's products, thus reducing pressure to perform on any one component if resources become scarce. Combining buyers and sellers increases dominance in a market, when both are part of one organization and the relationship is solidified. Organizations can reduce or eliminate their dependence on other organizations in the environment, and reduce sources of risk. Mergers became increasingly common in the years after Pfeffer and Salancik's book was published. Mergers and acquisitions during the 1980s were largely motivated by profit, such as hostile takeovers and leveraged buyouts. By the twenty-first century, however, most of these business moves were strategic attempts to find mutual benefits.

Interorganizational relationships, such as joint ventures, joint marketing agreements, and strategic alliances, help an organization more reliably acquire resources. Business arrangements such as joint ventures often simplify trade, especially between domestic and international organizations. Organizations that create alliances with others that compete for the same resources can gain power over suppliers because they have combined the customer base. This is of most benefit to smaller organizations that partner with larger firms.

Pfeffer and Salancik believed that boards of directors could aid organizations in acquiring resources or reducing risk in gaining them. An organization with significant environmental needs functions best with a board that includes a high percentage of outsiders. Its membership should align with the organization's resource needs. Researchers have found that when carefully chosen, the directors' other memberships often can aid a firm in finding resources. Because directors offer benefits, they may be regarded as both capital and resources themselves.

Resource dependence may spur organizations to take political action to affect their environment. They try to shape government policies to their benefit, for example, by making political contributions to those who may have influence on regulations that affect the organization. Political action is linked to organizations' resource dependence and is an important factor in achieving a created environment. In many cases, researchers have found that government officials who leave office join boards of directors of organizations that have donated to their campaigns, and often have contacts that provide benefits in acquiring resources.

Executive succession is related to an organization's environment. The degree to which it is independent of resource pressure correlates to the organization's power, which influences internal practices and hierarchy. Pfeffer and Salancik found that an organization showing poor results could be hindered by practices that are out of touch with the environment, which is often attributed to a chief executive officer's (CEO's) strategies. Researchers have found the greatest executive turnover in organizations with a stronger dependence on the environment. Executive churn is also most common in highly competitive and unpredictable environments.

Organizations have tried a number of strategies to improve their positions in the twenty-first century. Outsourcing and information sharing, for example, have become common, yet could affect an organization's access to resources. Outsourcing to full-service suppliers frees some company resources, but it could tie up multiple resources in a subcontractor and threaten services if quality suffers. Information exchange could affect future development and create a power imbalance that also could affect resource availability. Organizations must consider such moves carefully and evaluate risks to resource acquisition.

Bibliography

Biermann, R., and M. Harsch. "Resource Dependence Theory." Palgrave Handbook of Inter-Organizational Relations in World Politics. Palgrave Macmillan, 2017, pp. 135–55.

Drees, Johannes M., and Pursey P.M.A.R. Heugens. "Synthesizing and Extending Resource Dependence Theory: A Meta-Analysis." Journal of Management, vol. 39, no. 6, 2013, pp. 1666–98.

Hillman, Amy J., et al. "The Resource Dependence Role of Corporate Directors: Strategic Adaptation of Board Composition in Response to Environmental Change." Journal of Management Studies, vol. 37, no. 2, 2000, pp. 235–56.

Hillman, Amy J., et al. "Resource Dependence Theory: A Review." Journal of Management, vol. 35, no. 6, 2009.

Hillman, Amy J., and Thomas Dalziel. "Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives." Academy of Management Review, vol. 28, no. 3, 2003, pp. 383–96.

Malatesta, Deanna, and Craig R. Smith. "Lessons from Resource Dependence Theory for Contemporary Public and Nonprofit Management." Public Administration Review, vol. 74, no. 1, 2014, pp. 14–25.

Pfeffer, Jeffrey, and Gerald R. Salancik. The External Control of Organizations: A Resource Dependence Perspective. Stanford Business Classics, 2003.

Zald, Mayer N. "Organization Studies as a Scientific and Humanistic Enterprise: Toward a Reconceptualization of the Foundations of the Field." Organization Science, vol. 4, no. 4, 1993, pp. 513–28.