Application of the main assumptions of resource

Some alternative theoretical approaches to the study of the relations of a higher educa-tion institueduca-tion to its environment have been reviewed. Compared with the theoretical inter-organisational approaches reviewed, resource dependence theory focuses on an organisation’s relations to other organisations providing resources, it recognises the im-portance of funds and other types of resources, it guides the defi ning of the boundaries of an entity whose autonomy is studied, and it recognises the importance of autonomy for an organisation. This theory fi ts with two perspectives on fi nancial autonomy. According to Rhoades (1992, 1989, see also Volkwein 1986, 512), resource dependency theory is the appropriate organisational theory when the analytical focus is on organisational revenues and on the infl uence and constraints of the resource providers.

AMKs’ relations with the Ministry of Education and maintaining bodies:

AMKs are seen as resource recipients and the Ministry of Education and their main-taining bodies are seen as resource providers. Resource dependence theory considers interaction between a resource recipient and a resource provider from the resourced organisation’s point of view. It focuses more on inter-organisational activities than the actors themselves (Pfeffer & Salancik 2003, 258-259; see also Oliver 1991, 148; Scott 2003, 203-213).

“To acquire resources, organizations must inevitably interact with their social environ-ments.” (Pfeffer & Salancik 2003, 19)

Higher education institutions have a mission to pursue and they need resources to do so (Herbst 2007, 53). As Pfeffer and Salancik state (2003, 145 and 261), the continu-ous fl ow of resources and stability of resources are needed in order to survive and keep the organisation functioning (see also Sheppard 1995, 33, Slaughter & Leslie 1997, 70-71; Mora & Vila 2003, 123).

The focus is often on funds when fi nancial autonomy is discussed. Block grant funding systems – where the power to allocate funds is given to the funded institutions – are typical ways of giving more fi nancial autonomy to higher education institutions (Herbst 2007, 68). However, freedom related to monetary resources and non-monetary resources is important in the analysis of the appearance of actual fi nancial autonomy of AMKs. Resource dependence theory views resources as what an organisation needs to survive¹⁰. The exchanges and transactions with the environment may involve monetary resources, physical resources, information and social legitimacy (Pfeffer & Salancik 2003, 43). Legitimacy can be understood as a relationship to enhance an organisation’s reputation and presence (Möller & Wilson 1995, 39)

“…control over resources provides other power over the organisation” (Pfeffer & Salancik (2003, 258)

Control and infl uence exerted by the Ministry of Education and maintaining bodies: Resource providers aim to achieve infl uence and control in order to further their own interests and to initiate actions for their own interests within an organisation (Pfeffer & Salancik 2003, 259- 261). In accordance with its title, resource dependence theory treats dependence as a main issue between a resource provider and a resource recipient. Dependence is defi ned as the product of the importance of a given input or output to the organisation and the extent to which it is controlled by external actors.

Dependence in resource dependence does not arise only as regards monetary re-sources. There are many other types of resources and, according to Pfeffer (1992, 87), one can regard all valuable things as resources for an organisation’s operations. The fi nancial autonomy of an AMK can likewise be affected through all valuable resources.

However, monetary mechanisms and economic tools are prominent in controlling and infl uencing the behaviour of higher education institutions (Herbst 2007, 82-83;

Slaughter & Leslie 1997, 101 and 111; Volkwein 1986, 525; Williams 1984, 84).

10. Resource dependence theory defi nes the importance of resources on the basis of how impor-tant the resource in question is for the continuing of operations of an organisation (Pfeffer &

Salancik 2003, 45). Important organisations are those that provide crucial resources because those groups or organisations that provide the most needed resources and capabilities have more control and infl uence over the organisation and its resources (Pfeffer & Salancik 2003, 27 and 258-259).

By control, one is able to initiate or terminate actions at one’s discretion. Control can be exercised or is possible when an external actor

a) possesses a resource b) has access to a resource

c) has the ability to actually use and the ability to control the use of the resource and d) has the ability to make rules or otherwise regulate the possession, allocation and use of resources and to enforce the regulations (Pfeffer & Salancik 2003, 47-49).

