Management Resource-Dependence Theory
by
Adam Cobb, Tyler Wry
  • LAST REVIEWED: 20 October 2016
  • LAST MODIFIED: 30 June 2014
  • DOI: 10.1093/obo/9780199846740-0072

Introduction

The resource dependence perspective (hereafter RD) refers to a research tradition that emerged from the basic framework of Jeffrey Pfeffer and Gerald R. Salancik’s classic 1978 work, The External Control of Organizations: A Resource Dependence Perspective (Pfeffer and Salancik 1978, cited under Classic Treatments). The theoretical arguments that serve as RD’s foundation can be summarized as follows: (1) an organization’s external environment comprises other organizations, each with their own interests and objectives; (2) organizations hold power over a focal firm—and may thus constrain its behavior—if they control resources that are vital to its ongoing operation and cannot be acquired elsewhere. RD also highlights a number of strategies that organizations can utilize to deal with problematic dependence relationships; empirical research in this tradition has largely focused on this catalog of strategies. This bibliography is organized by the topic areas covered in External Control and displays representative and impactful work associated with each topic. Though RD’s influence has spread to a number of disparate fields beyond management (Gerald F. Davis and J. Adam Cobb’s article “Resource Dependence Theory: Past and Future” (Davis and Cobb 2010, cited under Reviews and Theoretical Intersections), this article focuses on scholarly work published in management journals and related fields such as strategy and economic sociology which collectively comprise the core RD literature.

Foundational Works

RD was an attempt to synthesize two somewhat divergent views concerning the context of organizational change: a diffuse view of “environments” that was being developed by scholars like the author of Thompson 1967 and a more political and power-oriented emphasis on inter-organizational dependence. In this way, RD’s theory of power can be traced to earlier research by the authors of Emerson 1962; Hickson, et al. 1971; and Zald 1970. Yuchtman and Seashore 1967 also linked power to resources in the external environment in a way that anticipated RD. Thus, while External Control is widely considered the crystallizing statement in resource dependence, the theory is crucially informed by a number of earlier works.

  • Emerson, Richard M. “Power-Dependence Relations.” American Sociological Review 27.1 (1962): 31–41.

    DOI: 10.2307/2089716Save Citation »Export Citation »

    Emerson’s theory of power-dependence was that actor A has power over actor B comes when s/he controls resources that B values and are not available elsewhere. Power and dependence are the obverse of each other: B is dependent on A to the degree that A has power over B. Power is not zero-sum: A and B can each have power over each other, making them interdependent.

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  • Hickson, David J., Christopher R. Hinings, Charles A. Lee, Rodney E. Schneck, and Johannes M. Pennings. “Strategic Contingencies Theory of Intraorganizational Power.” Administrative Science Quarterly 16.2 (1971): 216–229.

    DOI: 10.2307/2391831Save Citation »Export Citation »

    This paper presents a theory of intra-organizational power that emphasizes the power distribution between organizational subunits. The authors argue that power accrues to those subunits in the organization best able to reduce uncertainties for the organization. This general line of argumentation informed much of the discussion of intra-organizational power in External Control.

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  • Thompson, James D. Organizations in Action. New York: McGraw Hill, 1967.

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    While each of the sociological theories of organizations (i.e. RD, neo-institutionalism, and organizational ecology) evolved in part from Thompson’s synthesis of organizations and environments, RD pursued the argument that organizations should absorb uncertainty that cannot otherwise be managed. The strategies in External Control for how firms can manage problematic external dependencies extended Thompson’s original insights and provided the foundation for subsequent empirical work.

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  • Yuchtman, Ephraim, and Stanley E. Seashore. “System Resource Approach to Organizational Effectiveness.” American Sociological Review 32.6 (1967): 891–903.

    DOI: 10.2307/2092843Save Citation »Export Citation »

    In their theoretical argument, the authors provide an early model that anticipated the subsequent development of RD by conceptualizing the external environments as resource controllers and organizations as competing for scarce resources. The imperative for organizations to avoid dependence on external parties is also implicit in their argument.

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  • Zald, Mayer N. “Political Economy: A Framework for Comparative Analysis.” In Power and Organizations. Edited by Mayer N. Zald, 221–261. Nashville: Vanderbilt University Press, 1970.

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    The author provides a framework for examining internal and external sources of power that both constrain and confer legitimacy to organizations. Organizations are both economic and political systems, and power and authority are dispersed throughout the web of interactions comprising its environment. Pfeffer and Salancik 1978 leveraged these insights to argue that firms should engage in political activity to alter their environment.

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Classic Treatments

RD can be seen as the culmination of a series of articles by Jeffery Pfeffer, Gerald R. Salancik, and their colleagues where the authors began to develop and test ideas about resource dependence. This work includes studies of the relationship between resources, power, and dependence (Pfeffer and Leong 1977, Salancik 1979) and strategies for managing inter-organizational (Pfeffer 1972a, Pfeffer 1972b, Pfeffer 1987) and intra-organizational (Pfeffer and Salancik 1974) dependencies. These efforts culminated in The External Control of Organizations: A Resource Dependence Perspective (Pfeffer and Salancik 1978), which Jeffery Pfeffer summarized a decade later (Pfeffer 1987) and reissued with a new introduction in 2003 (Pfeffer and Salancik 2003).

  • Pfeffer, Jeffrey. “Merger as a Response to Organizational Interdependence.” Administrative Science Quarterly 17.3 (1972a): 382–394.

    DOI: 10.2307/2392151Save Citation »Export Citation »

    In this study, the author examines patterns of merger behavior among industries and finds a positive association between patterns of resource exchange and patterns of merger activity. This early study helped to substantiate mergers as a strategy that organizations can use to deal with interdependence.

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  • Pfeffer, Jeffrey. “Size and Composition of Corporate Boards of Directors: Organization and Its Environment.” Administrative Science Quarterly 17.2 (1972b): 218–228.

    DOI: 10.2307/2393956Save Citation »Export Citation »

    This study advances the argument that organizations use their boards of directors as a means to co-opt external organizations upon whom they depend. In a study of eighty nonfinancial corporations, the author found that larger firms have larger boards and firms with higher debt/equity ratios have more board members from financial institutions and more external board members.

