Pfeffer and Salancik

The External Control of Organizations: A Resource Dependence Perspective (1978)

Main point: The principal contention of the resource dependence perspective is that to understand organizational behavior one must consider the organizational context (environment). The key to organizational survival is the ability to control needed resources. Authors assert that most studies of organizations are concerned with the internal processes of firms. They argues that this promotes a conceptual bias that causality appears to be linked to individuals and assumes that problems can best be solved within the organizations. However, the resource dependence perspective asserts that organizations are most influenced by those who control resources (such control may be located inside or outside of the firm).

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Dependence is defined as the product of

1. the importance of a resource and

2. the extent to which the resource is controlled by a few organizations (suppliers

(fewer suppliers may make a resource more difficult to obtain)

The authors refer to organizational attempts to avoid dependence on a critical resources exchange (such as a position in which one company supplies a key part in the production process) as buffering. It is one of the ways firms try to address uncertainty in their environments. Firms can attempt to buffer themselves from exposure to resource dependence by developing inventories of the resource or establishing long-run contracts. Other ways organization confront resource dependence and attempt to control their contexts include:

1. vertical integration: bring suppliers in-house

2. horizontal integration: buy out competitors

3. diversification

The authors find support for their theory in that corporate mergers can be characterized by resource dependent patterns. These strategies of attempting to control the environment are predicated on the assumption that organizational growth and larger size increases the survival chances of an organization and gives them greater power with respect to the environment.