Organizational Theories: A Critical Analysis of Strategic Choice, Deterministic Theories, and Resource-Based Theory

This essay critically analyzes the three organizational theories i.e. strategic choice, deterministic theories, and resource-based theory. It examines the advantages and disadvantages of each theory and concludes that resource-based theory is the most compelling theory of organizational design and action.

Running Head: MANAGEMENT THEORY AND PRACTICE 1
Management Theory and Practice

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Introduction
The context of organizational theories is characterized as an uneven body of knowledge with
different competing theoretical concepts to describe the actions of organization. There are two
types of organizational theories i.e. strategic choice and deterministic theory. Further, the three
deterministic theories about organization to introduce in late 1970s and early 1980s were
resource dependence theory, institutional theory and population ecology theoryi. Different
theories address different theories so every concept makes its own norms and claims that come
with its own strengths and weaknesses. There are various authors who entitled that differences
and debates among these three theories showcase the competitiveness of theories. Strategic
theory is the theory of organizational structure design that describes the roles and responsibilities
of leaders and managers play in affecting a workplace by making the choices in dynamic
political process. Deterministic theory is developed from combination of three theories i.e.
resource dependence theory, institutional theory and population ecology theory. Resource
dependence concept shows the study of how organization’s external resources impact the
organizational behavior. Institutional theory considers different rules, norms and regulations
which affect the social behavior of an organization. There are various scholars who believe that
all of these organizational theories are originated from the findings of pragmatic research and
implemented to overcome the issues faced by real world businesses and individuals.
The purpose of this essay is to answer the question that “which theory is the most compelling
among all three theories”. In the essay, the opinions and ideas of different authors are analyzed
critically. Moreover, all the theories are described by reviewing a literature. Later, a
paradigmatic controversy is started and advantages and disadvantages of these theories are
identified. On the basis of this assessment, the question is answered and then all the ideas are
concluded.
Strategic Choice Theory
Among the theories of organizational design and action, one of the most important theories is
strategic choice theory which defines the duties and roles which the leaders need to play so that
they can influence the company by developing different choices. This is the theoretical concept
that is totally emphasized on the organizational people and different groups to generate

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alternatives. These strategic options formed the component of workplace learning process that
adapted to both external and internal environment of business. This theory of organizational
structure is studies with the relation to responses of people to everyday conflicts. In order to
resolve these conflicts, both the respondents and complainants can use various strategies. This
theory is both advantageous and disadvantageous for the organization. One of the biggest
advantages of this theory is that it assists in defining many choices which a company can make
for getting better results from marketplace. With the assistance of strategic choice theory, a
business entity can distinguish its operations and functions in the external environment by using
available strategic choices. The major benefit of this theory is that businesses have many
alternatives available in environment and they can select the most appropriate oneii.
Apart from above advantages, there is a major disadvantage that this theory is not an approach
with predetermined goals and pre-specified actors. This theory separates the organizations from
their external environment and marketplace so they are unable to know about their competing
brands. It can affect the business growth and performance of organization in perspective
industry. However, it provides the businesses opportunity to select from available options, but it
can cause conflicts among available options and among organizational individuals. There may be
possibility that organizational fail to analyze the changes in market and market trends. In this
way, this theory is both advantageous and disadvantageous for the organizations which are
applying strategic theory.
Deterministic Theories
In today’s competitive business environment, it is very important for each and every organization
to adopt organizational theories for their effective management. Organizational theories can be
divided into two categories i.e. strategic and deterministic theories. Management scholars
differentiate these theories based on the degree of flexibility that they supposed to run in market.
There are various authors who have introduced three theories of deterministic concept i.e.
population ecology theory, resource dependence theory and institutional theory. According to
Bozkurta, Kalkanb and Armancm (2014), all three theories have the potential to give answer to
different question like institutional theory replies how the companies politically created by their
institutional environment. Secondly, population ecology theory identifies that why some