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  • Pfeffer, Jeffrey. “A Resource Dependence Perspective on Interorganizational Relations.” In Intercorporate Relations: The Structural Analysis of Business. Edited by Mark S. Mizruchi and Michael Schwartz, 25–55. Cambridge, UK: Cambridge University Press, 1987.

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    This work provides a nice summary of the core insights found in External Control. It also elaborates on how RD is distinct from social class perspectives.

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  • Pfeffer, Jeffrey, and Anthony Leong. “Resource Allocations in United Funds: Examination of Power and Dependence.” Social Forces 55.3 (1977): 775–790.

    DOI: 10.1093/sf/55.3.775Save Citation »Export Citation »

    In a study of the monetary allocations of sixty-six United Funds, the authors found that allocations to member agencies within the fund were a function of power (measured by the member organization’s ability to raise money outside the fund). Member agencies also received greater allocations to the extent the fund was dependent on them, as measured by the visibility of the member agency.

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  • Pfeffer, Jeffrey, and Gerald R. Salancik. “Organizational Decision Making as a Political Process: Case of a University Budget.” Administrative Science Quarterly 19.2 (1974): 135–151.

    DOI: 10.2307/2393885Save Citation »Export Citation »

    In a study of how budgetary funds get allocated in a university, the authors find that measures of departmental power are significantly related to the proportion of the budget received.

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  • Pfeffer, Jeffrey, and Gerald R. Salancik. The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row, 1978.

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    This book comprises two parts. The first four chapters present a theory of the environment and a theory of power. While the latter was adapted from Emerson 1962 (cited under Foundational Works), the theory of the environment was more revelatory, significantly advancing previous conceptualizations of environmental complexity. The remaining chapters catalogue a series of strategies that organizations can use to manage external dependencies.

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  • Pfeffer, Jeffrey, and Gerald R. Salancik. The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row, 2003.

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    Second edition of Pfeffer and Salancik 1978, with a new introduction by Jeff Pfeffer.

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  • Salancik, Gerald R. “Interorganizational Dependence and Responsiveness to Affirmative-Action: The Case of Women and Defense Contractors.” Academy of Management Journal 22.2 (1979): 375–394.

    DOI: 10.2307/255596Save Citation »Export Citation »

    This audit study of defense contractors found that contractors who were more reliant on the federal government were faster and more thorough in their replies to requests for information on their firms’ affirmative action policies. The study therefore highlights a core argument in RD that firms in a position of dependence or more likely to respond to demands from their more powerful alters.

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Power and Dependence

A key facet of RD is its theory of power adapted from Emerson’s exchange-based view. Although detailing the relationship between power and dependence was not one of RD’s primary contributions, it usefully extended these concepts to organizational contexts and specified the types of resources (monetary or physical resources, information, and legitimacy) that are relevant to inter-organizational influence. Going beyond this, there have been efforts to disturb the relationship between dependence and autonomy (Dant and Gundlach 1999) and to show how the sources of an organization’s power (Santos and Eisenhardt 2009) and its dependencies (Silver 1993) evolve over its life-course.

  • Dant, Ranjiv P., and Gregory T. Gundlach. “The Challenge of Autonomy and Dependence in Franchised Channels of Distribution.” Journal of Business Venturing 14.1 (1999): 35–67.

    DOI: 10.1016/S0883-9026(97)00096-7Save Citation »Export Citation »

    The authors challenge the assumption that dependence and autonomy lie on opposite ends of the same continuum. Instead, they argue that dependence and autonomy can be mixed in four ways (hi,hi; hi,low; low,hi; and low,low), each combination with different implications for firm-franchise relationships. An empirical examination of franchised fast-food restaurants lends support by showing an emergence of all four combinations of dependence and autonomy.

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  • Santos, Filipe M., and Kathleen M. Eisenhardt. “Constructing Markets and Shaping Boundaries: Entrepreneurial Power in Nascent Fields.” Academy of Management Journal 52.4 (2009): 643–671.

    DOI: 10.5465/AMJ.2009.43669892Save Citation »Export Citation »

    The authors argue that the underlying logic used by entrepreneurs to dominate a new market is power. However, evidence is presented that new firms tend to use persuasion and other soft-power strategies to dominate a new market rather than the hard-power strategies—such as coercion—that are typically associated with resource dependence theory.

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  • Silver, Robin S. “Conditions of Autonomous Action and Performance: A Study of the Fonds d’Action Sociale.” Administration & Society 24.4 (1993): 487–511.

    DOI: 10.1177/009539979302400404Save Citation »Export Citation »

    In this case study chronicling nearly forty years of history of a large public organization, the author provides a nuanced depiction of an organization facing different environmental conditions and how this impacts its autonomy/dependence. These different states have implications for the organization’s ability to innovate and perform.

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Complexity and the External Environment

Consistent with other open-systems approaches, the underlying premise of RD is that organizations depend on their environments for survival. In this regard, while RD is commonly remembered for its theory of power, a more unique contribution was to link this to an empirically tractable theory of complexity where the external environment comprises other organizations with varying interests and levels of influence over the focal firm. As such, a key feature of RD is that it theorizes the external environment as a source of complex (incommensurate) demands on an organization. Scholars who are interested in the complexity of environments may find it useful to consult RD studies that map the locus and level of competing demands in the external environment (Gargiulo 1993; Lomi and Pattison 2006; Provan, et al. 1980) and the strategies that firms can use to manage these pressures effectively (Aharoni, et al. 1981; Meznar and Nigh 1995).

  • Aharoni, Yair, Zvi Maimon, and Eli Segev. “Interrelationships between Environmental Dependencies: A Basis for Tradeoffs to Increase Autonomy.” Strategic Management Journal 2.2 (1981): 197–208.

    DOI: 10.1002/smj.4250020208Save Citation »Export Citation »

    This study provided early evidence for the argument that firms face heterogeneous and conflicting pressures by virtue of their varied external dependencies. The authors show that this may create conflict, but can also opportunities whereby satisfying one set of demands helps lessen the pressure emanating from other sets of demands.

