Resource Dependence Theory

Lecture 16

Week 7
McFarland Lectures
Resource Dependency Theory and
related theories…
 Coalition Formation
 Organizational Learning
 Organizational Culture
McFarland Lectures
Coalition Formation
When does it apply?
When there are multiple actors with inconsistent
preferences and identities, and none of whom can “go it
alone”.

Summary or Basic Argument
Focus 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
Bureaucratic Politics

Coalitions 1-3
Players in positions (A-F)
Goals, interests, stakes
and stands (n-z)


(1) (2) (3)

A B
z r
y y
C D E
n t z
x y r
F
p
r
Coalition Formation
Management Strategies
Bargain 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 Inference
Action = 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 asymmetric
McFarland Lectures
Organizational Learning
When does it apply?
Exists when there are clear feedback loops,
adaptations, memory, and support for the
development of applied-expertise.
Summary or Basic Argument
Focuses on practices and their continual
adaptation and change to fit reality – i.e.,
practices reflecting organizational intelligence
(focus on core technology improvement).
McFarland Lectures
Organizational Learning
Management Strategies
 Find 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 Inference
 Action = 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 Culture
When 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 Argument
 Actors seek expression and fulfillment of
identity, and organizational culture is the
medium for such expression/sense-
making.

Integrated
Fragmented
Ambiguity
SOP
(ostensive rules)





Organizational Culture
Management Strategies
Find 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 Inference
Action = 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 Uncertainty
Prior theories – internal
RDT – in external relations of dependence
View of Uncertainty and Dependence
Coalition Formation: not a problem – they
hold the coalition together
 Resource Dependency Theory: they
threaten survival and autonomy


McFarland 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
Cor
e
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 dependencies
McFarland Lectures
Firm
Environment
Core Features of Resource
Dependence Theory
Factors involved in dependence:
What are the key resources in an environment?
Who controls the resources?
A. Types of resources
B. Value of resources
C. Discretion over the resource
Core Features of Resource
Dependence Theory
Factors involved in dependence:
What are the key resources in an
environment? Who controls the resources?
A. Types of resources
1. Physical
2. Technical
3. Social
Core Features of Resource
Dependence Theory
Factors involved in dependence:
What are the key resources in an
environment? Who controls the resources?

B. Value of resources
1. Importance
(crucial, in demand)
2. Availability
(alternatives, supply)
Core Features of Resource
Dependence Theory
Factors involved in dependence:
What are the key resources in an
environment? Who controls the resources?

C. Discretion over resource
1. Who
2. What
Core Features of Resource
Dependence Theory
Factors involved in dependence:
What are the key resources in an environment?
Who controls the resources?
A. Types of resources
B. Value of resources
C. 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. Negotiating
2. Exchanging
3. Pooling
4. Merging
McFarland Lectures
Management Strategies for Dealing
with Dependence -- Bridging
1. Negotiating
i. Normative coordination
ii. Bargaining
Management Strategies for Dealing
with Dependence -- Bridging
2. Exchanging
i. Contracting
ii. Interlocking directorates
iii. Hierarchical contracts
Management Strategies for Dealing
with Dependence -- Bridging
3. Pooling
i. Joint venture
ii. Strategic alliances
iii. Associations and Cartels
Management Strategies for Dealing
with Dependence - Bridging
4. Merging
i. Vertical merger
ii. Horizontal merger
iii. Diversification
Producer
Supplier Supplier
General Management Approaches
A. Avoid Dependencies
Stockpile, form long-term protective
contracts, set regulations, diversify

B. Break Dependencies
Use secrecy, restrict information, begin an
anti-trust suit, coopt controller, merge
vertically.
McFarland Lectures
Forms of Dependence
Symbiotic 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 Dependence
Competitive 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.
McFarland Lectures
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?
McFarland Lectures
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

When does
it apply?
Exists when there is a focal actor interested in
decreasing dependence, increasing autonomy,
increasing power, and (possibly) increasing
efficiency.
Dominant
Pattern of
Inference
Action = scan the environment for resource
opportunities and threats, attempt to strike
favorable bargains so as to minimize dependence
and maximize autonomy / certainty.

