Resource dependence theory is a theory of external resource management and control by organizations. The resource might see in different forms. Employees, production strategies, raw materials, directors, contract structure, finance, organizational strategy and so on. It is the study of how external resources influence the behaviour of the organization. When a company is engaged in producing consumer goods, customers are the ultimate resources for them. So, resource dependence theory is trying to reveal the cause-effect relationship between the organization and its resources. In this post, we are trying to give a partial view of resource dependency theory.
“If you do not interfere in politics, politics will eventually interfere in your life”. In this quote, Vladimir Lenin describes how everyone is a part of something bigger, and that we rely on each other. The same can be said for any organization, business, firm, or company that exists and operate today. One way this is exhibited through a company’s dependence on another organization for the resources it desires to operate. The idea is referred to as resource dependency theory.
What is resource dependence theory?
The elementary proposition of resource dependence theory is the need for environmental associations between the firm and external resources. In this viewpoint, directors serve to link the firm with outside factors by co-opting the resources needed to survive. This means that the board of directors is a significant mechanism for absorbing critical elements of environmental uncertainty into the firm. . In other words, the theory examines the relationship between organizations and the products they need to operate. Resources come in many systems, such as raw materials, funding, and employees. Getting these external resources is an important aspect of the strategic and planned management of any business.
Resource dependence theory is supported by the idea that resources are vital to organizational success and that access and control over resources is a basis of power. Resources are often organized by organizations, not in the control of the organization demanding them, meaning that strategies must be carefully measured in order to maintain open access to resources. When a corporation owns all stocks of a particular external resource, it will make other companies reliant on them to operate. This creates a reciprocal relationship. Too much reliance creates uncertainty and weakness, and the risk of external checks being levied on the organization. External checks can be enforced by governments as well as other organizations, and this can have a substantial effect on the operational activities of a business, for example, when it comes to financing or hiring.
Hands behind resource dependence theory
The significance of this theory was recognized during the 1970s when authors Jeffrey Pfeffer and Gerald R. Salancik published The External Control of Organizations: A Resource Dependence Viewpoint, which deliberated their study of where power and dependence emerges, and how organizations may use their power and manage those that are dependent upon them. Managers are continually seeking advantages to improve partnerships with other organizations in order to support their own.
Every company has a symbiotic relationship with other companies for acquiring resources. Although such transactions can be mutually beneficial, they can also create dependencies that are not. Resources used by organizations might be rare, not always obtainable, or hard to source. Unequal exchanges of these possessions can generate differences in power, authority, and further access to resources. If the resource is scarce, there will be much more dominance that might be shown by suppliers. So, minimizing dependency should be the future slogan of a company as well as the nation.
How to minimize dependency
Well-organized strategies are the only response in order to prevent dependency. The company’s internal structure should be designed to hold a better negotiating position when intervening in resource-related transactions. These activities include; diversification, developing internal infrastructure to generate scarce resources within the company holdings, developing a new relationship with other organizations, political action etc.
Particularly developing internal infrastructure for scarce resources can reduce the dependency of business.
The Resource Dependence Theory doesn’t just examine the dependency on resources like staffs, capital, and raw materials. Managers in organizations comprehend that their success is connected to consumer demand. Their careers prosper when consumer demand grows. That makes clients the ultimate resource that businesses are reliant on. This may seem noticeable when it comes to sales, but it’s really the organizational impetuses that show the management customers as a resource.
A number of researchers claim that the dependency on resources is the reason that non-profit organizations incline to operate with more commercial interest these days. They are getting fewer and fewer government grants or subsidies and resources that are instead used for social services, which can even lead to deal competition on the labour market. This has led to more and more non-profit organizations using market practices that used to be the domain of the private sector. So, commercialization of the non-profit organization may be the order of the day. If the supplying agents do not expect profit on which they are supplying to the non-profit organizations, these organizations can do social work without inclining to the profit motive initiatives.
Global resource dependency
People are not independent. Nobody can get rid of the very nature. Everything you have owned would be a gift of your nature. Without nature, you can’t create anything. Whatever you have created, all have come from the land. This means, by nature man is dependent. This includes sky, water, soil, minerals, plants, animals, and energy. Some of these properties are renewable over the course of a human lifetime, while others are not. Examples of resources that are not renewable are fossil fuels and mineral resources.
Resources that are important to modern societies aren’t dispersed equally across the globe. Take oil in the Middle East, for instance, and gold in America. Most of these essentials are present in the earth’s crust in concentrations that are too small to mine. Other places have geological processes that concentrated there in the past, resulting in extraction being worth it there.
Generally, peoples have dwelled in places that are climatologically, hydrologically, and geologically advantageous for the availability of drinking water, food production through agriculture, trade, and other aspects of civilization. The obtainability of resources, or rather the lack thereof, can limit the development of certain countries. As the world’s population grows, and there is increasing demand for a higher standard of living, resources that used to be considered readily available are now also becoming scarcer and more precious. The push and pull factors are also determined by resource dependency. Where it is rich in resource attract people, and where there is lack of resource will throw the people elsewhere.