Resource dependence – a value net-based refinement
Resource dependence theory (RDT) represents a scientific approach to explain and manage the dependence of an organization on resources owned by other organizations in its environment, mainly suppliers, shareholders, unions, competitors, public authorities and other stakeholders. Resource dependence causes external control in terms of power exerted by other players. In the first decade of the 21st century several research projects have been dedicated to the future perspectives of RDT the roots of which date back in the late 1970s. Some of these projects investigate the alignment of RDT with some other paradigms of organizational research conceived in the 1980/90s, such as the resource based view, the relational view as well as approaches from New Institutional Economics, e.g. transaction cost theory.
Critics agree that both domains of the original RDT-approach require refinement: The domain of intervention is concerned with new ways for dealing with resource dependence and external power. The domain of intelligence centers around the diagnosis of sources of resource dependence.
Unfortunately all mainstream attempts to foster future RDT-perspectives suffer from two major deficits:
Deficits in Intervention Perspectives
So far, scientific investment is focused on the intervention domain. M&A, strategic alliances, interlocking directorates, diversification in supplier relationship management and other ways of restructuring the company-environment relationship are scrutinized with respect to their capacity to reduce external power. However, some new paradigms of resource management have not yet been recognized, let alone integrated: First and foremost, this applies to open business approaches (open innovation, open source) in terms of pooling resources and sharing intellectual property. They operate on the notion of virtual size in terms of available resources, whereas RDT relates power and control to conventional size (proprietary resources) only.
Moreover, coopetition has not yet been aligned with resource dependence reasoning. Coopetition – a hybrid of cooperation and competition – is also a suitable means of reducing dependence. This holds for instance for reduced dependence on a single supplier by creating a competitive dual sourcing situation between two suppliers (as opposed to merely relying on diversified sourcing).
Deficits in Intelligence Perspectives
An equally relevant deficit is caused by the lack of a model that covers not just specific instances of resource dependence but provides a wide angle view of the existing multi-dependence. The value net model serves as a powerful intelligence tool for spotting sources in a holistic way due to the fact that it covers the various arenas of resource dependence.
Supplier resources: This arena is already covered by the existing illustrations of resource dependence. However, some more sophisticated ways of supplier integration such as ingredient branding should be dealt with more intensively by RD theoreticians.
Customer resources: The co-production, co-creation, and prosumer approaches imply that customers invest their resources (e.g. human resources) into the development and/ or manufacturing processes of products.
Complementor resources: Organizations in the hardware business depend on complementors in the software business, likewise power generation on power transmission since only the configuration of the respective complementary goods creates customer value and revenue. The dependence on complementor resources becomes most evident on two-sided markets. Also third parties like intermediaries, mediators, independent auditors provide most relevant complementor resources.
Co-opetitor resources: A specific category of co-opetitors are the so called good competitors. Without their support the innovation endeavors of organizations – e.g. related to renewable energy or e-mobility – are bound to fail: only a joint – emergent or engineered – activity of several companies – and not just of a single innovative company – is capable of promoting the innovation. These joint promotion activities utilize competitor resources, such as R&D or marketing resources.
The value net also enables micro-organizational in addition to the prevailing macro-organizational specifications of the involved actors. Whereas “corporations” represent the appropriate reference unit for macro-organizational analysis of resource dependence, intra-corporate business and service units serve as the appropriate references for micro-organizational analysis. On this level, business units depend on intra-corporate suppliers (e.g. shared services), co-opetitors, complementors and co-producing customers. In addition to inter-organizational resource dependence (external control) the model supports the investigation of intra-organizational resource dependence (internal control). Outsourcing options (e.g. managed as opposed to shared services) constitute an effective tool to reduce intra-corporate resource dependence.
The Author: Prof. Michael Reiss holds the Chair of Organizational Design and Behaviour, University of Stuttgart.
Click to see his Publications.
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Hambrick, D. C., Finkelstein, S., Cho, T. S., & Jackson, E. M.: Isomorphism in reverse: Institutional theory as an explanation for recent increases in intraindustry heterogeneity and managerial discretion, in: Research in Organizational Behavior 26 (2005), pp. 307-350.
Hillman, A.J./ Withers, M.C./ Collins, B.J.: Resource Dependence Theory: A Review, in: Journal of Management 35(2009)6, pp. 1404–1427
Narayana, B.V.L.: Resource Dependency Theory: Renaissance and Extensions – A Conceptual Basis, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2015273
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Pfeffer, J./Salancik, G. R.: The External Control of Organizations: A Resource Dependence Perspective, New York 1978