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  • Gargiulo, Martin. “Two-Step Leverage: Managing Constraint in Organizational Politics.” Administrative Science Quarterly 38.1 (1993): 1–19.

    DOI: 10.2307/2393252Save Citation »Export Citation »

    This study introduces the concept of two-step leverage as a means through which external parties may exert pressure on an organization. Examining discussion networks among cooperative agribusinesses, the author showed that firms attempt to form linkages with key resource providers. When this was untenable, however, decision-makers pursued relationships with intermediaries who had the power to influence a target organization, thus creating an indirect influence channel.

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  • Lomi, Alessandro, and Philippa Pattison. “Manufacturing Relations: An Empirical Study of the Organization of Production across Multiple Networks.” Organization Science 17.3 (2006): 313–332.

    DOI: 10.1287/orsc.1060.0190Save Citation »Export Citation »

    In a study of transportation firms in Italy, the authors find that organizations form tie portfolios with firms in their local community as well as with different, but overlapping, networks as a means to manage resource dependencies. As such, the study moves beyond the dyadic network imagery commonly presented in RD research, showing that dependencies may extend across multiple networks.

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  • Meznar, Martin B., and Douglas Nigh. “Buffer or Bridge: Environmental and Organizational Determinants of Public Affairs Activities in American Firms.” Academy of Management Journal 38.4 (1995): 975–996.

    DOI: 10.2307/256617Save Citation »Export Citation »

    The study examines the use of bridging and buffering tactics to manage stakeholder demands. The findings support RD for buffering: environmental uncertainty, resource importance, and organizational size are positively related to buffering. Uncertainty and managerial proclivities toward social responsibility are positively associated with bridging. This suggests that buffering and bridging are not opposite ends of a continuum, but rather a set of independent strategies.

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  • Provan, Keith G., Janice M. Beyer, and Carlos Kruytbosch. “Environmental Linkages and Power in Resource-Dependence Relations between Organizations.” Administrative Science Quarterly 25.2 (1980): 200–225.

    DOI: 10.2307/2392452Save Citation »Export Citation »

    Based on empirical examination of a United Way organization, this study found that ties with important community elements decreased the organization’s dependence and increased its power. A precursor to subsequent work developing ideas related to “two-step” leverage and indirect influence, the central argument here is that power-dependence relations cannot be fully understood by examining dyadic relationships in isolation: an organization’s ties with third parties may significantly affect a focal relationship.

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Altering the Boundaries of the Firm

According to RD, an organization can absorb external constraint is by altering its boundaries in ways that increase its power or diversify its focus—and thus buffer external influences—or by absorbing problematic dependencies through mergers and acquisitions.

Size and Growth

While there have been few studies that have directly examined how organizational growth and size relate to power and autonomy, RD proposes a link between firm size and power/autonomy. By leveraging greater market-power, the argument is that firms may be able to influence others while enjoying greater leeway for strategic action. Haveman 1993 provides a good empirical illustration of this argument, while Johnston and Menguc 2007 extend it to account for the relationship between headquarters and subsidiaries in multinational firms.

  • Haveman, Heather A. “Organizational Size and Change: Diversification in the Savings and Loan Industry after Deregulation.” Administrative Science Quarterly 38.1 (1993): 20–50.

    DOI: 10.2307/2393253Save Citation »Export Citation »

    This paper investigates the proposition from RD that larger firms enjoy greater market power, and thus autonomy, than do small firms. Examining expansion into new markets among Savings and Loans Associations, the author supports the proposed relationship between size and power.

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  • Johnston, Stewart, and Bulent Menguc. “Subsidiary Size and the Level of Subsidiary Autonomy in Multinational Corporations: A Quadratic Model Investigation of Australian Subsidiaries.” Journal of International Business Studies 38.5 (2007): 787–801.

    DOI: 10.1057/palgrave.jibs.8400294Save Citation »Export Citation »

    Extending RD arguments to multinational management, this paper examines how the size of a multinational subsidiary affects its ability to act autonomously of headquarters. The authors find an inverted U relationship. Size is initially associated with control over local resources and increased autonomy. However, very large subsidiaries receive increased attention, resulting in increased coordination and control mechanisms that limit possibilities for autonomous action.

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Mergers and Acquisitions

A more constraining approach to managing dependencies through boundary changes is to merge with, or acquire, key resource holders. Three types of mergers are discussed: (1) horizontal mergers, which reduce uncertainty emanating from inter-firm competition; (2) vertical integration, which can eliminate a firm’s dependence on its exchange partners and thus stabilize critical exchanges; and (3) diversified mergers, which are a method for decreasing the focal organization’s dependence on other dominant organizations. Galbraith and Stiles 1984 provides a good illustration. In a notable contribution, Casciaro and Piskorski 2005 challenges RD by suggesting that its conceptualization of mutual interdependence embeds variants that support opposite predictions about merger behavior.

  • Casciaro, Tiziana, and Mikolaj J. Piskorski. “Power Imbalance, Mutual Dependence, and Constraint, Absorption: A Close Look at Resource Dependence Theory.” Administrative Science Quarterly 50.2 (2005): 167–199.

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    Critically revisiting RD’s concept of “mutual interdependence”—the condition where two parties are concurrently dependent on each other—the authors argue that power imbalance and mutual dependence yield conflicting predictions about organizational behavior. This distinction is validated through a study of US public corporations between 1985 and 2000, showing that mutual dependence leads to mergers, as predicted by RD, while power imbalance does not.

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  • Galbraith, Craig S., and Curt H. Stiles. “Merger Strategies as a Response to Bilateral Market Power.” Academy of Management Journal 27.3 (1984): 511–524.

    DOI: 10.2307/256042Save Citation »Export Citation »

    RD predicts that mergers are more likely among organizations in industries that engage in frequent exchanges. This paper contends, however, that exchanges cannot be meaningfully understood in a vacuum. Rather, the power of the respective parties must be considered. Supporting this view, the authors show that power differentials lead to different types of mergers (e.g., conglomerate vs. vertical and horizontal).

