Introduction
Management entails one of the most essential activities of every company. Management is deeply rooted in the personalities or the human beings that run the organization. It started long from the time humanity began to form social organizations that were meant to aid them to achieve their aims and objectives that they could not accomplish at individual levels. Management is therefore pivotal since it performs the ordinated efforts of individuals. As entities continue to depend on the collective individual effort, the management task for the leaders of the organizations is increasingly becoming more complicated. Henceforth, the management heads of organizations have to become crucial in the way they manage their entities, and it makes them employ various management theories. The paper seeks to explain the relationships of the Resource Dependence Theory and how it exists. Moreover, it will expand on its pros and cons determining how it can both benefit and harm the entities that use it. A suggestion of how to neutralize and counter its demerits will also be discussed, and how the advantages can be utilized to ensure companies that employ it as a strategy nets maximum gain.
Resource Dependence Theory
Biermann & Harsch (2017) states that Resource Dependence Theory (RDT) entails how the institutional behavior is affected by external resources that the institution utilizes. The factors may include raw materials. The theory is significant since an entities ability to gather alter and exploit raw materials faster ahead of its rivals can be pivotal to its success. In this aspect, Biermann & Harsch (2017) asserts that RDT is founded on the rule that an incorporation is dependent on other companies within its business circles for the supply its necessary required resources. Such types of operations may be of merit, but their demerit is that they may create unnecessary dependencies (Biermann & Harsch, 2017). Hillman, Withers, & Collins, (2009) maintain that the organization may require resources that may be scarce, under the control of its competitors or rivals, or not readily obtainable. Institutions, therefore, need to develop internal structures and strategies that can improve the bargaining position in resource-related businesses. Parts of the approach entail, the reorganization and expansion of an entities scale of production and developing connections with other organizations, diversifying products, and taking necessary political actions were deemed necessary ( Hillman, Withers, & Collins, 2009 ). It is such strategies that lessen the incorporation’s dependence on other enterprises and improve its overall leverage (Biermann & Harsch, 2017). Hillman, Withers, & Collins, (2009 ) maintains that the significance of RDT is planted on the idea that resources are pivotal to the success of the organization, and that the control over these resources is the foundation of autonomy. The funds are typically controlled by the institutions, not in control of the organization needing them ( Hillman, Withers, & Collins, 2009 ). The implication is that strategies have to be carefully considered to maintain open access to resources, and that is the essence of this discussion ( Hillman, Withers, & Collins, 2009 ).
Delegate your assignment to our experts and they will do the rest.
The Examples of Relationships as Explained by RDT.
Davis & Cobb (2010) has it that the theory was first known in the 1970’s after Jeffrey Pfeffer and Gerald completed the publication “The public External Control of Organizations: A Resource Dependence Perspective.” Davis & Cobb (2010) outlines the function of the RDT as one that ensures that resources are often controlled by entities, not in the control of the institution that needs them. According to Hillman, Withers, & Collins (2009 ) , the theory implies that strategies must be carefully considered to maintain open access to resources. At the same time, Biermann & Harsch (2017) states that institutions create redundancy into resource acquisition to reduce their reliance on single sources, i.e. through liaising with numerous suppliers.
The necessity of entities to adapt to the shifts in the environment comply then to adjust to the changes in their relationships that regard power (Altholz, 2010). (Altholz (2010) states that among the conventions of resource dependency theory is that vagueness clouds an entities’ management of its values and it is key to its choice of independent values. According to Brettel & Voss (2013 the necessities other organizational needs increase upon the increase of dependencies and uncertainties increase. For instance, declining entity yields may lead to expanded business activity through a strategic alliance with other entities or diversification.
