Resource Dependency Theory: Understanding Company Interactions

This essay critically examines the Resource Dependency Theory (RDT) and its significance for managers in understanding organizational behavior and interactions. It explores how RDT helps managers analyze a company's ability to acquire and exploit resources in a competitive business environment. The essay discusses the theory's core concepts, emphasizing the importance of resource control and strategic decision-making. It highlights how managers can influence the environment and gain a competitive advantage through strategic choices and resource management, drawing on examples like Amazon and Kogan.com. The essay concludes that RDT is a crucial framework for managers to assess a company's external environment and its relationships with stakeholders, ultimately enhancing organizational success and competitiveness. The essay uses academic references to support its claims.

Running head: ORGANIZATION BEHAVIOR
Organization Behavior
Name of the Student
Name of the University
Author note

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Essay Topic- Importance of Resource Dependency Theory to Managers for Developing
Framework of Understanding Company and Cooperative and Competitive Interactions
with other Companies
Introduction
The respective essay throws light in analyzing the importance and effective of Resource
Dependency Theory for the managers in understanding the organization. It will be providing a
brief outlook on the cooperative along with competitive interactions with the different
organizations. As commented by Bergmann, Stechemesser and Guenther (2016), the resource
dependency theory is mainly apprehensive for organizational behavior is affected by the various
kinds of external type of resources which are utilized by the company such as usage of the raw
materials.
Through the introduction of the respective theory, it will be beneficial for different
managers or the higher officials as it will be helpful for them in analyzing the ability of the
organization for assembling, altering along with exploiting various resources fast in comparison
to competitors which are operating in the competitive business scenario. It is considered to be the
fundamental aspect for success and it will be helpful for achieving competitiveness. In the essay,
the main aim and purpose is to understand the concept of Resource Dependency Theory,
Importance and Significance of the theory to the managers in the company and its impact in the
entire competitive business environment.
Discussion
As commented by Biermann and Harsch (2017), the respective RDT helps in examining
the relationship between the companies along with the different resources which are required by

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them for operating and succeeding in market that is highly competitive. Moreover, as opined by
Cao, Li and Wang (2017), the Resource Dependency Theory is concerned with impact of low
organizational behavior is affected by the external kind of resources like raw materials. As
described by Coupet and McWilliams (2017), the respective theory is highly important as it will
be improving the performance and ability of the different companies in gathering, altering along
with exploiting the different resources in comparison to other competitor companies and generate
high level of success.
As commented by Cuervo‐Cazurra, Mudambi and Pedersen (2019), the resource are the
key elements which helps in managing the success of the company and that the access along with
control over the different resources is considered as the basis of power. RDT is mainly based on
the idea which helps in understanding that the earth has limited resources present and the
different companies are highly dependent on the resources for the overall survival of their
course. As opined by Fang (2018), the lack of control over the different resources can be creating
the different level of uncertainties for the different firms in operating in the respective
environment. In such scenarios, the managers of the companies need to have some alternative
strategies and plans for using the resources properly that are also required by the different firms
as to make sure their own survival.
As opined by Gelderman, Semeijn and Nagel (2017), external usage of the resources may
be reducing the managerial judgment, interfere with achievement of the different organizational
related goals which will be threatening the existence of the focal company. In such scenarios, as
described by Ma, Wang and Li (2019), the resource dependency theory suggests that the strategic
decisions along with opinions of the firms mainly depends on the environment in which it is
operating as the firms are mainly dependent on the environment for the different resources such

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as raw materials. In such instance, the companies need to analyze certain strategies which will be
allowing them in acquiring the resources in a suitable manner.
For instance- The organic kind of grocery store can be purchasing the organic tomatoes
from one particular local farm. In such scenario, the farm has the knowledge that it is the main
and local source for providing the organic tomatoes. Therefore, it pressurizes organic grocery
store to sell the bell peppers. The store decides to sell the bell peppers even though they are
expensive as they need to sell the tomatoes in their store.
There is a vast literature on the Resource Dependency Theory, however, after analyzing
the entire literature, it has been seen that there are three major factors which helps the managers
in influencing the company and be competitive in comparison to the other competitors which are
present in the market in different sectors. As commented by Pedersen (2019), in order to achieve
and maintain the competitive advantage against the other competitors present in the market,
choosing the right and appropriate kind of strategy is the prime element which will be suitable
for proactively influence as well as control environment to the advantage in the strategic kind of
decision-making. Moreover, as opined by Rahayu, Djamhuri and Rosidi (2019), the companies
need to typically build proper redundancy into the resource acquisition for reducing the reliance
on the single source and they need to have the different alternatives which will be effective for
the management of the growth prospects of the company in a positive and suitable manner.
As commented by Roundy and Bayer (2019), when the companies are internally focused,
they will be having the capability in coping up with the environmental uncertainties along with
dependencies which will be helping them in generating positive outcomes. As suggested by (),