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Diversification

RD suggests that diversification is a useful strategy to buffer a firm from the uncertainty and instability associated with dependence on a dominant organization that cannot otherwise be absorbed. For instance, Pennings, et al. 1984 showed how dependencies may lead to vertical diversification.

  • Pennings, Johannes M., Donald C. Hambrick, and Ian C. Macmillan. “Interorganizational Dependence and Forward Integration.” Organization Studies 5.4 (1984): 307–326.

    DOI: 10.1177/017084068400500402Save Citation »Export Citation »

    A rare study investigating the relationship between dependence, uncertainty, and diversification; the authors present evidence from three industries showing that customer power is related to uncertainty, and thus predicts vertical diversification.

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Inter-organizational Linkages

RD suggests that a firm may be able to efficaciously address external constraints by establishing bridging ties to other organizations. This can be accomplished through various means such as joining business groups such as coalitions or cartels, pursuing joint ventures or alliances, or through board interlocks (given the preponderance of work on interlocks, this research is discussed in a distinct section for Boards of Directors). While economic explanations for such linkages focus on spreading risk and increasing capital or market access, RD suggests that they may also reduce uncertainty and promote stability by conferring legitimacy and by facilitating information exchange.

Alliances, Joint Ventures, and Other Inter-organizational Linkages

A number of studies have examined the efficacy of managing external dependencies through alliances or joint ventures. Overall, studies support the argument that firms pursue alliances with their key resource holders (Baker 1990). Interesting elaborations to this argument have focused on showing that firms pursue different types of ties under different environments (Beckman, et al. 2004; Beekun and Ginn 1993) and based on their position within extant networks (Gulati and Gargiulo 1999). Recently, efforts have been made to extend these insights to novel domains including multinational management (Li, et al. 2002; Xia 2011) and entrepreneurship (Katila, et al. 2008). Work by Gulati and Sytch 2007 also draws on RDs insights about inter-organizational linkages to develop new theory that distinguishes between different types of dependency relationships.

  • Baker, Wayne E. “Market Networks and Corporate Behavior.” American Journal of Sociology 96.3 (1990): 589–625.

    DOI: 10.1086/229573Save Citation »Export Citation »

    In a study of firms’ relationships with their investment bank(s), the author shows that market ties form in order to manage dependence. Firms directly manipulate the number and intensity of these ties to pursue independence, uncertainty reduction, and efficiency.

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  • Beckman, Christine M., Pamela R. Haunschild, and Damon J. Phillips. “Friends or Strangers? Firm-Specific Uncertainty, Market Uncertainty, and Network Partner Selection.” Organization Science 15.3 (2004): 259–275.

    DOI: 10.1287/orsc.1040.0065Save Citation »Export Citation »

    Adding depth to arguments about dependence and uncertainty, this study distinguishes between firm- and industry-level dependencies. The authors show that this distinction has important implications for organizational behavior. When uncertainty is shared among industry members, firms are more likely to deepen ties with existing partners. However, when individual firms face uncertainty, they are more likely to pursue ties with new partners.

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  • Beekun, Rafik I., and Gregory O. Ginn. “Business Strategy and Interorganizational Linkages within the Acute Care Hospital Industry: An Expansion of the Miles and Snow Typology.” Human Relations 46.11 (1993): 1291–1318.

    DOI: 10.1177/001872679304601102Save Citation »Export Citation »

    The study examines the relationship between environmental turbulence and inter-organizational linkages for firms pursuing different types of strategies. The authors analyze acute care hospitals following reactor, defender, prospector, and analyzer strategies and find these interact differently with environmental turbulence to predict loose versus tight inter-organizational linkages.

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  • Gulati, Ranjay, and Martin Gargiulo. “Where Do Interorganizational Networks Come From?” American Journal of Sociology 104.5 (1999): 1439–1493.

    DOI: 10.1086/210179Save Citation »Export Citation »

    This study finds that organizations establish ties to organizations with which they have interdependencies, but that this effect is contingent on the position of these other organizations in the social network. In so doing, the study emphasizes the importance of embeddedness as a mechanism that mediates the influence of resource interdependence on tie formation.

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  • Gulati, Ranjay, and Maxim Sytch. “Dependence Asymmetry and Joint Dependence in Interorganizational Relationships: Effects of Embeddedness on a Manufacturer’s Performance in Procurement Relationships.” Administrative Science Quarterly 52.1 (2007): 32–69.

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    The authors distinguish between dependence asymmetry (difference in actors’ dependencies on each other) and joint dependence (sum of dependence between actors in a relationship). In a study of two major US auto manufacturers, the authors show that joint dependence has positive effects on procurement relationships while asymmetry has mostly disadvantageous effects.

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  • Katila, Riita, Jeff D. Rosenberger, and Kathleen M. Eisenhardt. “Swimming with Sharks: Technology Ventures, Defense Mechanisms and Corporate Relationships.” Administrative Science Quarterly 53.2 (2008): 295–332.

    DOI: 10.2189/asqu.53.2.295Save Citation »Export Citation »

    This study examines entrepreneurial funding relationships. The authors show the importance of resource needs and defense mechanisms available to entrepreneurial firms when choosing with whom to seek financing. Whereas RD focuses on resource interdependencies that cause inter-organizational ties to form, this study emphasizes the importance of considering how power differentials may prevent such linkages.

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  • Li, Ji, Leonard Karakowsky, and Kevin C. K. Lam. “East Meets East and East Meets West: The Case of Sino-Japanese and Sino-West Joint Ventures in China.” Journal of Management Studies 39.6 (2002): 841–863.

    DOI: 10.1111/1467-6486.00314Save Citation »Export Citation »

    This paper investigates the relationship between the cultural composition and financial performance of international joint ventures. Examining China, the authors show that more balanced ventures perform better than those with just US/UK or Chinese managers. Assumedly, this is because of the ability of different managers to negotiate the multifaceted demands of host and home country environments.

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  • Xia, Jun. “Mutual Dependence, Partner Substitutability, and Repeated Partnership: The Survival of Cross-Border Alliances.” Strategic Management Journal 32.3 (2011): 229–253.