Through the research that uses dependency theory, the organizational adaptations and dependencies can now be easily observed (Altholz, 2010). A perfect adaptation form may include one that ensures the organizational elements are properly aligned to match the elements of the organization to the business environment. Entities then follow the shifting trends of their environments. It is these company choices that differ with the design concepts of the organization which assumes that organizations operate as closed systems (Delke, 2015). Closed-systems frameworks have it that rational utilization of resources, individual abilities, and individual motivation determine an entities success and that other actors in the environment are not much significant (Altholz, 2010). In contrast, open-systems frameworks affirm the impact of the environment, which consists of other institutions, organizations, the state, and the professions (Delke, 2015). According to Biermann, & Harsch the open-systems has it that an organization will be efficient to the level that it recognizes shifts in its environment and adjust within its environment according to the contingencies it has (2017).
As noted before RDT emphasizes the term “resource” as an important element within the prevailing context of formulation and enactment of the corporate policy to make constant viable recompenses (Delke, 2015). Biermann, & Harsch insist that the theory observes the company from an external perspective hence the dependence of the company according to the theory enables corporations to make strategic alliances (2017). Consequently, the theory of RBT has its merits and demerits. Biermann, & Harsch (2017) supports that the fame of RDT, therefore, wax and wane like the prevalence of the tactics it described.
RDT considers the term environment from the entity’s perspective; It the business actors and identifiable institutions like labor unions authorities and others that comprise business environment for the entity. (Altholz, 2010). According to Brettel & Voss, (2013), the broad sense means the entity’s situation can be labelled as “every world incident which heavily impacts on results or activities. This example of wide definition does not single out that particular groups in charge of controlling necessary organization resources, but it meant the wide variety of existing interactions within the company and business environment. (Altholz, 2010). Brettel & Voss, (2013) states that since a company is not in a position to react to each environmental impact, it is significant for the entity to distinguish between “little” and “large” effects of elements from its outside environment to ‘protect the internal procedures from outside influences.” Indeed, Brettel & Voss, (2013) states that this is since external influences can bring about instability and uncertainty about the future of an entity.
Besides, Delke (2015) assert that the performance of a company is often measured using various types of effectiveness, and this implies that it can create acceptable actions and outcomes. Delke (2015) state that the external standard for evaluating an entities’ performance is through effectiveness. It implies that entity is meeting the demands of numerous groups and organizations that are linked to its activities (Altholz, 2010). The company is therefore successful implementing the demands of interest groups through enacting relevant decisions: In this case, an example is the motivation of its clients to buy its goods throughout (Altholz, 2010). Therefore, A Biermann, & Harsch maintains that since Pfeffer and Salancik the pioneers of RDT theory strongly distinguish between the term’s “efficiency” and “effectiveness,” it should be more significant `to consider the fact that the two terms are strongly interrelated (2017). According to Brettel & Voss, (2013), all these are evidence enough about the level of performance of a firm and they are useful while investigating the company’s level of affiliation with its interest partners.
Merits and demerits of applying RDT
RDT is emerging as one of the prominent theoretical rationales explaining why entities engage in mergers and acquisitions and this ranks it only second to transaction costs economics (Delke, 2015). Nienhüser (2008) states that the theory provides an externally focused perspective of why firms acquire other firms, RDT enables entities to reduce competition by adopting an important competitor firm, then it also does so to manage interdependence with either source if purchasers of output or input by absorbing them (Altholz 2010). Lastly, Delke (2015), states that it aids organizations to diversify operations and henceforth, this lessens dependence on the present organizations with which it exchanges.
Nienhüser (2008) states that RDT also merits as the theoretical perspective to understand joint ventures and other interorganizational relationships like joint market agreements, strategic alliances, research consortia, and interdependence. Delke (2015) however points that Whenever organizations employ the RDT strategy, they improve in their inter-organizational relationships with the domestic and international suppliers. Regarding power, firms implementing RDT gain the power over providers whenever they enter into alliances with other agencies. Infact, Nienhüser (2008) states that smaller firms merit more form such alliances than larger firms and the implication here RDT promotes firm growth. The alliances that organizations formed symbiotically depend on each other but the partner that controls more important resources retains the strategic control (Altholz 2010). According to Nienhüser (2008), it is this that makes organizational managers increasingly focused on the nature of interdependence and power from RDT. But then, according to Delke (2015), RDT remains valuable even though it does not wholly explain inter-organizational relationships.
