Notes on McFarland Week 7 Lecture 1 Resource Dependency Theory

What is Resource Dependency Theory about A little history

Beginnings: Contingency theory (1950s) Thompson - Focus on the technical core and protecting the organization from environment Seal off technical core Differentiate input/output functions Stockpile resources and grow (smooth and absorb uncertainty) Maintain alternatives / minimize dependence:Coopting, Contracting,Join ventures Open system perspective in organization There is no "right" way to organize a firm The best way depends on the environment Defines the organization in terms of its dependencies with other organizations

Resource Dependency Theory (Pfeffer and Salancick) - Modify boundaries

Environmental determinism Specific goals depend on dependence relations General goal is to find certainty and autonomy Respond options: Comply/adapt, Avoid/manage Dependence defined Forms of dependence Symbiotic interdependence o When two or more different kinds of organizations interchange resources o Accomplished by: Normative coordination, Hierarchical contracts, Join ventures, Vertical mergers Competitive interdependence o When two or more organizations compete for the resources of a third party o Accomplished by: Normative coordination, Cooptation/interlocking boards, Trade associations, Joint ventures, Horizontal mergers Factors involved in dependence Types of resources: Physical, Technical, Social Value of resources: Importance, Availability (alternatives, supply) Discretion over the resources: Who controls the resource?, What controls dependency (laws, copyright, etc) Management strategies for dealing with dependence Buffering Strategies change the core task of the firm Coding (example: tracking/classifying) Stockpiling (example: endowment) Leveling (example: advertising) Forecasting Adjusting scale (example: downsizing, budget cuts) Bridging Negotiating: Normative coordination, Bargaining Exchanging o Contracts: Define rules, Routine negotiations (Interlocking directorates, Hierarchical contracts)

Prepared by Ariadna73

Page 1 of 3

Notes on McFarland Week 7 Lecture 1 Resource Dependency Theory

o Handle disputes o Resolve internal conflicts Pooling (More involved) o Joint venture o Strategic alliances o Associations and cartels Cartels are illegal in the US Merging (More involved) o Vertical (producer/supplier) o Horizontal (Eat the competition) o Diversification (Acquiring an entirely different business) o General management approaches Avoid dependencies o Stockpile o Form long-term protective contracts o Set regulations o Diversify Break dependencies o Use secrecy o Restrict information o Begin an anti-trust suit o Coopt controller o Merge vertically

Critique
Organizations are assumed to be more or less similar Value in resource is often unclear until after the fact What happened to culture and mission? What about the larger network? RDT focuses on pairwise relationships between firms Fails to consider the environment as a larger network of interconnected organizations

Prepared by Ariadna73

Page 2 of 3

Notes on McFarland Week 7 Lecture 1 Resource Dependency Theory

Contrasting Resource Dependency with other theories studied in this class

TheoryName Coalitions BriefReviewofthetheory
It applies where there are multiple actors Focus on Players, Parochial interests, Resources, Bargaining processes Management strategies: Relations via bargaining Dominant pattern of inference: Action = agreement

SimilaritiesandDifferenceswithResourceDependenceTheory
Inter-Organizational focus Focal organization Resources dependencies with other organizations Extended-Exchange relations An organization can find ways to overcome dependencies o Mergers o Absorbing The relations can be asymmetric RDTDescribes How the technological core of an organization is buffered from the environment How the organization bridges in the environment Theconcerniswith Adapting to the external environment Being effective in the environment by creating SOPs Thefocusshiftsfrommostlyinwardstomostlyoutwards

Organizational Learning

It applies when there are clear feedback loops, adaptations, memory and support for developing expertise Focus on practices and their continual adaptation (core technology improvement) Management strategies: find ways to create social learning experiences to retaining and transferring expertise. Want communication, improvisation, practice and knowledge sharing Dominant pattern of inference: Action = Result of collaborative search and adapting rules to situations

Cognitive and normative aspects of cultures seem to guide decisions (sense making) Integrated Fragmented Ambiguous Actors seek expression and fulfillment of identity Management strategies: confer ideology and lead others to identify with it. Do not make it explicit Dominant pattern of inference: Action = Result of culture (deep structure) Not concerned with sense making Selection of SOPS Manage the organization's dyadic relations in the environment Selected for their consequences in dependence relations Step back to the logic of consequence

Organizational culture

Prepared by Ariadna73

Page 3 of 3