Resource Dependence Theory

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Organizational Theory, Design, and Change Fifth Edition Gareth R. Jones Chapter 3 Managing in a Changing Global Environment

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Learning ObjectivesList the forces in an organization’s specific and general environment that give rise to opportunities and threats Identify why uncertainty exists in the environment Describe how and why an organization seeks to adapt to and control these forces to reduce uncertainty

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Learning Objectives (cont.)Understand how resource dependence theory and transaction cost explain why organizations choose different kinds of interorganizational strategies to manage their environments to gain the resources needed to achieve their goals and create value for the stakeholders

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What is the Organizational Environment? Environment: the set of forces surrounding an organization that have the potential to affect the way it operates and its access to scarce resources Organizational domain: the particular range of goods and services that the organization produces, and the customers and other stakeholders whom it serves

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Figure 3-1: The Organizational Environment

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The Specific EnvironmentThe forces from outside stakeholder groups that directly affect an organization’s ability to secure resources Outside stakeholders include customers, distributors, unions, competitors, suppliers, and the government The organization must engage in transactions with all outside stakeholders to obtain resources to survive

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The General EnvironmentThe forces that shape the specific environment and affect the ability of all organizations in a particular environment to obtain resources

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The General Environment (cont.)Economic forces: factors, such as interest rates, the state of the economy, and the unemployment rate, determine the level of demand for products and the price of inputs Technological forces: the development of new production techniques and new information-processing equipment, influence many aspects of organizations’ operations

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The General Environment (cont.)Political and environmental forces: influence government policy toward organizations and their stakeholders Demographic, cultural, and social forces: the age, education, lifestyle, norms, values, and customs of a nation’s people Shape organization’s customers, managers, and employees

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Sources of Uncertainty in the Organizational EnvironmentAll environmental forces cause uncertainty for organizations Greater uncertainty makes it more difficult for managers to control the flow of resources to protect and enlarge their domains

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Sources of Uncertainty in the Environment (cont.)Environmental complexity: the strength, number, and interconnectedness of the specific and general forces that an organization has to manage Interconnectedness: increases complexity

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Sources of Uncertainty in the Environment (cont.)Environmental dynamism: the degree to which forces in the specific and general environments change over time Stable environment: forces that affect the supply of resources are predictable Unstable (dynamic) environment: it is difficult to predict how forces will change that affect the supply of resources

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Sources of Uncertainty in the Environment (cont.)Environmental richness: the amount of resources available to support an organization’s domain Environments may be poor because: The organization is located in a poor country or in a poor region of a country There is a high level of competition, and organizations are fighting over available resources

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Figure 3-2: Three Factors Causing Uncertainty

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Resource Dependence TheoryThe goal of an organization is to minimize its dependence on other organizations for the supply of scare resources and to find ways of influencing them to make resources available

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Resource Dependence Theory (cont.)An organization has to manage two aspects of its resource dependence: It has to exert influence over other organizations so that it can obtain resources It must respond to the needs and demands of the other organizations in its environment

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Interorganizational Strategies for Managing Resource DependenciesTwo basic types of interdependencies cause uncertainty Symbiotic interdependencies: interdependencies that exist between an organization and its suppliers and distributors Competitive interdependencies: interdependencies that exist among organizations that compete for scarce inputs and outputs Organizations aim to choose the interorganizational strategy that offers the most reduction in uncertainty with least loss of control

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Figure 3.3: Interorganizational Strategies for Managing Symbiotic Interdependencies

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Strategies for Managing Symbiotic Resource InterdependenciesDeveloping a good reputation Reputation: a state in which an organization is held in high regard and trusted by other parties because of its fair and honest business practices Reputation and trust are the most common linkage mechanisms for managing symbiotic interdependencies

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Strategies for Managing Symbiotic Resource Interdependencies (cont.)Co-optation: a strategy that manages symbiotic interdependencies by neutralizing problematic forces in the specific environment Make outside stakeholders inside stakeholders Interlocking directorate: a linkage that results when a director from one company sits on the board of another company

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Strategies for Managing Symbiotic Resource Interdependencies (cont.)Strategic alliances: an agreement that commits two or more companies to share their resources to develop joint new business opportunities An increasingly common mechanism for managing symbiotic (and competitive) interdependencies The more formal the alliance, the stronger and more prescribed the linkage and tighter control of joint activities Greater formality preferred with uncertainty

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Types of Strategic AlliancesLong-term contracts Networks: a cluster of different organizations whose actions are coordinated by contracts and agreements rather than through a formal hierarchy of authority Minority ownership Keiretsu: a group of organizations, each of which owns shares in the other organizations in the group, that work together to further the group’s interests

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Figure 3-4: Types of Strategic Alliances

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Figure 3-5: The Fuyo Keiretsu

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Types of Strategic Alliances (cont.)Joint venture: a strategic alliance among two or more organizations that agree to jointly establish and share the ownership of a new business

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Figure 3.6: Joint Venture Formation

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Last Updated: 8th March 2018

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