Infl uence in inter-organisational relations is tied to the ability to control the other’s resources (Pfeffer & Salancik 2003, 26-27, 44, 71, 259). Infl uence may be present without the specifi ed use of tools. Regulation is a typical example of mechanisms to exercise control over higher education institutions (Gornitzka & Maassen 2000, 268).

Resource dependence theory does not specify in detail the possible tools or mechanisms that resource providers use to control and infl uence resourced organisations. The theory focuses more on the preconditions for the ability to exercise control and infl uence.

There are a number of classifi cations in the research literature of the state’s steer-ing tools (Bleiklie 2000, 55-62; Becher & Kogan 1992, 81-86; Goedegebuure et al.

1993, 334-338; Kogan 1998, 123; van Vught 1997b, 128-132; Vedung 1998, 21-58).

However, in general the tools vary in terms of the level of restraint and how they are applied (van Vught 1997b, 126-127). Kogan (1998, 123) for example, identifi es fi ve types of mechanisms through which the relationship and interaction between the government and higher education institutions function. The mechanisms are legal controls, bureaucratic rules or guidelines, fi nancial controls, normative or evaluative infl uence, competition and contracts.

“Organizations seek to avoid dependencies and external control and, at the same time, to shape their own contexts and retain their autonomy for independent action.” (Pfeffer &

Salancik 2003, 261)

Actions taken by AMKs: In the organisation literature, it was pointed out decades ago that organisations like to attain autonomy (e.g. Mindlin & Aldrich 1975, Volkwein 1986). This is also the case in resource dependence theory and what the theory assumes concerning a resourced organisation. A resource recipient is not seen as a passive actor with respect to external control and infl uence. Instead, the resource recipient aims to infl uence other organisations. This is to say that an organisation takes actions to reduce dependence. In this way, the deterministic approach of resource dependence theory has a mitigating effect. Actions of the resource recipient are not manifest in the form of an instrument in the theory. Rather the theory categorises actions into adaptation or avoid-ance, changing patterns of dependence (buffering according to Scott 2003) and formation inter-organisational structures or associations (bridging according to Scott 2003).

In principle, the theory recognises two main options for a resourced organisation:

it may either comply or avoid external infl uence. Compliance means fulfi lling the de-mands of resource providers. Total compliance is problematic, because all organisations including higher education institutions also face confl icting demands and they have to manage with confl icting demands somehow instead of satisfying all. Compliance without an organisation’s own considerations and without balancing demands from various interest groups means limited autonomy for an organisation. It is clear that no organisation can fulfi l all the demands. However, demands typically change. Thus, it is a question of an organisation’s ability to react to changes occurring around it in order to obtain the resources needed to stay operational (Chevaillier 2002, 87). The theory suggests a range of actions to avoid control and infl uence. Many alternative actions are concerned with inter-fi rm activities and linkages in the private sector. An organisation may encourage or discourage the articulation of demands. It may defi ne the level of satisfaction of its interest groups and it may take part in the formation of demands.

Relating to resources, three basic actions for attempting to restructure dependence can be recognised:

1) extending an organisation’s own control

2) changing one’s own situation of interdependence

3) decreasing reliance on single critical exchanges (Pfeffer

Salancik 2003, 113).

To the above list can be added from Emerson (1962, see Goedegebuure & Meek 1994, 135) reducing the importance of the resource, searching for alternative sources for the resource, increasing the importance of own resources and creating dependence on the resources of a resource recipient.

Organisational actions towards others are determined by the way the organisation perceives its environment, and by the things it believes to be true about the environment (Pfeffer & Salancik 2003, 89). Pfeffer and Salancik (2003; see also Scott 2003, 119) extensively analysed organisational actions to avoid dependency and buffer autonomy in four different chapters. They pointed out that there are actions of adaptation or avoidance of external demands, changing patterns of interdependence, establishment of collective structures and controlling interdependence.

