Managers' Decision-making: Strategic Choice Or Determinism? A Review Of Resource Dependency Theory, Institutional Theory, Population Ecology Theory, And Essay.

Exploring the Paradigm Wars in Organisation Theory

The field of organisation theory is characterised as a fragmented body of knowledge, with many competing theories to explain organisational action.

Your task is to critically analyse the contribution that strategic choice and determinist theories (Resource Dependency Theory; Institutional Theory; Population Ecology) make to our understanding of organisational action. Which perspective do you find most compelling - strategic choice or determinism? Explain your reasoning.

Detailed instructions:

Write an essay-style response to this question, referring to the current academic literature on this topic. As a general rule, a minimum of three (3) academic references from peer-reviewed journals, in addition to references from the subject core text is required. You may find this resource on Essay Writing helpful.

This essay is a critical review of the influential ideas about the role of managers in shaping organsational outcomes. Most critical essays follow this type of structure:

Introduction

Open the essay with a short introduction to the area.
Provide a response to the essay question.
Provide a summary or 'road map' of your essay (a very brief outline of what you will discuss)

The main body of your essay will consist of paragraphs, which are akin to building blocks in the construction of your argument. Ensure that you:

develop a discussion, informed by the key academics in the field, which answers the essay question
demonstrate your knowledge of the field
offer exposition and evidence to develop your arguments. Evidence will be the references to seminal works and key empirical studies
use relevant examples and authoritative quotes - however only use quotes for effect. Excessive quoting does not demonstrate your understanding of the field.
if your question has multiple parts, consider using subheadings to break up the text into a logical structure.

When structuring your paragraphs, remember that a paragraph is a related group of sentences that develops one main idea. Each paragraph should contain:

A topic sentence that states the main idea to be discussed
supporting sentences, which explain and develop the point that you're making
evidence - your points should be supported by evidence from your readings
analysis - analyse and interpret the evidence. Consider the implications, significance and impact of what you have been discussing, and conclude the paragraph with a critical conclusion you have drawn from the evidence.

Do managers prefer strategic choice or determinism models when making decision? To answer this question, the essay will explore the role played by Resource Dependency Theory; Institutional Theory; Population Ecology theory in determining how managers makes strategic decision. By reflecting on different sources, I will demonstrate that resource dependency theory is one of the key theories that influence organizational action. In other words, I will demonstrate that strategic choice theories have more influence on organizational action.

The first thing I will do is to explore each theory. For example, I determine how often do organization refer to each of the theories (resource dependency theory, institutional theory and population ecology theory). Based on the findings from the analysis, I will give final decision as to which of the approaches is influential in the organizational action.

In 1978, Pfeffer and Salancik present a theory that contributes to the explanation and understanding of the influence of interdependence that exists between organizations, known as Theory of Resource Dependence (TDR). Interdependence is a consequence of the nature of organizations' open systems, the fact that organizations must conduct transactions with elements of the environment in order to obtain the necessary resources for survival (Pfeffer & Salancik, 1978, p.43 ), interdependence becoming the central idea of this theory. These authors identified two forms of interdependence: interdependence of results and interdependence of behaviors.

To demonstrate the importance of the interdependencies of results and behavior, the work of Vestrum & Rasmussen (2013) is shown . These researchers carried out a study using TDR as a theoretical basis with the objective of analyzing how emerging community companies -CV: non-profit organizations whose objective is to create social wealth within the communities in which they mobilize resources of local communities and how The process of mobilizing resources shapes these new ventures. The interest was related to two approaches of the TOR in relation to the interdependence between the organizations: the asymmetric dependence with the providers of resources and the joint dependence between the organizations. According to the results of this investigation,Vestrum & Rasmussen (2013) came to the conclusion that emerging community enterprises (VCs) gradually gained legitimacy and power in their communities. This made it possible to reduce asymmetric interdependence, integrate into their communities and develop joint dependency relationships with local resource providers (Khieng & Dahles, 2015).

The resource is a vital priority to environmental demands which the organization must respond element. Likewise, the importance of the influence of environmental factors in the study of the behavior of organizations is evidenced in the classification model of organizational dependencies presented by Jacobs (1974), whose contributions form part of the origins of the TDR, which explain how organizations are controlled by five external forces: (a) acquisition of inputs, (b) elimination of products, (c) acquisition of capital, (d) acquisition of factors of production, and (e) acquisition of labor power (labor). The incidence of these five aspects varies according to the type of organization. Hence organizations that cannot bend to the forces of change imposed on them will have difficulties or their survival will be impossible. In other words, organic entities that cannot adapt to changes in their ecological niche cannot survive (Jacobs, 1974, p.58 )

Institutional Theory

The model of Jacobs (1974) highlights the importance of determining or calculating the greater impact of the five forces mentioned above in the organization, in order to make the changes and adjustments that allow it to respond effectively to external sources of control. The key is to determine the relationship between dependence and vulnerability.

