Using Resource Dependency Theory To Develop A Framework For Understanding Organizational Effectiveness
Resource Dependency Theory
The organizational theory is defined as the set of the interrelated definitions and concepts, which helps in explaining groups, subgroups or the individual behavior, which interacts with each other for performing the activities, which are intended towards common goal accomplishment. The theory seeks for suggesting the best way for structuring or managing the organization by providing approaches for the organizational analysis. The understanding of the different principles of organizations continues to be vital for the success of all the kinds, shapes and sizes of organizations (Grosvold, Rehbein & Baker, 2015).
Among various organizational theories, resource dependency theory is concerned with study of impact of resources acquisition on the behavior of the organization. This is the most important theory because the ability of the organizations for gathering, altering as well as exploiting the raw materials quicker than the competitors can be important and fundamental to the success of organization. This theory is based on the idea that resources are crucial for success of organization and that the access as well as control over the resources is dependent upon the power basis (Dutta, 2013). Hence, this report includes the discussion on the resource dependency theory used by the managers for developing the framework of understanding for the organization.
The resource dependency theory is theory that examines relationship between the organizations as well as resources, which is required for operations. The resources are defined as tangible as well as intangible assets that are used by the firm for conceiving of as well as implementing their strategies. It may take various forms or shapes that include workers, raw materials and even funding. If certain organization maintains majority of the resources then other organization will become dependent upon it for operating as well as creating the symbolic relationship. In case of too much of the dependency, uncertainty is created that leaves the organization subject to the external control risks. The external control imposed by the other organizations or other organization can have significant impact on the operations of the company such as funding or the personnel policies (Mitchell & O’Neill, 2015). The resource dependency theory makes the assumptions that organization makes the active choices for achieving the objectives. The major tenet of resource dependency theory is scarcity of resources which results into various organizations that competes for the similar set of the resources. According to the resources dependency theory, the organizations are dependent upon the other actors in the immediate environment of task for obtaining resources. In order to survive, the firms requires for obtaining resources from the external environment. As the result of which, focal organizations acts for reducing or increasing their reliance level on those actors with the help of actions such as joint ventures or the alliances (Grosvold, Rehbein & Baker, 2015).
The Role of Managers in Resource Acquisition
The managers of the company makes strategies for the alternative plans of business for lower this type of risks. They constantly seek advantages for improving the partnership with the other organizations for strengthening their own. The factors influencing resource dependence includes resources importance, resources abundance as well as control of the resources. In terms of resource importance, the organization should ask itself that how much is the resources vital to the continued operations. Most often, resources are controlled by the organization that access and control the resources but not those organizations, which needs them (Hecker, 2012). Typically, organization builds redundancy into the resource acquisition for reducing their reliance on the single sources such as with the help of liaising with the multiple suppliers. Therefore, there is the requirement of great strategies for maintaining open access to the resources. The original formulation of resource dependence theory is consists of relationship among the units that are within organizations. It is consistent with institutional as well as ecological theories of organization in which organizations is viewed as the persistent structures of the order, under the constant negotiation and reinterpretation, interacting with the uncertain environment of the turbulence as well as multitude of the competing interests (Mitchell & O’Neill, 2015).
The basic argument of perspective of resources as well as inter organizational relations is major units for understanding inter-corporate relations as well as the society. These particular organizations are not considered autonomous rather they are being controlled by the interdependencies with the other organizations. In addition, when the interdependence compelled with the uncertainty regarding the actions with which the organization is independent then it leads towards the situation, under which there is uncertain success and survival (Wei et al. 2017). Further, actions are taken by the organization for managing the external independence, however, these actions are never successful completely and it produces new patterns of the dependence as well as interdependence. Lastly, these patterns of the dependence produce the power of inter-organizational and intra-organizational. The basic assumptions of the resource dependency theory includes organizations makes the active choices for achieving the objectives, they responds towards the demands made by the other actors in environment as well as they tries for minimizing their dependence on the resources on which they are depending heavily (Schuster & Holtbrügge, 2014).
Managers’ uses resources of organizations that are both physical and human for achieving goals. The management aims for achieving the goals of the organization with the help of ensuring effective use of the resources in society’s best interest. Further, the managers uses resource-based dependency framework for strategizing regarding survival as well as sustainability of the organization. The organizational survival is underpinned by its ability for acquiring resources in the uncontrolled environment (Hessels & Terjesen 2008). These organizations are linked to the environment with their dependence on the other organizations for various resources required by them. As the environment becomes more tumultuous, the organizations must evolve as well as adapt quicker than that of their competitors. Hence, the execution of the actions by the organization can be better understand by knowing something about the level of effectiveness of organization, organizational environment, problem created by it to obtain the resources as well as constraints and contingencies that drives from the environment (Radhakrishnan et al. 2018).
Factors Influencing Resource Dependence
The predominant way by which the effectiveness of the organizations is viewed is the level of their goal achievement. The goal-oriented view of the organizations includes collection of the individual efforts, which come together for achieving something, which could not be achieved with the individual action (Mitchell & O’Neill, 2015). The effectiveness of the organizations are achieved with the help of avenues, for instance efforts of strategic planning are designed for assessing and measuring specific outcomes and goals. Since, the resources of society are utilized by the organizations; their assessment is driven by some societal coalitions and groups, which evaluates activities appropriateness as well as output usefulness (Chambers & Munemo, 2018).