On the whole, the approach of resource dependence theory to an organisation’s autonomy is based on actions by other external organisations (resource providers) and on the actions of the organisation (a resource recipient) that is buffering its autonomy.

Both the resource perspective and the entity perspective developed on the fi nancial autonomy of AMK institutions can be combined with the above main assumptions of resource dependence theory.

5.3 Conclusions

AMKs operate in different contexts and they are subject to various and competing claims from their maintaining organisations (e.g. OECD 2003, 178). According to Daily, Dalton & Rajagopalan (2003, 153) there is no single theoretical perspective that could capture the complexity of the differing interests of ownership types. This chapter reviewed some major organisational theoretical approaches in which the emphasis was on inter-organisational relationships. There are differences between the theoretical approaches reviewed.

One fl aw in the theoretical approaches reviewed is that each theory can shed light on the study from a limited perspective. A selected theory should be applicable to study the fi nancial autonomy of an AMK in relation both to the state and to its maintaining body. One autonomy related issue at the local level is how an AMK is viewed as its own entity and how to defi ne its boundaries. How this manifests at individual AMK institutions needs empirical examination. Resource dependence theory recognises an organisation as an entity and the importance of autonomy for this entity, but, for example, entity based thinking is less applicable and autonomy is not important in new institutional theory. According to Meyer & Rowan (1991, 47) organisations are part of their general institutional environment and tend to disappear as distinct units.

Moreover, new institutional theory is a “fairly complex body of theoretical writings which encompasses several mechanisms, through taken-for-granteds to norms to state coercion” and access to true “taken-for-granteds” may be unsustainable (see Donaldson 1995, 128).

Resource dependence theory and its basic assumptions are focused on the techni-cal environment of an organisation but it also recognises institutional environments.

Thompson’s (1967) task environment is close to technical environment, and following Thompson, task environments include customers, suppliers, competitors and regula-tory groups. Maintaining bodies and the Ministry of Education are resource providers, and also the regulatory bodies of AMKs. Institutional environments are much broader than technical environments.

The basic assumptions in resource dependence theory seem to focus on the techni-cal environment of an organisation. There are links through technitechni-cal environments to institutional environments (Pfeffer & Salancik 2003, 147-152; 259; Oliver 1991, 148).

According to Scott (2003, 214), “whereas organizations exchange elements with their technical environments, they are constituted by elements drawn from their institutional environments”. Resource dependence theory recognises that not all organisations are alike, instead they have varying social contexts and they face varying interests (Pfeffer

& Salancik 2003, 45). The following citation reveals links to the wider environment of an organisation: “…not only that organizations are constrained by the economic, social, political, and legal environments but that in fact, law, social norms, values, and political outcomes refl ect, in part, actions taken by organizations in their interests of

survival, growth, and enhancement” (Pfeffer & Salancik 2003, 190). Thus, this study recognises that through receiving resources AMKs are also infl uenced explicitly or implicitly by different types of environmental elements.

Given that AMKs’ ownership structures, their steering structures and funding systems are diverse and even fragmented, and that there will be together six case study institutions (Chapter 7) the study applies the principle of simplicity with regard to its theoretical approach. Hence, to tackle the research theme from the approach selected rather than hoping to discover an ideal solution, the theoretical approach should be as simple as possible. This principal of simplicity is a philosophical principle known as Occam’s Razor. Thus, the main idea of ontological parsimony is applied. (Standford Encyclopedia of Philosophy 2008a.) Resource dependence theory is applicable to the approach selected for this study; to study the fi nancial autonomy of individual AMKs from perspectives of institutional management in relation to their major funding bodies.

Moreover, it fi ts with the entity and resource perspectives on fi nancial autonomy applied.

However, resource dependence theory is not an all-inclusive theoretical framework to account for fi nancial autonomy.

Part III

Perspectives of senior management

on fi nancial autonomy