When an organization needs resources from the environment, the dependency can increase or decrease, modifying power relations with other organizations, which implies, according to Ulrich & Barney (1984) , to work towards two related objectives: (a) acquire control over resources that they minimize their dependence on other organizations, and (b) acquire control over resources that maximize dependence on other organizations. These authors consider that, in practice, the achievement of these objectives modifies inter-organizational power relations. In this sense, some organizations necessarily acquire control of the relationship that is established between the different organizations that intervene in this exchange process, being this a central idea of the theory of resource dependence.

Based on the previous theoretical review, it is pertinent to analyze: what options can organizations use to adapt to the environment? In this sense, Zapata & Mirabal (2011) affirm that the options of adaptation and integration of the environment are: (a) adapt to their conditions; (b) actively participate in the creation and control of the environment, and c) the organization can face the environment by focusing on the search for a balance between the two previous points of view. Additionally, Hillman et al. (2009) offer other alternatives that companies can adopt to minimize dependence on the environment: (a) mergers (vertical integration), (b) joint ventures, (c) conformation of the board of directors, (d) political action, and (e) succession executive These authors point out that each of these choices entails different degrees of risk and control, and that mergers 4 are the most complete forms of absorption, since they allow in an important way to minimize dependence on the environment.

Jun, Jiang, Li & Aulakh (2014) argues that the mergers can be by: (a) absorption (acquisition): assets and liabilities of the selling company that are transferred to the purchasing company and are absorbed by it; and (b) consolidation: when two companies merge to create a totally new one, without specifying who buys whom. In the case of acquisitions, "they seek to ensure control over a certain company by the acquirer, but without encompassing the company within it" Jun, Jiang, Li & Aulakh (2014). According to Pfeffer (1972, p.391) , the reasons why companies carry out mergers or acquisitions, which revolve around the principles of the theory of dependence on resources, are to reduce the interdependence of resources, either by acquiring competitors that are looking for similar resources or markets; or acquire suppliers and customers that are vertically related to the organization in the exchange relations of entry and exit and to reduce interdependence through diversification in other activities, so as to reduce the interdependence of other organizations present in the environment (Barney & Arikan, 2001).

According to Davis & Cobb (2009), mergers are a strategy that allows the dependence of organizations to be managed with legality and various types have been used throughout the twentieth century. These authors point out that, in the nineties, in the USA, horizontal mergers were the most relevant, as a result of the deregulation of the industry. Also, they included in their analysis the study of the influence of the TDR, this in order to know if it was successful in the empirical, social and academic world of its time. 

Population Ecology Theory

The TDR has been compared with other theories that from the external control point out that organizations seek to adapt to the environment to survive; among these are the theory of the ecology of populations, institutional theory and contingent theory. Corroborating with this idea, Pfeffer (1972) affirms: "the dependence of resources is extremely comparable to the population ecology in that both theories emphasize the effects of the environments on the organizations".

About the relationship between the institutional theory and the TDR, Scott (1995) argues that these are complemented because both consider the environment as a key factor for the functioning of the organization. Likewise, Hessels & Terjesen (2010) carried out an investigation with the purpose of analyzing the dependence of the resources and the perspectives of the institutional theory on the initiatives of direct and indirect exports of small and medium enterprises.

To understand the relationship between the TDR and the contingent theory, it is necessary to point out that in the contingent theory "it is argued that the structure of the organization needs to be adjusted to three contextual factors: the environment, the size and the strategy, and of said adjustment. depends largely on the performance and results of the organization (Zapata & Mirabal, 2011). The postulates of the contingent theory state that the organization must consider the requirements of the environment for its adjustment, hence its relationship with the TDR (Chiambaretto, 2015).

The contingent theory and the dependence of resources maintain a vision of adaptation, that is, they support the approach that the changes in the organization, its behavior, its processes, structure, results and even its own stability depend on and are explained through the influence or pressures exerted by environmental factors (Zapata & Mirabal, 2011, p.81 )

In this same sense, Zapata (2015) pointed out that the contingent theory expect companies pay special attention to the constraints imposed by contingency factors, which highlights the importance of the study of organizations from the perspective of external control. In the previous paragraphs, the relationship of the TDR with three theories that are located from the perspective of external control was described. Similarly, the theoretical review shows that the TDR can be completed or compared with other theories studied by organizations, but from the perspective of internal control, as shown by the contribution of Arik et al. (2016). These researchers conducted a study of the strategies used by the US non-profit sector in response to the economic crisis of 2008. The objective of the work was focused on the solution of three questions: (a) what were the strategic responses of non-profit organizations to the economic crisis ?, (b) ) Which non-profit factors determined a stronger level of strategic responses ?, and c) which strategic responses were related to the overall financial growth of the non-profit organization?

