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