    DOI: 10.1002/smj.873Save Citation »Export Citation »

    This paper examines the embeddedness of international alliances in country-level power-dependence relationships. The author finds that country-level dependencies affect alliance formation by affecting the supply of potential partners in a country. When numerous substitutes are available in a target country, alliances are more transient and subject to dissolution.

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Coalitions and Cartels

Although few studies have examined the resource dependence effects of these business groups, RD suggests that they may be a useful tool for absorbing uncertainty by bridging to the external environment. Membership may attenuate competition and increase the flow of information between member organizations. Scholars with an interest in the area will find Stern 1981, a work on college athletics, useful. Provan 1983, a study of hospital consortia, provides another good illustration.

  • Provan, Keith G. “The Federation as an Interorganizational Linkage Network.” Academy of Management Review 8.1 (1983): 79–89.

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    This article focuses on the ways in which coalitions may constrain member organizations. Examining hospital consortia, the author suggests that power-dependence relationships will play out among members in ways that mirror other types of inter-organizational relationships.

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  • Stern, Robert N. “Competitive Influences on the Interorganizational Regulation of College Athletics.” Administrative Science Quarterly 26.1 (1981): 15–32.

    DOI: 10.2307/2392597Save Citation »Export Citation »

    This paper provides an empirical analysis of the National Collegiate Athletic Association (NCAA) as an inter-organizational cartel, looking specifically at the relationship between the athletic competitiveness of member institutions and the likelihood and severity of punishment for rule violations. The finding that is most relevant to RD is that institutions which are less dependent on the cartel receive lower penalties than those who are more highly dependent.

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Boards of Directors

RD suggests that firms can manage uncertainty and external dependencies through interlocking directorates. Specifically, interlocks are thought to facilitate inter-organizational information flows, provide specialized knowledge, and co-opt sources of constraint by giving them a vested interest in a firm’s survival. Although board studies are arguably the most vibrant area of resource dependence research, empirical support for the theory’s propositions has been mixed.

Board Composition

A number of studies have examined board composition, investigating the degree to which directors are selected based on their ability to address key dependencies and confer legitimacy on a focal firm. Research by Amy J. Hillman and colleagues, in particular, has shown that board composition is (relatively) homologous with a firm’s external dependencies and sensitive to environmental changes (Hillman 2005; Hillman, et al. 2000; Hillman, et al. 2007). Cowen and Marcel 2011 provides an interesting elaboration, showing how these effects play out under corporate scandals.

  • Cowen, Amanda P., and Jeremy J. Marcel. “Damaged Goods: Board Decisions to Dismiss Reputationally Compromised Directors.” Academy of Management Journal 54.3 (2011): 509–527.

    DOI: 10.5465/AMJ.2011.61967992Save Citation »Export Citation »

    RD emphasizes that one of the key functions of the board of directors is to confer legitimacy on the host firm. This study investigates what happens in the wake of financial fraud by a sending firm on the outside board appointments of its employees. Consistent with expectations, acts of fraud increase the likelihood of executives being dismissed as directors of other firms.

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  • Hillman, Amy J. “Politicians on the Board of Directors: Do Connections Affect the Bottom Line?” Journal of Management 31.3 (2005): 464–481.

    DOI: 10.1177/0149206304272187Save Citation »Export Citation »

    One of the critical sources of external dependence and uncertainty for business is the government. This study investigates one mechanism through which firms can manage this constraint—the appointment of ex-politicians to the board of directors. Results show that firms in heavily regulated industries have more ex-politicians on their boards and that this is associated with improved financial performance.

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  • Hillman, Amy J., Albert A. Cannella, and Ramona L. Paetzold. “The Resource Dependence Role of Corporate Directors: Strategic Adaptation of Board Composition in Response to Environmental Change.” Journal of Management Studies 37.2 (2000): 235–255.

    DOI: 10.1111/1467-6486.00179Save Citation »Export Citation »

    This paper highlights four resource dependence roles of directors (insiders, business experts, support specialists, and community influentials) and through a study of US airlines undergoing deregulation, finds that the composition of corporate boards changes in response to the changing resource dependencies of the firm.

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  • Hillman, Amy J., Christine Shropshire, and Albert A. Cannella Jr. “Organizational Predictors of Women on Corporate Boards.” Academy of Management Journal 50.4 (2007): 941–952.

    DOI: 10.5465/AMJ.2007.26279222Save Citation »Export Citation »

    Examining the relationship between external environments and board composition, this study found that large firms that face legitimacy pressures, those in industries that are heavily dependent on female employees, and those with ties to companies that have female board members are likely to have women directors on their board. Thus, the composition of boards seemingly mirrors the environmental constraints faced by firms.

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Interlocks and Co-optation

A key assumed motivation for creating interlocks is to co-opt sources of external dependence and give them a stake in the continued success of a focal firm. A number of studies have investigated this basic proposition by examining patterns of inter-organizational linkage. Burt, et al. 1980 provides researchers with a useful introduction to, and illustration of, this argument. Other notable research has identified boundary conditions on the interlocking patterns predicted by RD (Kono, et al. 1998), as well as showing how complementary mechanisms such as tie reconstitution and friendship ties may serve the same function as interlocks (Palmer 1983; Westphal, et al. 2006).

  • Burt, Ronald S., Kenneth P. Christman, and Harold C. Kilburn. “Testing a Structural Theory of Corporate Cooptation: Interorganizational Directorate Ties as a Strategy for Avoiding Market Constraints on Profits.” American Sociological Review 45.5 (1980): 821–841.

    DOI: 10.2307/2094897Save Citation »Export Citation »

    Adding specificity to RD, this study developed a precise way to measure external constraint. The authors argue that market constraint results from the extent to which an industry segment transacts with some other segment. Three types of directorate ties (establishments connected through boards by ownership, by direct interlocking, and/or indirect interlocks through financial firms) tend to occur where there are greater levels of market constraint.

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  • Kono, Clifford, Donald Palmer, Roger Friedland, and Matthew Zafonte. “Lost in Space: The Geography of Corporate Interlocking Directorates.” American Journal of Sociology 103.4 (1998): 863–911.