The resource dependency theory is determined not only by the company’s competitive position within the different markets but it also determined by the resources that makes its superior in comparison to the other competitors. As the result of which, it becomes apparent for the company to have competitive advantage from the quality of their resources as well as competencies. The term resources used in context of the company is in broader sense. It includes organizational processes, information, capabilities, attributes, knowledge, assets and so on controlled by the organization, which enables them for formulating as well as implementing the strategies that helps in improving their efficiency as well as effectiveness. The companies are required for continuously monitor the threats as well as opportunities, which is created by balances of power as well as dynamics of market in order ensure and maintain flow of the resources (Uygun, 2017). It is because of this purpose, they tend for increasing the level of the coordination as well as control processes. The organization seeks opportunities for decreasing uncertainty as well as managing dependency with the help of structuring purposefully their exchange relationships as well as establishing formal as well as semi-formal links with the other businesses (Michael & Popov, 2014). They use the framework of resource dependency theory for determining the strategic resources, which firms could exploit for achieving the sustainable competitive advantages. The strategy of the business specifies scope of every business as well as defined base on which the business unit could maintain as well as achieve the competitive advantages within their industry. The strategic decision-making mostly depends upon the decision makers on the way internal as well as external resources are available to the organization for their success in the long run. In this case, internal resources is considered to be directly in the control by the organization with the help of effective use of the competitive advantages as the management of the external resources is done by organization (Raye, 2014).
Organizational Survival and Adaptation
Resources are the key feature within the context of formulation as well as implementations of the corporate strategy for generating persistent competitive advantages. The resource dependence theory does not only look for internal perspective but it also looks for the external perspective. The dependence of the company on the external resources allows them for acquiring the new business, creating strategic and co-operative alliances as well as merging with the other companies. These types of strategic decisions made by the company shows that how company could decrease the uncertainty about the future development. If the company is able for generating the resources it needs then it is able for enhancing competitive advantages. The competitive advantage of the company results from the competencies as well as internal resources quality (Michael & Popov, 2014).
Resources are considered o be crucial for company because lack of its access can pose threat to its survival in the competitive business environment. The scarcity of the resources might leads towards appearances of the power relations between company as well as external environment and it results into creating basis for the control over the particular resources. The manager needs to make sure that the company remains competitive in terms of its resources in order to survive in the long run (Zgrzywa-Ziemak, 2015).
Conclusion
Therefore, this report concludes that organizational theory is the discipline that is comprised of the large number if the alternative perspective on the organization. Among all theories of organizations, resource dependency theory is the increasingly important perspective because this theory helps to contribute significantly towards explanation of the behavior, stability, structure as well as change of the organization. It has been analyzed that there is great reliance of the company in the other organization for the resources to operate. This theory is based on the assumptions that the dependence on the important as well as critical resources influences the organizational actions and the actions and decisions of the organization depends on certain situations of dependency. Further, it has been explained that framework of the resource dependency theory are used by the managers for the long-run survival as well as sustainability of the organization. Lastly, it has been analyzed that the framework of resource dependence theory contributes towards competitive advantage. The managers of the company are required for ensuring that company is competitive enough in terms of its resources in comparison to its competitors. Hence, it can be said that resource dependency theory helps organizations for recognizing influence of external factors on organizational behavior. However, managers act for reducing the uncertainty as well as dependence of the environment with the help of reducing the power of others over them and attempt to increase their powers over others. Therefore, managers plays vital role in shaping the outcomes of the organizations.
References
Chambers, D., & Munemo, J. 2018. Natural Resource Dependency and Entrepreneurship: Are Nations with High Resource Rents Cursed?. Journal of International Development, 31(2): 137-164.
Dutta, D. 2013. Path Dependence, VRIN Resource Endowments, and Managers: Towards an Integration of Resource-Based Theory and Upper Echelons Theory. Journal of Business Theory and Practice, 1(1): 109.
Grosvold, J., Rehbein, K., & Baker, P. 2015. Predicting Board Decisions: Are Agency Theory and Resource Dependency Theory Still Relevant?. Academy of Management Proceedings, 2015(1): 12155.
Hecker, A. 2012. Knowledge Beyond the Individual? Making Sense of a Notion of Collective Knowledge in Organization Theory. Organization Studies, 33(3): 423-445.
Hessels, J., & Terjesen, S. 2008. Resource dependency and institutional theory perspectives on direct and indirect export choices. Small Business Economics, 34(2): 203-220.
Michael, B., & Popov, M. 2014. The Failure of Theory to Predict the Way Public Sector Organisation Responds to its Organisational Environment and the Need for a Mosaic-View of Organisational Theory. Public Organization Review, 16(1): 55-75.
Mitchell, C., & O’Neill, K. 2015. Tracing economic transition in the mine towns of northern Ontario: An application of the “resource-dependency model”. The Canadian Geographer / Le Géographe canadien, 60(1): 91-106.
Radhakrishnan, A., Davis, J., David, D., & Sridharan, S. 2018. Re-examining supply chain integration: a resource dependency theory perspective. International Journal of Logistics Systems and Management, 30(1): 1.
Raye, J. 2014. Fractal Organisation Theory. Journal of Organisational Transformation & Social Change, 11(1): 50-68.
Schuster, T., & Holtbrügge, D. 2014. Resource Dependency, Innovative Strategies, and Firm Performance in BOP Markets. Journal of Product Innovation Management, 31: 43-59.
Uygun, M. 2017. Purchasing decisions at private hospitals in the framework of resource dependency theory. Independent Journal of Management & Production, 8(4): 1400.
Wei, C., Sun, X., Liu, J., Zhou, C., & Xue, G. 2017. High Power Distance Enhances Employees’ Preference for Likable Managers: A Resource Dependency Perspective. Frontiers in Psychology, 7.
Zgrzywa-Ziemak, A. 2015. The Impact of Organisational Learning on Organisational Performance. Management and Business Administration. Central Europe, 23(4): 98-112.