Resource dependence theory pdf

The procurement of external resources is an important resource dependence theory pdf of both the strategic and tactical management of any company. Resource dependence theory has implications regarding the optimal divisional structure of organizations, recruitment of board members and employees, production strategies, contract structure, external organizational links, and many other aspects of organizational strategy.

These resources ultimately originate from an organization’s environment. The environment, to a considerable extent, contains other organizations. The resources one organization needs are thus often in the hand of other organizations. Resources are a basis of power.

Legally independent organizations can therefore depend on each other. Organization A’s power over organization B is equal to organization B’s dependence on organization A’s resources. Power is thus relational, situational and potentially mutual. Organizations depend on multidimensional resources: labor, capital, raw material, etc. Organizations may not be able to come out with countervailing initiatives for all these multiple resources.

Hence organization should move through the principle of criticality and principle of scarcity. Critical resources are those the organization must have to function. For example, a burger outlet can’t function without bread. An organization may adopt various countervailing strategies—it may associate with more suppliers, or integrate vertically or horizontally.

Resource dependence concerns more than the external organizations that provide, distribute, finance, and compete with a firm. Although executive decisions have more individual weight than non-executive decisions, in aggregate the latter have greater organizational impact. Managers throughout the organization understand their success is tied to customer demand. Managers’ careers thrive when customer demand expands.