    DOI: 10.1086/231292Save Citation »Export Citation »

    This study emphasized the importance of geography in determining the mechanisms behind patterns of interlocking. Non-local interlocks followed patterns predicted by RD, whereas local interlocks did not.

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  • Palmer, Donald. “Broken Ties: Interlocking Directorates and Intercorporate Coordination.” Administrative Science Quarterly 28.1 (1983): 40–55.

    DOI: 10.2307/2392384Save Citation »Export Citation »

    This study of the reconstitution of broken board interlocks proved valuable for testing the mechanisms that RD proposed were the impetus to the formation of board interlocks. The study found that most broken ties were not reconstituted, casting doubt on the argument that interlocking directorates serve to manage dependence relations.

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  • Westphal, James D., Steven Boivie, and Han Ming Chng. “The Strategic Impetus for Social Network Ties: Reconstituting Broken CEO Friendship Ties.” Strategic Management Journal 27.5 (2006): 425–445.

    DOI: 10.1002/smj.525Save Citation »Export Citation »

    The authors found that managers seek to reconstitute social relationships with managers in firms upon which the focal firm is dependent. These informal ties among executives serve the same purpose as formal board interlocks but impose fewer constraints on the focal firm.

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Director Influence

In addition to examining board composition and patterns of interlocking, a number of studies have drawn on RD to investigate the substantive influence that various types of directors have on firm behavior. This work has examined the personal characteristics of different directors, as well as the nature of the dependence that they represent for the focal firm. Goodstein, et al. 1996 provides a good illustration of board power. Haynes and Hillman 2010 extends this to examine how a board’s human and social capital translates into influence, while Kori and Misangyi 2008 provides an interesting exploration of how these insights apply to entrepreneurial ventures.

  • Goodstein, Jerry, Warren Boeker, and John Stephan. “Professional Interests and Strategic Flexibility: A Political Perspective on Organizational Contracting.” Strategic Management Journal 17.7 (1996): 577–586.

    DOI: 10.1002/(SICI)1097-0266(199607)17:7%3C577::AID-SMJ828%3E3.3.CO;2-ISave Citation »Export Citation »

    This study illustrates how physician power—as measured by their representation on hospital boards—limits the use of external contracting, whereas greater representation of managers on the board increases the use of outside contractors. Thus, the study shows the power of organizational boards and how the interests of board members are predictive of the types of external relationships that an organization forms.

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  • Haynes, Katalin T., and Amy J. Hillman. “The Effect of Board Capital and CEO Power on Strategic Change.” Strategic Management Journal 31.11 (2010): 1145–1163.

    DOI: 10.1002/smj.859Save Citation »Export Citation »

    This study examines the impact of different kinds of board capital—defined as the composite human and social capital of the board of directors—on strategic decision-making. The authors find that when a board has a breadth of capital, more strategic change occurs. Board capital depth, on the other hand, reduces the amount of strategic change.

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  • Kori, Yasemin Y., and Vilmos F. Misangyi. “Outside Directors’ Industry-Specific Experience and Firms’ Liability of Newness.” Strategic Management Journal 29.12 (2008): 1345–1355.

    DOI: 10.1002/smj.709Save Citation »Export Citation »

    In a study of young entrepreneurial firms, the authors show that outside directors with relevant domain experience supplement the relative lack of managerial experience of the firm, thereby offsetting the liability of newness for these ventures. In so doing, the study emphasizes the importance of board expertise during the early years of firm development.

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Organizational Decision Making

While not a discrete topic in RD, studies have shown how power-dependence relations affect the decisions that a firm makes in ways that go beyond linking with resource providers. For instance, there is evidence that customer power may constrain a firm’s capacity for adaptive innovation (Christensen and Bower 1996) and that powerful firms can influence the decisions of less powerful ones during negotiations (Elg and Johansson 1997). Wang, et al. 2008 also shows that organizations are more likely to be influenced by resource providers in dynamic environments.

  • Christensen, Clayton M., and Joseph L. Bower. “Customer Power, Strategic Investment, and the Failure of Leading Firms.” Strategic Management Journal 17.3 (1996): 197–218.

    DOI: 10.1002/(SICI)1097-0266(199603)17:3%3C197::AID-SMJ804%3E3.0.CO;2-USave Citation »Export Citation »

    Studying the disk drive industry, the authors show that established firms led the development of technologies that addressed existing customer needs. These same firms failed to develop technologies that had a new and less-developed customer base. The paper illustrates the constraining influence of resource providers by showing the difficulty firms have in innovating in ways that depart from the interests of existing customers.

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  • Elg, Ulf, and Ulf Johansson. “Decision Making in Inter-firm Networks as a Political Process.” Organization Studies 18.3 (1997): 361–384.

    DOI: 10.1177/017084069701800302Save Citation »Export Citation »

    In a case study of the introduction of information technology in the Swedish food industry, the findings illustrate political dynamics involved in inter-firm decision making around the adoption of innovations. In particular, the authors illustrate how powerful actors in the inter-firm network can utilize their position to influence the decision-making process, but do so not through overt coercion but rather more subtle acts of influence.

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  • Wang, Heli, Jaepil Choi, and Jiatao Li. “Too Little or Too Much? Untangling the Relationship between Corporate Philanthropy and Firm Financial Performance.” Organization Science 19.1 (2008): 143–159.

    DOI: 10.1287/orsc.1070.0271Save Citation »Export Citation »

    The authors find that effects of philanthropy on financial performance are strengthened in dynamic environments where firms face greater uncertainty and thus benefit more from managing the perceptions of external resource providers. Study acknowledges that multiple practices can conform to a specific logic and that a given practice can conform to multiple (and potentially competing) logics.

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Corporate Political Action

A different type of strategy for managing dependence relationships involves actively working to shape the external environment through political action. Put succinctly, RD suggests that when firms are unable to reduce problematic dependencies through other means, they will seek to create new and more favorable environmental conditions by establishing, altering, or dismantling government regulations. While compared to other areas of RD, there is little research on the subject, Hillman, et al. 1999 examined how firms can affect public policy decisions and recent work has also extended RD to examine how firms can manage ties with contentious regimes (Dieleman and Boddewyn 2012).

