Core argument
In The External Control of Organizations (1978) Jeffrey Pfeffer and Gerald Salancik argued that no organisation can generate all the resources it needs. Actors who control those resources gain power over it, and much organisational behaviour reflects their demands. Managers in turn act on the environment to reduce or manage dependence.
Determinants of dependence
- Importance: how critical the resource is to operation and survival
- Discretion: how far others control its allocation
- Alternatives: how concentrated or substitutable the sources are
Responses
- Mergers and vertical integration: absorb the source of dependence.
- Joint ventures and alliances: share resources partially.
- Board interlocks and co-optation: bring key outsiders onto the board.
- Political action: lobbying and campaign funding to shape regulation.
- Diversification: spread dependence across suppliers and customers.
Standing and critiques
Alongside institutional theory, population ecology and transaction cost economics, it is a leading theory of organisation-environment relations and is widely used to study funding dependence in public and nonprofit bodies. Critics note its broad concepts are hard to test and it downplays efficiency; later work refined it by distinguishing mutual dependence from power imbalance.
References
- Pfeffer, J., & Salancik, G. R. (1978). The External Control of Organizations: A Resource Dependence Perspective. Harper & Row.
- Hillman, A. J., Withers, M. C., & Collins, B. J. (2009). Resource dependence theory: A review. Journal of Management, 35(6), 1404-1427.
- Casciaro, T., & Piskorski, M. J. (2005). Power imbalance, mutual dependence, and constraint absorption. Administrative Science Quarterly, 50(2), 167-199.