This article provides a practical explanation of the Resource Dependence Theory (RDT). After reading this, you’ll understand the basics of this management tool.
What is the Resource Dependence Theory (RDT)?
Resource Dependence Theory (RDT) came out of a study into how organisations’ external resources affect the behaviour of those organisations. In other words, the theory examines the relationship between organisations and the products they need to operate. Resources come in many forms, such as raw materials, financing, and employees. Acquiring these external resources is an important aspect of the strategic and tactical management for any business.
When a company owns all stocks of a particular external resource, it will make other companies dependent on them to operate. This creates a symbiotic relationship. Too much dependence creates uncertainty and vulnerability, and the risk of external checks being imposed on the organisation. External checks can be imposed by governments as well as other organisations, and this can have a significant effect on the operational activities of a business, for instance when it comes to financing or hiring.
The Resource Dependence Theory (RDT) is based on the principle that resources are the key to an organisation’s success and that access to and control over these resources are a foundation for power.
Who created the Resource Dependence Theory (RDT)?
Although it had already been known for some time that organisations rely on external resources, the theory on the dangers of that reliance didn’t come into prominence until the 1970s. Authors Jeffrey Pfeffer and Gerald R. Salancik published the book, ‘The External Control of Organisations: A Resource Dependence Perspective. In it they discussed where power and dependency come from, and how organisations can use this power to manage dependent organisations. Managers and leaders are always looking for advantages to strengthen their relationships towards other organisations and to strengthen and improve their own organisation.
As we mentioned, every business has to acquire resources to be able to operate in their surroundings. You can read more about different purchasing strategies here. Although such transactions can be mutually beneficial, they can also create dependencies which are not. Resources used by organisations might be scarce, not always available, or hard to source. Unequal exchanges of these resources can generate differences in power, authority, and further access to resources.
In order to prevent such dependencies, organisations often develop strategies and internal structures that have been designed to give them a better negotiating position when it comes to resource-related transactions. These activities include:
- Political action
- Increasing scale of production
- Developing new relationships with other organisations
Particularly diversification of product or service lines can reduce the dependency of businesses and increase their power and leverage.
What else are organisations dependent on?
The Resource Dependence Theory doesn’t just refer to the dependency on resources like employees, capital, and raw materials. Managers in organisations understand that their success is linked to consumer demand. Their careers thrive when consumer demand grows. That makes customers the ultimate resource that businesses are dependent on. This may seem obvious when it comes to sales, but it’s actually the organisational stimuli that show the management customers as a resource.
Non-profit sector and dependency
Several researchers claim that the dependency on resources is the reason that non-profit organisations tend to operate more commercially these days. They are getting less and less government subsidies and resources that are instead used for social services, which can even lead to contract competition on the labour market. This has led to more and more non-profit organisations using market techniques that used to be the domain of the private sector.
These researchers also predict that the commercialisation of the non-profit sector will lead to a reduction of the quality of the services that are supplied by organisations not in it for profit.
Organisations’ dependency in sustainability sectors
Companies that focus on sustainability aspects are often more dependent on resources than commercially minded businesses. That’s because they’re often exclusively aimed at sustainability, rather than economic success. That leads to them having to rely on others for the resources they need. For instance from local government. The government is often the party that invests the necessary funding in sustainability initiatives to start the work.
The problem with sustainability initiatives and resource dependency is that it influences their work. This could be due to the fact that governments often set conditions for organisations before investing resources. This can damage these sustainability organisations.
An example of these conditions is that financing is only granted to non-profit organisations. For instance, while an organisation might have planned to make money with sustainability, the conditions might lead to them adjusting their plans in order to meet the requirement of being a non-profit to get financing.
Global resource dependency
People are dependent on our planet’s land, oceans, atmosphere and biosphere for resources. This includes sky, water, soil, minerals, plants, animals, and energy. Some of these resources are renewable over the course of a human lifetime, while others are not. Examples or resources that are not renewable are fossil fuels and mineral resources.
Resources that are important to modern societies aren’t distributed equally across the planet. Take oil in the Middle East, for instance, and gold in America. Most of these elements are present in the earth’s crust in concentrations that are too small to mine them. Other places have geological processes that concentrated there in the past, resulting in extraction being worth it there.
Historically, peoples have settled in places that are climatologically, hydrologically, and geologically advantageous for the availability of drinking water, food production through agriculture, trade, and other aspects of civilisation. The availability 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.
Much of current energy production comes from non-renewable resources like coal and oil. This means that mankind remains dependent on these resources. As a result, the players who have cornered these resources, can abuse the power they have over others. Progress in related sciences and technology can however help reduce the cost of energy harvested from renewable sources, such as sunlight. This leads to a future in which it’s likely that energy will come from a wide range of sources, substantially reducing the costs. This is necessary for underdeveloped regions on earth to accelerate their development.
Now it’s your turn
What do you think? Do you recognise the explanation of Resource Dependence Theory (RDT)? Did you also make the connection to dependency on fossil fuels? What other forms of dependency can you list? How do you think control over resources should be regulated? Are there resources you have difficulty obtaining? Do you have any tips or additional comments?
Share your experience and knowledge in the comments box below.
- Davis, G. F., & Adam Cobb, J. (2010). Chapter 2 Resource dependence theory: Past and future. In Stanford’s organization theory renaissance, 1970–2000 (pp. 21-42). Emerald Group Publishing Limited.
- Hillman, A. J., Withers, M. C., & Collins, B. J. (2009). Resource dependence theory: A review. Journal of management, 35(6), 1404-1427.
- Malatesta, D., & Smith, C. R. (2014). Lessons from resource dependence theory for contemporary public and nonprofit management. Public Administration Review, 74(1), 14-25.
- Nienhüser, W. (2008). Resource dependence theory-How well does it explain behavior of organizations?. management revue, 9-32.
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