A study on Resource Dependence Theory

Resource dependency theory describe about the external resources of the company that how much they are important for a company and how can he get competitive advantage through utilizing these resources, firm capitalize their resources in way that when there is bad time they use it and sustain in the market, for example recently crisis of power in Pakistan, some firms are creating their own power to avoid any shortage of power, so firms always tries to capitalize there resources to get competitive advantage and to sustained in the market and effectiveness .Effectiveness is described as follows: “The effectiveness of an organization is its ability to create acceptable outcomes and actions” (Pfeffer and Salancik, 1978, p. 7).

Resource dependence theory is based on the idea that environments have limited resources and organizations are dependent on these resources for their survival of course .A lack of control over these resources creates uncertainty for firms operating in that environment. So organization should have some plans to use these resources properly, which are also being required by other firms, in order to make sure their own survival.

Scott (1998) says that often, the external control of these resources may reduce managerial judgment, interfere with the achievement of organizational goals, and ultimately threaten the existence of the focal organization.

I am agreed to the findings of Pfeffer and Salancik (1978), he explains that the basic structural characteristics of environments are concentration, the extent to which power and authority in the environment are widely dispersed, the availability or shortage of critical resources and the number and pattern of linkages, or connections, among organizations. Resource dependence theory also says that if there is a firm its strategic decisions and the options it has, depends on the environment and as well as determined by the environment because firms are dependent on the environment for resources they should have some sort of strategies that can allow them to acquire these resources.

After going the literature of the resource dependence theory and as per model of the paper I figure out the some point the first one the resources of the organization both intern and external which are very important for the company

After going through the literature that is very vast for resource dependence theory I figured out that there can be three factors that can influence the level of dependence the organizations can have on external resources that can be in shortage present in the respective environment. First can be the overall importance of the resource to the firm was important in determining the resource dependence of the firm. Second can be the shortage of the resource can also be a factor. The more the shortage of the resource would be the more dependant the firm would become another factor that can influence resource dependence is the competition between organizations for control of that resource. Together all three of these factors can to influence the level of dependence that an organization can have for getting resource and improved strategies on all these factors can improve firm’s efficiency and performance overall.

To describe the idea of firms managing the competitive environment to its advantage, Jon W. Chin used a term that is controlling orientation in which he says that it is “Choosing the appropriate strategies in which to proactively influence and thereby control the environment to its advantage should be a consideration in strategic decision-making” It is about using and choosing and right strategies and the organization should be to get competitive advantage in getting linked to the external resources effectively and efficiently. Environments that contained high levels of resources can be less unfriendly to the stability of organizations whereas those with low levels of resources can increase the competition between the firms. To decrease the uncertainty of the organization performance it is necessary for organizations to develop and maintain effective relationships with their external environment. After building up my argument I can take some of the variables of resource dependence theory that can affect firm’s performance and its effectiveness.

The concept of brands emerged from the domain of consumer products and was originally considered more or less synonymous with that category. Over the years, however, marketing scholars have reappraised the traditional brand concept and widened its meaning to include corporate as well as product brands, and to recognize the fundamental differences between these levels (Balmer and Gray, 2003). Keller (1998) defines brand elements as those trademark able devices that help to identify and differentiate the brand.

Model-1

Capitalization of resources

Competitive advantage

Firm Performance

Firms Image

Hypothesis: (2 Required)

H1: better the firm image, more the competitive advantage.

H2: the greater the capitalization of resources, greater the competitive advantage.

H3: Greater competitive advantage that affect’s firm’s performance.

The 1st hypothesis is the relationship between firm image and competitive advantage / as the firm with better image can produce the better result no dout for making image ,it takes time and firm try their best to make betterimage as once it creates then firm enjoy a bundle of profit .and once it make the firm performance will also increase the resource dependency and the controlling orientation that has been discussed above,

2nd hypothesis is the relationship between capitalization of resources and the competitive advantage. The more would be capitalization of resources, the more would be competitive advantage. Strategic decisions can be made to control the environment regarding the dependency of the resources to create a strategic competitive advantage in the market.

3rd hypothesis is the relation between the competitive advantage and firm performance .if a firm get competitive advantage then the performance of the firm also increase, the more would be competitive advantage that would lead to better firm’s performance.

Variables:

Capitalization of resources.

Brand image/Firm image.

Reputation of the firm.

Competitive advantage.

Firm performance.