Review of Resource Dependence
Theory

Key Elements
Technology
(what brings about
changes in dependence)
External adaptations in order to increase autonomy and/or decrease
dependence (see management).
Participants Focal organization and other organizations with resource interdependence.
Goals Goal is organizational survival through external adaptation (for certainty
and autonomy).
Social Structure Formal roles, standard operating procedures, inter-organizational
bargaining / politics.
(note: coalition approach emphasizes individuals and interests. Here, the
organization is the main actor and exchanges are with other organizations.)
Environment Exchange partners and external relations more salient than internal
dynamics; Bridging more relevant than buffering.

Review of Resource Dependence
Theory

Management
Strategies
Buffering: protecting technical core from environmental
threats (coding, stockpiling, leveling, forecasting and
adjusting scale).

Bridging: security of entire organization with relation to
the environment. Total absorption via merger (vertical,
horizontal, and diversification), partial absorption
(cooptation [vertical or horizontal], interlocks, joint
ventures, strategic alliances, associations)

RDT Application to Case
 Uncertain environment
 Horizontal merger attempted between
competitors
 Some buffering by downsizing and
specialization
 Some evidence of cooptation (in secrecy)
Key Elements
Technology
(what brings about
changes in dependence)
Merger would increase economies of scale (making the university
more efficient and autonomous) and minimize some of the problems
related to economic cycles. The larger size also leads to increased
diversification –thereby increasing autonomy.
Participants Walter Scott, board of trustees, outside consultant, faculty, alumni,
press
Goals Ideal university! Increase the sustainability of the university, and
increase quality of education via service and practice.
Social Structure Undergraduate >> graduate programs.
Evanston Campus, Downtown Campus, Trustees, Deans, Faculty,
Alumni, Students.
Coalitions/Opponents: School of Education, Medical School, and
College of Liberal Arts.
Cognitive / Normative: Service, Dewey pragmatism, utilitarianism.
(UofC view–bumpkin school to north).
Environment Major economic downturn hurting all aspects of the university.
Supposedly, economic pressures were greater for Northwestern than
for Chicago.

Northwestern University
University of Chicago
Key Elements
Technology
(what brings about changes
in dependence)
Merger would increase economies of scale (making the university
more efficient and autonomous) and minimize some of the
problems related to economic cycles. The larger size also leads to
increased diversification –thereby increasing autonomy.
Participants Robert Hutchins, board of trustees, outside consultant, faculty,
alumni, press
Goals Ideal university! Increase the sustainability of the university, and
increase quality of education via theory and truth.
Social Structure Undergraduate << graduate programs.
Trustees, Deans, Faculty, Alumni, Students.
Cognitive / Normative: Theory/Truth, Idealism and “Great Books”
(Northwestern view-Easterner funded [Rockefeller] school led by
elitist / idealist [Hutchins]).
Environment Major economic downturn hurting all aspects of the university.
Supposedly, economic pressures were greater for Northwestern
than for Chicago.

Managerial Concerns

Horizontal Merger
Northwestern Wanted to maintain tax break (buffer) as NWU charter
Was to lose grad programs but keep professional and
undergraduate schools
Gains elite grad program / prestige
Coopts competition

Chicago Wanted NWU’s tax break
Was to lose professional programs and undergrad emphasis
(but actually keeps ed schl and college – working for an edge!)
Move less desirable programs off-site (!)
Coopts competition


Critique
Resource Dependence Theory
 Asymmetric resource dependence
 Normative coordination violation
Coalition Theory
 Internal dynamics of decisions
Organizational Culture
 Chicago as integrated
 Cultures as requiring equality