The demerits of RDT as a strategy.
Besides, the study of management differs among the individuals who manage firms as stated by Delke (2015). The implication is that the variations regarding breadth, depth, and the management’s stance in the various topics that regard the human social capital theories imply that they will intend to copy or imitate whatever is working for other firms (Delke, 2015). Indeed, Nienhüser (2008) states that this may delay or thwart the full implementation of the RDT. Delke (2015) has it that the success of the RDT only comes from the intrinsic motivation from within the internal connections within the organizations that employ it.
Since the RDT is majorly concerned with the external factors that are linked to the success of a company, the RDT is the best tool that can be used to observe the political factors and their impact to the environments of the entity (Singh, Power, & Chuong, 2011). Nienhüser (2008) states that the organizations that face similar environmental and dependencies can, therefore, use the RDT to engage in the correct political actions and business patterns that can enhance better coordination of development that is necessary for their upward growth. Davis & Cobb (2010) states that good political goodwill aids organizations in managing their dependencies. Nienhüser (2008) states that it is valid that good shareholder returns are an example of the factors that enhance the accumulation of firms returns. The ties between the government, political decision makers and organizations aid in the improvement of market shares especially for heavily regulated firms (Singh, Power, & Chuong, 2011). Davis & Cobb has it that it is the RDT that aids in the creation of cooperative linkages between the government and organizations (2010).
Consequently, Singh, Power, & Chuong (2011) support that there is strong concurrence that mergers occur between firms that depend on each other including suppliers/buyers and competitors as a mechanism of reducing dependence. Additionally, Davis and Cobb (2010) state that the magnitude of the dependency predicts the likelihood of mergers. However, it has also been found out that the notion is an informative, but incomplete (Singh, Power, & Chuong, 2011). Consequently, Nienhüser (2008) warns that this notion should not be taken as a complete weakness of RDT, but it needs to be exemplified in the efforts to differentiate between mutual dependence and power imbalance.
On the other hand, political activities have not experienced the theoretical reforms to be fair to the environment that is needed by organizations and entities (Altholz, 2010). Davis & Cobbs (2010) add that political actions are tied to the degree of environmental dependency, and in this case, this makes the entities facing the same environment to form the same political behavior to manage the same environment. According to Singh, Power, & Chuong (2011), It, therefore, works for them efficiently, and they end up dropping RDT altogether.
Even though RDT-based studies that have been done on the boards of management represent a strong support for its success, it has been dwarfed by the applications of other theories like agency theory (Davis & Cobba, 2010). Garvare & Johansson, (2010) maintains that the managers are more interested in attaining positive firm outcomes in a short time, one that may not be guaranteed by the RDT, which takes several phases for it to show yields fully. Nienhüser (2008) state that Instead of the managers placing their primary focus in the implementation of the RDT, they often delegate their duties to their assistant directors who in turn bring in other theories that can bring quick success, and this serves as an impediment towards the implementation of the RDT.
Neutralizing the limitations of RDT
The corporation survival is dependent on external environment which remains noteworthy for a firm’s survival that is if the company does not accommodate the interests of its players, and that they can react with pressure and resistance which could endanger the whole company (Nienhüser, 2008). In such a case the number of interactions of an individual company with its external environment cannot save it from looming conflict (Singh, Power, & Chuong, 2011). Davis & Cobbs state that external organizations should closely watch the entity in charge of its resources through properly laid allocation processes (2010). Indeed, this proves as the first way of enhancing the shortfalls that are linked to RDT. It is therefore significant for the company to be in the best position to accurately interpret its environmental circumstances to terminate, if possible, the probable causes of conflict as stated in Singh, Power, & Chuong (2011) and to influence how the responsible stakeholders interpret the various processes and functioning of the organization.
