Resource Dependence Theory

Lecture 16

Week 7

McFarland Lectures

Resource Dependency Theory and related theories… Coalition Formation Organizational Learning Organizational Culture

McFarland Lectures

Coalition FormationWhen does it apply?When there are multiple actors with inconsistent preferences and identities, and none of whom can “go it alone”.

Summary or Basic ArgumentFocus on:

players occupying various positions their parochial interests (their problems and solutions) their resources (expertise, money, people) and stakes in

game the bargaining processes between them that establish

agreements / coalitions – exchange!

McFarland Lectures

Coalition FormationManagement StrategiesBargain with players (log-roll, horse-trade, hinder opposition’s coalition formation, etc). Learn others’ interests / weaknesses so you know how to manipulate and win. Direct management of relations via bargaining.Dominant Pattern of InferenceAction = agreement that results from political bargaining in narrow time frame of each transaction / exchange.

McFarland Lectures

Coalition Formation and Resource Dependence Theory (RDT) Inter-organizational Focus

Concerns a focal organization and its resource dependencies with other organizations in the environment.

Extended exchange relations An organization can form a wide variety

of buffering or bridging maneuvers used to overcome dependencies in the environment

These relations can be asymmetricMcFarland Lectures

Organizational LearningWhen does it apply?Exists when there are clear feedback loops, adaptations, memory, and support for the development of applied-expertise.Summary or Basic ArgumentFocuses on practices and their continual adaptation and change to fit reality – i.e., practices reflecting organizational intelligence (focus on core technology improvement).

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Organizational LearningManagement StrategiesFind ways to create applied, social learning experiences with means to retaining and transferring expertise. Want communication, collective improvisation, practice and knowledge sharing to arise.Dominant Pattern of InferenceAction = result of local actors collaborative search (trial & error / transfer) and adapting rules to situations.

McFarland Lectures

Organizational Learning and Resource Dependency Theory (RDT) • Resource Dependence Theory describes

how the technological core of an organization is buffered from the environment

how the organization bridges in the environment.

The concern is with adapting to the external environment being effective in the environment by

establishing certain SOP’s for resource exchanges in the environment.

McFarland Lectures

Organizational CultureWhen does it apply?When the cognitive and normative aspects of social structure are of concern and seem to guide organizational decisions (sense-making) and outcomes.

Summary or Basic ArgumentActors seek expression and fulfillment of identity, and organizational culture is the medium for such expression/sense-making.

Integrated

Fragmented

Ambiguity

SOP (ostensive rules)

Organizational CultureManagement StrategiesFind ways to confer ideology and lead others to identify with it (using practices), but don’t make it so explicit that cynicism emerges. Give room for self-expression so distancing is unnecessary, and encourage members to generate a culture of their own (~org learning culture).

Dominant Pattern of InferenceAction = result of culture (deep structure) generated in the organization, but which is mediated by the member’s relation to it.

McFarland Lectures

Deep Practice

Organizational Culture and Resource Dependency Theory

Resource Dependency Theory is not concerned with sense-making (deep structure), but with the selection of standard operating procedures (SOP) that manage the organization’s dyadic relations in the environment. These SOP’s are selected for their consequences in dependence relations.

McFarland Lectures

How RDT Differs From Prior Organizational Theories

Locus of UncertaintyPrior theories – internal RDT – in external relations of dependence View of Uncertainty and DependenceCoalition Formation: not a problem – they hold the coalition together Resource Dependency Theory: they

threaten survival and autonomyMcFarland Lectures

RDT: Beginnings Contingency Theory (Thompson) Focus is on the technical core

of the organization and protecting it from environmental disturbances. Seal off technical core Differentiate input / output functions Stockpile resources and grow (smooth and

absorb uncertainty) Maintain alternatives / minimize dependence

McFarland Lectures

Tech

Core

Environment

Firm

RDT: Beginnings Resource Dependence Theory

(Pfeffer and Salancick) modify boundaries to manage disturbances in the external environment.

