RESOURCE DEPENDENCY THEORY.
Ans.   This theory studies how an organizations behavior affected external resources. It also studies how organizations reduce environments interdependence and uncertainty. It explains how the external environment impacts optimal divisional structure of an organization, recruitment of board member and employees, production strategies and external organizations links.
The theory assumes that organizations are dependent on resources for their survival and these resources which are scare are available from the environment. The environment also contains other organization and who also need this resources. Thus often the resources needed by one organization is in the hands of other organization. Resources then became basis of power as organizations to have control over the resource so that their dependency on others reduce or others become more dependent on them. An organization success is on maximizing its power. In other words the resource dependency theory states how organizations seek to manage their environment and shows importance of exchange and power relations in and around the organization.
Originally The resource dependency theory provided an alternative perspective explanation to economic theory of merge and board interlocks and understand inter-organizational relations. Thus this theory implies corporate governance is all about constitution of boards, the inter and intra relationships of an organization and strategies adopted by an organization to succeed in its business.
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