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the executive kind of succession in itself is one of the strategic responses towards the
environmental contingencies and there are following model of effects which are as follows:
The environment related context is the first model with the different kinds of
contingencies along with uncertainties which can be influencing the distribution of proper power
along with the control within them (Schnittfeld and Busch 2016).
The distribution of the power along with control in the company can be impacting the
tenure along with selection of the major organizational administrators.
Organizational policies as well as the structures are the ultimate results of the different
decisions influenced by the different distribution of the power as well as control (Sherer,
Suddaby and Rozsa de Coquet 2019).
Lastly, the administrators capable of controlling the organizational activities which affect
activities as well as resultant structures in a successful manner
As commented by Tashman and Rivera (2016), the poor performance of the firms may be
resulting in the misalignment of the organizational behavior with the entire environment. In such
scenario, the replacement of the CEO of the company with someone highly capable of coping
with critical kind of problems faced by the company may be helpful in providing remedy to the
different misalignments. Moreover, as defined by Zhang and Li (2017), the different firms are
highly dependent on environmental factors and it creates increased rate of the turnover among
the different executives. In such scenarios, as described by Zhang et al. (2019), there are few
aspects which are needed to be handled by the managers to make their companies competitive
and generate high effectiveness.

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As opined by Zhang and Li (2017), prevalence is the most important aspect which is
needed to be considered as it is highly necessary to consider prevalence along with abundance of
the resources while discussing regarding the security of the company. The company themselves
such as managers and employees need to ask themselves first whether they have the abundant
resources in order to compete with the other companies present in the market. For instance- In
Australian economy, Amazon has been capable of building the strong presence among the
different individuals and they are performing quite well. In such scenario, the Kogan.com, the
other e-commerce company of Australia is not capable of taking over Amazon in the minds of
customers as Amazon is efficient in managing their resources and they have been able to
understand the tastes and preferences in a proper manner which helped them in managing their
business throughout the globe and it left Kogan.com far behind.
As commented by Schnittfeld and Busch (2016), the importance is the second most
essential element as while thinking regarding the significance of such resources, the different
companies and the employees along with managers need to ask to what extent is the resource
crucial to the continual procedures as well as processes. For instance- Jeff Bezos, the CEO of
Amazon has the capability in understanding the necessity of the different resources which can be
depleted. In such scenario, there is stock of such resources for a specific span of time and it helps
the business in satisfying the needs of customers and become the top priority of the customers in
comparison to the other competitors which are present in the economy.
Lastly, as described by Zhang et al. (2019), the control is the other prime factor which is
needed to be implemented by the managers of the different companies need to establish the
proper control they have over the resources and where the resources are coming from. In
addition, as commented by Zhang and Li (2017), the proper resource management is the key

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element which is needed to be implemented by the different companies for pulling the rug from
under the feet of the business. Through the usage of the Resource Based View, the different
unique elements are needed to be separated which will be beneficial for the company in making
the strategic decisions and gain competitive advantage in the market successfully.
In addition, as commented by Schnittfeld and Busch (2016), the resource based view
focuses on the internal elements and resources and the resource dependence theory focuses on
the external resources. Since, the managers do not have any control on the external environment
and resources, in such scenario, the main element which is needed to be done is the saving and
bringing the resources under control for gaining competitiveness against the different other
competitors which are present in the market. As opined by Zhang and Li (2017), the
organizational success in the Resource Dependence Theory is defined as the aspect wherein the
companies can be maximizing their power.
As opined by Zhang et al. (2019), as the RDT mainly deals with the external
environmental prospects, in such scenario, the companies need to acquire the different resources
as to ensure their own survival successfully. It is highly clear that the certain level of dependency
of the company on the external environment is effective as if the company is not able to
accommodate to the needs of the different external stakeholders, they could be reacting with
resistance as well as pressure which could be endangering it. RDT mainly considers the term
environment from the institutional perspective and the environment is capable of consisting of
identifiable institutions as well as actors which includes companies, labor unions along with
different other authorities.
Conclusion

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Therefore, it can be concluded that the resource dependence theory is one of the
significant aspects and theories which is needed to be adopted by the different managers or the
other higher officials of the company for understanding the effectiveness of the companies and
whether they have the capability in coping with the different resources present in the
environment which is limited in nature. Resource Dependence Theory helps in developing the
external look in the different activities of the company from the position of the stakeholders of
the company. It is also appropriate for the outside-in analysis of the resource allocation process
of the organization. In addition, it has been learnt that with the help of the Resource Dependence
Theory, it will be beneficial in determining whether or not the particular organization is strongly
interrelated with the overall external business environment as it will be beneficial in analyzing
the number of conflicts that could be increasing the uncertainty of the company.
From the different instances of Amazon, Kogan.com along with the organic tomato farm
and retail store, it is noted that when there are limited suppliers present in the economy, it can be
a big challenge for the companies to understand the availability of the different resources which
are highly necessary and needed. However, unlike the Resource Based View, the Resource
Dependence Theory does not include generation of the different internal resources as the
essential task in response to the reduction towards the uncertainty within the organization. The
different managers need to adopt the Resource Dependence Theory in such a manner which will
be creating high level of opportunities for improving their performance in the entire market
which is highly competitive in nature in comparison to the other companies which are already
present.

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References
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