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 oppositions 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 SOPs 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 dont 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 members
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 organizations dyadic
relations in the environment. These SOPs 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 viewbumpkin 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 NWUs 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