  • Dieleman, Marleen, and Jean J. Boddewyn. “Using Organization Structure to Buffer Political Ties in Emerging Markets: A Case Study.” Organization Studies 33.1 (2012): 71–95.

    DOI: 10.1177/0170840611430595Save Citation »Export Citation »

    The authors describe the organizational structures used by a large Indonesian business group to manage its political ties. High dependence on the government coupled with the potential downside risks of having visible connections to the government led to the formation of a variety of loosely coupled organizational structures designed specifically to maintain access to the Suharto regime while also limiting the group’s exposure.

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  • Hillman, Amy J., Ashgar Zardkoohi, and Leonard Bierman. “Corporate Political Strategies and Firm Performance: Indications of Firm-Specific Benefits from Personal Service in the US Government.” Strategic Management Journal 20.1 (1999): 67–81.

    DOI: 10.1002/(SICI)1097-0266(199901)20:1%3C67::AID-SMJ22%3E3.0.CO;2-TSave Citation »Export Citation »

    This study introduces the concept of political service—defined as having a firm representative serve in a political capacity—as a mechanism through which firms can gain influence within or access to the public policy process. The study shows that such linkages positively affect firm valuation.

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  • Mizruchi, Mark S. “Similarity of Political Behavior among Large American Corporations.” American Journal of Sociology 95.2 (1989): 401–424.

    DOI: 10.1086/229274Save Citation »Export Citation »

    The author combines insights from RD and social class theory to examine the conditions under which firms engage in similar patterns of political contribution. Results show that when facing similar constraints, firms utilize contribution strategies as a means to shape their environment.

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Internal Organizational Dynamics

In addition to the strategies firms can employ to buffer from, and bridge themselves to, other organizations in positions of power, RD offers insight into the internal dynamics of organizations. Notably, the theory recognizes that firms are internally diverse and encompass groups with varying and competing interests. Linking this to the external environment, RD predicts that the internal groups which are best able to deal with a firm’s most pressing dependencies—assuming that these are accurately interpreted—will obtain the most power within the organization.

Intra-organizational Coalitions

RD suggests that an organization’s internal power structure will be (relatively) homologous with its external environment. A number of studies have tested this, finding general support for the argument that power accrues to groups within the firm that are best able to address problematic external dependencies. Schwochau, et al. 1988 provides evidence of this general finding, while Kim, et al. 2004 shows its application to non-Western contexts. Other research has considered alternate sources of power rooted in workflow interdependencies (Astley and Zajac 1990) and symbolic action (Galang and Ferris 1997).

  • Astley, W. Graham, and Edward J. Zajac. “Beyond Dyadic Exchange: Functional Interdependence and Subunit Power.” Organization Studies 11.4 (1990): 481–501.

    DOI: 10.1177/017084069001100403Save Citation »Export Citation »

    In a study of organizational subunits, the authors move beyond considerations of dyadic interdependence and show that rather than being a function of exchange dependencies, subunit power is determined by centrality within a system of workflow interdependencies.

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  • Galang, Maria C., and Gerald R. Ferris. “Human Resource Department Power and Influence through Symbolic Action.” Human Relations 50.11 (1997): 1403–1426.

    DOI: 10.1177/001872679705001104Save Citation »Export Citation »

    This survey-based study finds that HR departments gain power when they engage in symbolic activities that highlight their importance to the organization. They do so by defining what resources are important and how they have unique skills needed to address them. The study finds that these symbolic actions are stronger predictors of HR department power than performance, unionization, and top management attitudes.

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  • Kim, Hicheon, Robert E. Hoskisson, and William P. Wan. “Power Dependence, Diversification Strategy, and Performance in Keiretsu Member Firms.” Strategic Management Journal 25.7 (2004): 613–636.

    DOI: 10.1002/smj.395Save Citation »Export Citation »

    In this study, the authors examine the keiretsu (a form of corporate organization in Japan characterized by interlocking business and ownership ties between member firms) as a power-dependence system and find that affiliation has dissimilar effects on member firms depending on the power that each possesses. More powerful members utilize diversification strategies in order to increase sales growth; weaker members are more constrained in focusing on profitability.

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  • Schwochau, Susan, Peter Feuille, and John T. Delaney. “The Resource Allocation Effects of Mandated Relationships.” Administrative Science Quarterly 33.3 (1988): 418–437.

    DOI: 10.2307/2392717Save Citation »Export Citation »

    The authors borrow insights from industrial relations to show how unions and the legal environment affect subunit power and thus resource allocations for police units. Specifically, in cities that were legally mandated to engage in collective bargaining, police units were able to attain a larger share of the city budgets when resources were scarce.

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Executive Succession

Although RD posits that organizational leaders serve a mostly symbolic role, it also notes that poor performance is often attributed to a misalignment between the environment and the internal structures of the organization. Replacing top managers with others who are considered more capable of dealing with critical organizational problems is seen as a strategic response for coping with environmental uncertainty. This was evident in early work by the authors of. Salancik and Pfeffer 1980 and has been elaborated by authors examining sources of executive power (Drazin and Rao 1999; Harrison, et al. 1988), and how this relates to organizational change initiatives (Goodstein and Boeker 1991).

  • Drazin, Robert, and Hayagreeva Rao. “Managerial Power and Succession: SBU Managers of Mutual Funds.” Organization Studies 20.2 (1999): 167–196.

    DOI: 10.1177/0170840699202001Save Citation »Export Citation »

    This study focuses on the antecedents of succession among portfolio managers of mutual funds and finds that unit managers are less likely to be terminated if their unit controls resources that are valuable to the firm. This pattern of results occurs even when fund performance is declining.

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  • Goodstein, Jerry, and Warren Boeker. “Turbulence at the Top: A New Perspective on Governance Structure Changes and Strategic Change.” Academy of Management Journal 34.2 (1991): 306–330.

    DOI: 10.2307/256444Save Citation »Export Citation »

    RD emphasizes the relationship between executive succession and strategic change. In this study, the impacts of ownership and director changes are also examined: both affect divestitures and service diversification. Thus, concurrent changes to ownership and management significantly increase the likelihood of strategic change. The ability for a new CEO to initiate change also appears to be related to board changes.

