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Monday, November 7, 2011

Organization Theory - 33 (Resource Dependency Theory)


In the last blog, we began our discussion about the relation between organization and environment with the contingency theory. In today's blog we look at another theory - the Resource Dependency Theory.

The Resource Dependency Theory suggests that "an analysis of inter-organizational relations within the network of the organization can help managers to understand the power/dependence relationships that exist between their organization and other network actors.

Every organization depends on its environment for almost all the tangible requirements - raw materials, labor, capital, equipments, and outlets for its produce.  This dependency of the organization on its environment gives the environment a power over the organization. 

Managers would need to perform this resource dependency analysis by identifying the source of organization's resources. The next point of focus has to be on environmental actors which can affect these organization-environment relationships and there by the organization. These are generally competitors and regulatory agencies. This is to be followed by sorting these by criticality and scarcity. 

With this analysis done, an apt strategy would have to be developed by the manager towards addressing these challenges from the resource front. There are numerous ways that have been traditionally followed, we would look at them in different cases at a later date.

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