Resource Dependency Theory

Resource dependency theory is based on the principle that an organization must engage in transactions with other actors and organizations in its environment in order to acquire resources. While transactions between organizational and environmental actors are advantageous, they also create dependencies that are not. The focus of the theory is on the relationship between resource acquisition and its related organizational behaviors. Resources the organization needs may be scarce, not always readily obtainable, or under the control of noncooperative actors. The resulting unequal exchange generates differences in power, authority, and access to further resources. This leads to a rise in dependencies. To avoid dependencies, organizations develop strategies (as well as internal structures) that will enhance their bargaining position in resourcerelated transactions. Such strategies include taking political action, increasing the scale of organizational operations, diversification, and developing interorganizational linkages. Strategies, like diversifying product lines, lessen an organization's dependence on other actors and improve its power and leverage.

Dependencies between organizations shift power, influence, and sometimes even administrative control to external agents. As the dynamics of power relationships between organizations change, they adjust their strategies to meet those changes. One of the assumptions of resource dependency theory is that uncertainty clouds an organization's control of resources and makes its choice of dependence-lessening strategies imperative. As environmental uncertainty and environmental dependencies increase, the need for external linkages increases. For example, declining profits may lead to expanding business activity through diversification and strategic alliances with other companies.

Research using resource dependency theory seeks to observe organizational adaptations to dependencies. Adaptation consists in aligning internal organizational elements with environmental pressures. By internalizing responses for managing dependent relationships, an organization enhances its performance. Organizations also adapt by attempting to alter their environments. This contrasts sharply with classic organizations' perspectives in which firms are seen as closed systems. Closed systems frameworks argue that rational use of resources, personal motivation, and individual capabilities determine organizational success, while other actors in the environment figure minimally. In open systems frameworks, the environment, consisting of other organizations, institutions, professions, and the state, predominates. An organization will be effective insofar as it correctly reads the environment and adjusts its responses to those contingencies.

There are two main strategies for protecting an organization from environmental uncertainty. The first tactic is to protect an organization's technical core from the kinds of environmental dependencies that threaten to disrupt its central activities. These buffering strategies provide a measure of coordination and control over resources that otherwise create greater dependence on external actors. Buffering is accom plished by coding, stockpiling, leveling, forecasting, and adjusting the scale of operations. Buffering strategies aimed at reducing environmental uncertainty involve coding all inputs as appropriate or not, or stockpiling materials. Coding inputs as appropriate or not is not limited to industrial or even for-profit enterprises. Human service agencies and hospitals guarantee organizational control by coding clients and patients into appropriate categories. Stockpiling allows organizations to collect and retain input materials in order to guard against gaps in supply as well as the instability of price fluctuations. Forecasting reduces uncertainty by using statistical techniques to anticipate changes and fluctuations in inputs and outputs. Statistical models of some sophistication are used to forecast changes in the environment. Last, large size translates into the power to dominate production, influence prices, and control decision making throughout the system.

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