Most notably, external environment is exclusive of the same organization and groups with comparable or bearable resources ( Hillman, Withers, & Collins, 2009 ). Accordingly, an entity quest could be delayed by one group, even if others consent. Indeed, Nienhüser (2008) maintains that this explains the fact that a company cannot survive by responding completely to every environmental demand since the demands often conflict. Indeed, this point indicates how controversial, multifarious, and elaborate the issue of uncertainty reduction for a company is significant (Hillman , Withers, & Collins, 2009 ). Delke (2015) state it is important for companies to conduct the practice of adjusting and observing its dependence rates with other entities and how they are related to existing environmental factors. To ensure its survival, the company should play deaf to irrelevant ones.
Hillman, Withers, & Collins (2009 ) states that RDT takes to consideration the term “environment” from the institutional stance: the theory has it that the environment entails the identifiable actors and institutions like companies, labor unions, and authorities among others. In the broad perspective, the entity’s environment could be expounded as “every event in the world which impacts on activities or outcomes ( Hillman, Withers, & Collins, 2009 ). Such an open definition of the business environment ignores the factions in charge of the necessary company resources, but this entails the wider range of possible ventures between the entity and external environment. A broad definition of the environment as such does not specify the groups that control the resources needed by the company, but it implies the broader range of probable interactions between the company and its external environment (Nienhüser, 2008). Since the company cannot respond to every impact of the environment, it is significant for the company to differentiate between little and significant impacts of elements from its external environment. Significant impacts have to receive most of the entity’s attention (Delke, 2015). Due to this Delke (2015) state that the company should occasionally observe and analyze its external environment for it to protect the internal operations arising from external factors can lead to uncertainty and instability about the future of a company.
According to Nienhüser (2008), an organization’s performance is measured by the various types of, and this implies that it can create acceptable actions and outcomes that matter. Nienhüser (2008) goes ahead to explain that the extended standard for evaluating a company’s performance is called ‘Effectiveness.” Effectiveness displays haw entities are ensuring that the organizations demands are being accomplished through the relevant activities. (Hillman, Withers, & Collins, 2009). A company can therefore be successful in ensuring that its activities and decisions are accepted by other players within the business environment if it completes proper manipulation and influence strategies. ( Hillman, Withers, & Collins, 2009 ) . According to ( Hillman, Withers, & Collins, 2009) efficiency and effectiveness are strongly linked, and thus they should never be ignored when looking at how a company connects it to likeminded corporate partners.
To completely neutralize the inefficiencies of RDT, companies should follow the standard practice for both the company its external environment to enable it to monitor efficiency, as an efficient process that ensures a company’s success (Biermann & Harsch, 2017). According to Hillman, Withers, & Collins (2009), The fact assumes that companies do not only need to survive, but they also intend to generate profits. Henceforth the internal and external standards of the company and the environment should be one that promotes a thriving relationship (Hillman, Withers, & Collins, 2009). Biermann & Harsch (2017). states that Regarding the context of the earlier mentioned relevance allocation of scarce resources, the entity should be adjusted and tested for the rate of complementary. The higher the degree means, the lower the risk of emergence of the business environment internal and external conflicts (Biermann & Harsch, 2017). An example entails a point where an entity insists on enhancing its productivity through cutting on both usage and the worth of resources, and this means the relevant factors of the company may be negatively impacted. (Biermann & Harsch, 2017)The implication is that if a specific resource allocation decision can be considered wrong or unnecessary, it could, nonetheless, get accepted as an efficient decision in response to the strategy (Biermann & Harsch, 2017)Biermann & Harsch (2017)states that it is valid that entities should take note of underlying conflicts that may be generated over the existing allocations of little resources without properly adjustment, and this is the perfect way of dealing with the shortfalls of RDT.