Environmental determinism Specific goals depend on dependence

relations General goal is to find certainty and

autonomy Response options: comply/adapt or

avoid/manage dependenciesMcFarland Lectures

Firm

Environment

Core Features of Resource Dependence TheoryFactors involved in dependence:What are the key resources in an environment? Who controls the resources?

A. Types of resourcesB. Value of resourcesC. Discretion over the resource

Core Features of Resource Dependence TheoryFactors involved in dependence:What are the key resources in an environment? Who controls the resources?A. Types of resources1.Physical2.Technical3.Social

Core Features of Resource Dependence TheoryFactors involved in dependence:What are the key resources in an environment? Who controls the resources?

B. Value of resources1. Importance

(crucial, in demand)2. Availability

(alternatives, supply)

Core Features of Resource Dependence TheoryFactors involved in dependence:What are the key resources in an environment? Who controls the resources?

C. Discretion over resource1. Who2. What

Core Features of Resource Dependence TheoryFactors involved in dependence:What are the key resources in an environment? Who controls the resources?

A. Types of resourcesB. Value of resourcesC. Discretion over the resource

Management Strategies for Dealing with Dependence - Buffering

1. Coding (ex: tracking / classifying)2. Stockpiling (ex: endowment)3. Leveling (ex: advertising)4. Forecasting (ex: Republican

president and NSF)5. Adjusting Scale (ex: downsizing – kill

arts)

Management Strategies for Dealing with Dependence - Bridging

1. Negotiating2. Exchanging3. Pooling4. Merging

McFarland Lectures

Management Strategies for Dealing with Dependence -- Bridging1. Negotiating

i. Normative coordinationii. Bargaining

Management Strategies for Dealing with Dependence -- Bridging2. Exchanging

i. Contractingii. Interlocking directoratesiii. Hierarchical contracts

Management Strategies for Dealing with Dependence -- Bridging3. Pooling

i. Joint ventureii. Strategic alliancesiii. Associations and Cartels

Management Strategies for Dealing with Dependence - Bridging4. Merging

i. Vertical mergerii. Horizontal merger iii. Diversification

Producer

Supplier Supplier

General Management ApproachesA. Avoid Dependencies

Stockpile, form long-term protective contracts, set regulations, diversify

B. Break DependenciesUse secrecy, restrict information, begin an anti-trust suit, coopt controller, merge vertically.

McFarland Lectures

Forms of DependenceSymbiotic interdependence. When two or more different kinds of organizations exchange resources (A B)Accomplished by: Normative coordination, contracts, hierarchical contracts (using clauses), joint ventures, and vertical mergers.

McFarland Lectures

Forms of DependenceCompetitive interdependence. When two or more organizations compete for the resources of a third party (A C B) Accomplished by: Normative coordination, cooptation / interlocking boards, trade associations, joint ventures, and horizontal mergers.

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Critique of RDT and Contingency Theory

Organizations are assumed to be more of less similar

Value in resource is often unclear until after the fact

What happened to culture and mission?

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Critique of Resource Dependence Theory

What about the larger network?

END

Application: University Merger

Lecture 17

Week 7

McFarland Lectures

Case: Failed University Merger Historical Account by Sarah Barnes

1933 Chicago Northwestern University and W.D. Scott

Case: Failed University Merger Historical Account by Sarah Barnes

1933 Chicago University of Chicago and R.M. Hutchins

Review of Resource Dependence Theory

Review of Resource Dependence Theory

Review of Resource Dependence Theory

RDT Application to Case Uncertain environment Horizontal merger attempted

between competitors Some buffering by downsizing and

specialization Some evidence of cooptation (in secrecy)

Northwestern University

University of Chicago

Managerial Concerns

CritiqueResource Dependence TheoryAsymmetric resource dependenceNormative coordination violationCoalition TheoryInternal dynamics of decisions Organizational CultureChicago as integratedCultures as requiring equality