Resource dependence theory: potential responses to dependence

The problem of dependence

The problem of dependence

• Some focal org is dependent on an external org for particular resource flows that are not easily obtained elsewhere; and those resource flow are becoming uncertain and/or the external resource provider is starting to make more onerous demands

Organizational responses to dependence

Potential organizational responses to the problem of dependence, mostly drawn from Davis & Cobb (2010)

General advice from resource dependence theory to focal organizations

“Choose the least-constraining device to govern relations with your exchange partners that will allow you to minimize uncertainty and dependence and maximize your autonomy” (Davis & Cobb, 2010, p. 5)

Davis & Cobb (2010) then list potential responses from less to more constraining, with “constraint” implicitly defined as being forced to engage in interactions that it can’t control.

• Less constraining responses
  • Growing large I a potential source of advantage [especially if you grow too big to fail]
    • Ex: big banks in 2008 mortgage crisis; community college enrollment growth solution
  • Avoidance
    • E.g., Say you did what was asked but do a half-assed job
  • If dependence comes from relying on a sole supplier, then an obvious solution is to get alternatives
    • Find an alternative source of the same resource
    • Rely on a different set of resources to avoid being dependent on any one resource exchange [example: grow nonresident enrollment]
• Other tactics require coordinated efforts with organizations, thereby entailing somewhat more constraint
  • Least constraining: organization join associations or business groups
    • Create association of organizations in order to develop a coalition that lobbies/makes demands with external resource provider on a unified front [e.g., AACC, association of land grant universities]
    • Doesn’t create constraints vis-a-vis external resource providers but does constrain behavior of orgs vis-a-vis the association
  • More constraining: form alliance or joint venture with the source of one’s constraint.
    • E.g., joint venture with a key supplier
• Riskier strategy for managing dependence, co-opt dependence
  • co-opt dependence: invite a representative of the source of constraint onto its governing board, thus trading sovereignty for support.
    • e.g., add a venture capitalist to the board to maintain sources of funding
    • Manager of focal org invites external resource provider to participate in activities of focal org
    • drawing on Selznick, Tennessee Valley Authority, manage uncertainty by inviting a representative of the source of constraint onto its governing board, thus trading sovereignty for support.
    • basic idea: having a representative serving on the board provides the source of constraint with a vested interest in the dependent organization’s survival
    • Members of focal org participate in activities of external resource provider (e.g., regulatory capture) Members of for profit colleges sit on regulatory panels considering changes to regulations about for-profit colleges
• Most constraining method of managing dependence:
  • “the most constraining method of managing dependence is toincorporate it within the organization’s boundary through mergers and acquisitions.”
  • Mergers, seen by those with an efficiency orientation as a means of reducing transaction costs, to the ultimate benefit of consumers. RDT said that mergers were actually a means of managing interdependence, and may provide little benefit to either consumers or shareholders.
• compliance/acquiescence
  • like cost reduction from Emerson

References

Davis, G. F., & Cobb, J. A. (2010). Resource dependence theory: Past and future. Research in the Sociology of Organizations, 28, 21–42.