Whenever decision makers take decisions, personal biases may be involved (Hillman, Withers, & Collins, 2009). Whenever the trend continues throughout the daily decision-making processes, then the biases may be involved in the strategic decision making of the organization (Biermann & Harsch, 2017) According to Delke (2015), A systematic and pragmatic approach that can ensure neutrality is the combination of various resources based on the strategies that the company prefers. It is the best way of achieving rationality as RDT gets implemented in the company.
Utilizing the advantages of Resource dependence theory
The primary objective behind using the RDT is to enable the manager to understand the behavior of the organization by replacing it within its environment Nienhüser (2008). Indeed, Delke (2015) states that this is since a company’s behavior is substantially affected by how it accesses the vital resources that it needs within the environment. Consequently, the management of companies can utilize the merits of RDT as follows;
Delke (2015) states that the directors who are implementing RDT should use it the redefine the marketing strategies of the firm to reduce the dependence on actual partners, or powerful business partners. According to Nienhüser (2008), the theoretical perspective of implementing RDT aims at the extension of the classical view of power in alliances, and resource dependence. Other traditional approaches to management are detrimental since they limit the company rate of freedom (Davis & Cobb, 2010). Hillman, Withers, & Collins (2009) states that through giving the weak companies the opportunity to shift its market boundaries actively, RDT increases the number of available options to it. Firms can, therefore, redesign their markets to access fresh alternatives. As the more outside options increase, Altholz states that the companies will relatively reduce its dependence on stronger and powerful partners into partners who will increase their profits (2010).
Davis & Cobbs (2010) states that entities can also employ the RDT approach to activate several parameters like shared goals and the amount and quality substitutes to reduce their reliance on powerful partners. Biermann & Harsch (2017) states that this makes them reduce their dependency rates as they escape deterministic patterns and partnerships that they form. Additionally, Hillman, Withers, & Collins states that firms can implement the merits of the RDT’s by increasing the quality offered by these new substitutes (2009). Nienhüser (2008) concludes that the introduction of the fresh variables enables the entities to assess their resource dependence rate and this allows them to analyses alliance bargaining issues in greater detail.
Conclusively Biermann & Harsch (2017) states that the combination of the merits of the RDT insights aid the organizations to reduce the power imbalances in the alliances they are involved within the market. The strategy is focal for the firms since it enables them to maintain the market networks hence they create the theoretical framework that enables them to work under all the circumstances that can leverage their markets (Nienhüser, 2008). In connection to this, it also leverages the market redefinition strategies of the entity since it enables them to change the structure of their markets hence they obtain the bargaining power from their business partners (Davis & Cobbs 2010).
Reference
Altholz, V. (2010). The advantages and limitations of developing an external perspective for analyzing corporate strategic alignment. Economic and Environmental Studies , 10 (1), 35-48.
Biermann, R., & Harsch, M. (2017). Resource dependence theory. In Palgrave Handbook of Inter-Organizational Relations in World Politics (pp. 135-155). Palgrave Macmillan, London.
Davis, G. F., & Adam Cobb, J. (2010). Chapter 2 Resource dependence theory: Past and future. In Stanford's organization theory renaissance, 1970–2000 (pp. 21-42). Emerald Group Publishing Limited.
Delke, V. F. (2015). The resource dependence theory: assessment and evaluation as a contributing theory for supply management (Bachelor's thesis, University of Twente).
Hillman, A. J., Withers, M. C., & Collins, B. J. (2009). Resource dependence theory: A review. Journal of management , 35 (6), 1404-1427.
Nienhüser, W. (2008). Resource dependence theory-How well does it explain behavior of organizations?. management revue , 9-32.
Singh, P. J., Power, D., & Chuong, S. C. (2011). A resource dependence theory perspective of ISO 9000 in managing organizational environment. Journal of Operations Management , 29 (1-2), 49-64.