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  • Harrison, J. Richard, David L. Torres, and Sal Kukalis. “The Changing of the Guard: Turnover and Structural-Change in the Top-Management Positions.” Administrative Science Quarterly 33.2 (1988): 211–232.

    DOI: 10.2307/2393056Save Citation »Export Citation »

    The authors examine how the relationship between the positions of CEO and board chair affects CEO/board chair turnover as well as consolidation/separation of the positions. CEO turnover is lower when the CEO has more power and, once consolidated, separation of the board and CEO functions is rare. Individuals holding both positions face greater accountability in the face of poor performance.

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  • Salancik, Gerald R., and Jeffrey Pfeffer. “Effects of Ownership and Performance on Executive Tenure in United States Corporations.” Academy of Management Journal 23.4 (1980): 653–664.

    DOI: 10.2307/255554Save Citation »Export Citation »

    In a study of eighty-four large US corporations, the authors found that ownership structure is an important mediating variable between firm performance and executive tenure. Tenure was positively related to profit margins in externally controlled firms (i.e., where an external owner controls at least 4 percent of the firm’s stock), but was unrelated to performance in owner-managed firms (i.e., where the CEO controlled at least 4 percent of the firm’s stock).

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Reviews and Theoretical Intersections

Befitting its impact, a handful of papers have reviewed the resource dependence literature. While the reviews are variably comprehensive, they are useful for seeing how studies have employed resource dependence thinking, as well as the historical evolution of the theory. Hillman, et al. 2009 reviewed the uses of RD in the management literature, while Davis and Cobb 2010 showed how RD has been used in other domains. Related to this, a number of studies have focused on how RD compares (Ulrich and Barney 1984) and contributes to other theoretical perspectives. In particular, insights about inter-organizational power and agentic responses to environmental constraints have helped to propel research on organizational evolution (Aldrich 1979) and stakeholder theory (Frooman 1999). In recent years neo-institutionalism, in particular, has shown renewed interest in resource dependence with scholars building on the early integration of these perspectives in Oliver 1991 to advance a research agenda around institutional complexity (Pache and Santos 2010). The review Wry, et al. 2013 offers an extended discussion of this and also details the intersections between RD and other organizational theories.

  • Aldrich, Howard E. Organizations and Environments. Englewood Cliffs, NJ: Prentice-Hall, 1979.

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    In this influential work on organizations and their environments, Aldrich draws heavily on resource dependence arguments to develop key points about inter-organizational relations. Specifically, he argues that selection processes are not simply the working out of an impersonal invisible hand, but rather that power and domination are the keys to understanding organizational change.

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  • Davis, Gerald F., and J. Adam Cobb. “Resource Dependence Theory: Past and Future.” In Stanford’s Organization Theory Renaissance, 1970–2000. Vol. 28. Edited by Claudia B. Schoonhoven and Frank Dobbin, 21–42. Bingley, UK: Emerald, 2010.

    DOI: 10.1108/S0733-558X(2010)0000028006Save Citation »Export Citation »

    This review summarizes the core arguments of RD and shows how they have been invoked across a host of disciplines. The authors conducted a citation of analysis of the book and present interesting evidence on how RD has diffused beyond the management literature to be increasingly used by scholars in fields such as education, health care, and public policy.

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  • Frooman, Jeff. “Stakeholder Influence Strategies.” Academy of Management Review 24.2 (1999): 191–205.

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    This paper contributed significantly to the development of stakeholder theory through the integration of RD’s insights about inter-organizational power. Unlike earlier stakeholder studies where power is conceptualized as an attribute of the actor, the author conceptualizes power as a property of the relationship between the organization and stakeholder group.

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  • Hillman, Amy J., Michael C. Withers, and Brian J. Collins. “Resource Dependence Theory: A Review.” Journal of Management 35.6 (2009): 1404–1427.

    DOI: 10.1177/0149206309343469Save Citation »Export Citation »

    This comprehensive review focuses on empirical papers that test the efficacy of the strategies advanced in External Control for how firms can manage their power-dependence relationships.

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  • Oliver, Christine. “Strategic Responses to Institutional Processes.” Academy of Management Review 16.1 (1991): 145–179.

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    In this highly influential paper, Oliver draws on RD as a means to incorporate agency and strategic action into neo-institutional theory. In particular, she proposes a range of strategies that are available to organizations as they respond to institutional pressures. Through this integration, the paper contributed significantly to the reorientation of neo-institutionalism toward issues of agency and change.

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  • Pache, Anne-Claire, and Filipe M. Santos. “When Worlds Collide: The Internal Dynamics of Organizational Responses to Conflicting Institutional Demands.” Academy of Management Review 35.3 (2010): 455–476.

    DOI: 10.5465/AMR.2010.51142368Save Citation »Export Citation »

    Extending the framework of Oliver 1991 to deal with situations where firms face multiple competing demands, this paper adopts insights from RD to theorize internal organizational dynamics and response strategies. Elaborating the concept of “competing demands,” the authors distinguish between conflict over the ends that a firm is pursuing versus the means used to achieve them.

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  • Ulrich, David, and Jay B. Barney. “Perspectives in Organizations: Resource Dependence, Efficiency, and Population.” Academy of Management Review 9.3 (1984): 471–481.

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    This paper reviews RD, efficiency, and population ecology perspectives and identifies points of integration across the three.

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  • Wry, Tyler, J. Adam Cobb, and Howard E. Aldrich. “More than a Metaphor: Assessing the Historical Legacy of Resource Dependence and Its Contemporary Promise as a Theory of Environmental Complexity.” Academy of Management Annals 7.1 (2013): 441–488.

    DOI: 10.1080/19416520.2013.781862Save Citation »Export Citation »

    This paper argues that RD’s most significant contribution was its theory of environmental complexity. However, through a comprehensive review, the authors show that these insights have been largely neglected. As scholars begin to show renewed interest in complexity from the perspective of neo-institutional theory, the authors argue that RD may furnish mechanisms that more robustly link conflicting external demands and organizational action.

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