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organizations fail and others exist for longer time. Lastly, resource based theory states how
companies interact with their environments and surrounding peopleiii.
Resource Dependence Theory
First and foremost theory of organizational design and action is resource dependence theory
which is introduced by Gerald and Jeffery. According to Nienhüser (2008), this theoretical
concept mainly lays emphasis on explanation of power-seeking features of business entities. It
looks at the connection between the firm and its resource holder on which the firm depends
completely. Moreover, this theory states that organizational agents are implored to look at
different priorities for needful resources that are required by the companies. It identifies the
major suppliers of the firms on which company is dependent for resources like raw materials,
human resources, financial resources etc. Then, these firms adopt many strategies and techniques
related to the resource requirements so that they can abolish its dependencies on other firmsiv.
In this relation, Pugliese, Minichilli & Zattoni (2014) stated that each and every organization
holds various resources such as tangible resources, intangible resources, financial resources, raw
materials, final products and some other related resources. While any business entity plans to
manage its assets and other resources, another company completely depends on other one. This
reliance on other companies can lead the organization towards uncertainty in the business outside
environment. In this way, organization needs to plan its operations very effectively so that they
can eliminate different risks and challenged faced in the process of resource and operational
planningv.
This theory has both advantages and disadvantages to the organization and organizational
behavior. This improves the resource availability for the firms when they need. This concept
does not view the organization and its workplace as a passive actor. Moreover, it claims that
companies are not very cooperative as they are featured by conflict over resources and power.
The concept of resource based theory can be critically analyzed by looking at the example of
ACME organization that has its operations in information technology sector. This company is
providing its products and services to a media entity i.e. XYZ. Using this technique, the
company is generating significant profits and revenues. This situation can cause various threats
and risks in the process of resource dependence implementation. To overcome it, first company
should see for other alternatives which will reduce its degree of dependency on XYZ. For

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effective utilization of organizational resources, the managers should implement different
strategic techniques such as mergers and acquisitions, strategic partnerships, collaborations and
joint venture. Thus, the above theory assists to understand the behavioral effects of firm. It can
be concluded that this theory is very strong and influential but it is characterized by the disputes
over the resources and power.
Institutional Theory
Moreover, second theory of organizational design and action is institutional theory. According to
Mahalingam & Levitt (2007) institutional theory is a concept on the stronger and deeper aspects
of organization’s social structure. This theory considers the processes by which different
structures consisting of norms, rules and schemes become recognized as influential guidelines
for social behavior. This theory focuses on the set of norms and values which support in the
development of organizational behavior. In this context, authors believe that firms incline to
become similar as they are shaped by their institutional atmospherevi. According to this theory,
institutional environment of a company comprises of different rules, norms and regulations to
which entities must comply with for managing the legitimacy and correctness. Consequently,
designing of organization is identified by the legality needs of the company. About this,
Greenwood et al. (2017) have given various values and principles which assist the organization
to improve situations of workplace. To survive in the competitive business environment, the
firms require complying with the applied regulations and bylaws. There are many management
scholars who have stated that institutional theoretical concept can be analyzed by looking at three
forces such as coercive, mimetic and normative forces. When an organization operates its
business as successful, then it can direct to mimetic pressure. Moreover, legal and political forces
are resulted from coercive pressures. Socio-cultural expectations and requirements can result in
the normative pressure. This theory recommends that success of firm can have cohesive models
and frameworks to comply with. When the firm is unable to comply with the rules and laws, it
can lead it to failure. The example of transportation firms is the best example to understand this
theory. The companies implement this concept that enables them to manage the safety of ships
and follow all the security standardsvii.
However, this theory offers the businesses opportunities that they comply with the rules,
regulations and norms of marketplace but it has an adverse impact on the organizational