The theoretical support to answer the questions mentioned was based on the basic postulates of the TDR and on the theory of vision based on resources, since they are two theories of strategic management widely used that complement each other in a unique way in the explanation of strategies and non-profit performance (Arik et al., 2016, p.51). The theory of vision based on resources is one of the ramifications of the theory of resources and capabilities.

Interdependence and Resource Dependency

By simultaneously using two perspectives of analysis (external and internal control), through TDR theories and resource-based vision, Arik et al. (2016) concluded that non-profit organizations must diversify their financial resources and ensure a strong human talent capacity, in order to increase their level of strategic responses.

In summary, the TDR is a valuable perspective whose theoretical postulates can be complemented with the theories of ecology of populations, institutional, contingent and vision based on resources, in order to define strategies and policies, based on the search for development and survival of organizations.

Conclusion:

The goal of the essay was to determine which of the theories has more influence on organizational action. Based on the application of each theories, it is apparent that resource dependency theory is commonly used for decision making. Organizations need to adapt to environmental factors in order to survive. In this way, the TDR can provide the theory of the ecology of the population’s elements for the analysis of populations of organizations. Also, with institutional theory, it shares the fact that entities are subject to external pressures and seek legitimacy. With the contingent theory, it coincides with the adaptation vision of companies to adjust to the pressures of the environment. Regarding the postulates and principles of the theory of vision based on resources, important orientations are provided to specific processes, including those related to the area of ??internationalization of the company, which covers the interest, the reasons and the forms of entry to the international markets,

In this way, managers and managers attend these exchanges with the purpose of establishing agreements and negotiations to seek superior performance or simply to achieve the survival of the company. In any case, in view of the different perspectives, the relationship of dependence on resources shows that organizations are not necessarily self-sufficient, but the relationships they can maintain with other entities can shed light to optimize their processes and complement them effectively as a strategy to maintain themselves. in the market. The organizational form like this is addressed and the approaches of the theory studied demonstrate its applications, which can be decisive when using it for such purposes.

References:

Arik, M, Clark, L, & Raffo, D (2016). Strategic responses of non-profit organizations to the economic crisis: Examining through the lenses of resource dependency and resourced-based view theories, Academy of Strategic Management Journal, 15 (1), 48-71.

Barney, J & Arikan, A (2001) The resource-based view: Origins and implications, Handbook of Strategic Management, 124-188.

Chiambaretto, P (2015) Resource dependence and power-balancing operations in alliances: The role of market redefinition strategies, Management, 18 (3), 205-233.

Davis, G & Cobb, A (2009) Resource dependence theory: Past and future. Ann Arbor, 1001, 01-31.

Hessels, J & Terjesen, S (2010) Resource dependency and institutional theory perspectives on direct and indirect export choices, Small Business Economics, 34 (2), 203-220.

Hillman, A, Withers, M, & Collins, B (2009) Resource dependence theory: A review, Journal of management , 35 (6), 1404-1427.

Jacobs, D (1974) Dependency and vulnerability: An exchange approach to the control of organizations, Administrative Science Quarterly, 19 (1), 45-59.

Jun, X, Jiang. M, Li, S, & Aulakh, P (2014) Practice standardization in cross-border activities of multinational corporations: A resource dependence perspective, Management International Review, 54 (5), 707-734.

Khieng, S, & Dahles, H (2015) Resource dependence and effects of funding diversification strategies among NGOs in Cambodia Volunteers, International Journal of Voluntary and Nonprofit Organizations, 26 (4), 1412-1437.

Pfeffer, J & Salancik, G (1978) The external control of organizations: A resource dependence perspective, United States of America: Harper & Row, Publishers.

Pfeffer, J (1972) Merger as a response to organizational interdependence, Administrative Science Quarterly, 17 (3), 382-394.

Scott, WR (1995) Institutions and organizations: Foundations for organizational science, London: A Sage Publication Series.

Ulrich, D & Barney, J (1984) Perspectives in organizations: Resource dependence, efficiency, and population. Academy of Management Review, 9 (3), 471-481.

Vestrum, I & Rasmussen, E (2013) How community ventures mobilize resources: Developing resource dependence and embeddedness. International Journal of Entrepreneurial Behavior & Research, 19 (3), 283-302.

Zapata, G & Mirabal, A (2011) The change in the organization: a theoretical study from the perspective of external control, Management Studies, 27 (119), 78-98.

Zapata, G (2015) The size and structure of the organization: a theoretical and empirical study with the contingent approach, Strategic Sciences Magazine, 23 (34), 193-208.