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behavior. Institutional myths and beliefs have negative impact on the organization and its
individuals. This theory is failed to explain the changes and differentiation among organizations.
About this theory, it can be concluded that it attempts to explain the relationship between
companies and their external environment but it confirms that companies can divert from their
core activities and goals due to institutional environment.
Population Ecology Theory
As per Jones and Salimath (2011), another organizational theory is population ecology theory
that was first pro-founded by Aldrich and Pfeffer in the year 1976. This theory conducts the
study on the alterations in organizational groups. This theory inspects the changes in the
organizational culture and structure, business life cycle and competitive business environment.
About this, it can be said that population ecology makes emphasis on the changes in people in
process than the differences of population adapting changing and complex contingencies. In
enduring changes, structural indolence may proliferate with emergence of companies that can be
a great barrier repelling changes to workplaceviii. The major reason of structural indolence can be
due to various reasons such lack of sufficient information, lack of investment and internal
political barriers in an organization. This structure inertia can lead to the organizational changes
to become incompatible with the atmosphere. This condition is very challenging and risky that
may cause the companies losing rivalry with new entrants better reacting to atmosphere. At this
viewpoint, this concept does not agree with the structural contingency approach that the firms are
adaptive to changes. It can be stated that this theory explains three potential situations i.e.
selection, variation and retention. Variation refers to that new companies will produced by the
emergence of new opportunities and industries. Retention showcases that only the surviving
companies are covered in the population. General Motors is the most appropriate instance to
understand this concept because this firm has made changes in the organizational activities and
implemented institutional factors to impact the policies of publicix. The major advantage of this
theory is that Population theory gives a good company structure that can be selected by its
people. It can support in safeguarding the core competencies, capabilities and resources. Apart
from this, this concept can create issues in some situations as it does not give response to
pragmatic situations.

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From the above critical analysis, it can be stated that among above four theories, resource based
theory is more compelling theory in comparison to others. The chief reason behind this is that
this concept explains the competencies of organization and their relationship with external and
internal environment. However, strategic choice theory also provides various benefits to the
company. Thus, it can be considered as most persuasive theory of organizational design and
actionx.
Conclusion
From the above essay, this can be concluded that different authors have given different theories
which help organizations to develop a good business environment. There are three theories like
institutional theory, resource based theory and population ecology theory which support the
firms to create an effective organizational structure. By doing a critical analysis, differences and
similarities in all the concepts are determined. The essay answers the above identified question.
After analysis, resource based theory is determined as the best and most compelling theoretical
concept of organizational design.

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i Bolman, L. G., & Deal, T. E. 2017. Reframing organizations: Artistry, choice, and leadership. John Wiley &
Sons.
ii Shafritz, J.M., Ott, J.S. & Jang, Y.S., 2015. Classics of organization theory. Cengage Learning.
iii Bozkurta, O.C., Kalkanb, A. & Armancm M. 2014. The Relationship between Structural Characteristics of
Organization and Followed Business Strategy: An application in Denizli. Procedia - Social and Behavioral
Sciences, 150, pp. 222 – 229.
iv Nienhüser, W., 2008. Resource dependence theory-How well does it explain behavior of
organizations?. management revue, pp.9-32.
v Pugliese, A., Minichilli, A., & Zattoni, A. 2014. Integrating agency and resource dependence theory: Firm
profitability, industry regulation, and board task performance. Journal of Business Research, 67(6), 1189-1200.
vi Mahalingam, A. & Levitt, R.E. 2007. Institutional Theory as a Framework for Analyzing Conflicts on Global
Projects. Journal Of Construction Engineering And Management. 133 (7): 517-528.
vii Greenwood, R., Oliver, C., Lawrence, T. B., & Meyer, R. E. (Eds.). 2017. The Sage handbook of
organizational institutionalism. Sage.
viii Jones, R. & Salimath, M.S. 2011. Population ecology theory: implications for sustainability. Management
Decision, 49 (6) pp.874-910.
ix Rockwood, L.L., 2015. Introduction to population ecology. John Wiley & Sons.
x Young, C., & Ghoshal, S. 2016. Organization theory and the multinational corporation. Springer.