Interdependency, strategic options and power

constrained by the environment: 1) interdependency; 2) strategic options; and 3) power (Pfeffer & Salancik, 2003).

Interdependency. Organisations are embedded in networks of both interdependencies and social relations. Organisations use resources acquired from external relations as inputs to ensure their survival (Pfeffer & Salancik, 2003; Casciaro & Piskorski, 2005). Dependencies are generally mutual and occasionally indirect. If organisations could generate all the resources they need to survive, there would be no need to establish relations with the external environment (Pfeffer & Salancik, 2003). However, organisations need to interact with other organisations to obtain a continuous and sufficient flow of resources in order to satisfy their stakeholders. Resource availability depends on the dynamism, complexity and generosity of the environment. Thus, organisations interact with the environment to guarantee the availability of the resources on which they depend (Pfeffer & Salancik, 2003).

‘Virtually all organizational outcomes are based on interdependent causes or agents. Interdependence characterizes the relationship between the creating an outcome, not the outcome itself’ (Pfeffer &

Salancik, 2003, p. 40).

RDT adds a new perspective to the debate of inter-organisational relations by adding a detailed register of organisational responses to interdependence. The resources on which organisations traditionally dependent are financial, informational and physical (Davis &

Cobb, 2010; Frooman & Murrell, 2005; Pfeffer & Salancik, 2003).

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Strategic option. RDT emphasises managers’ role in reducing resource dependence by managing the dependencies (Davis & Cobb, 2010; Malatesta & Smith, 2014; Pfeffer &

Salancik, 2003). This view—that the manager has the ability to shape the environment, not only be shaped by it—constitutes the originality of the theory compared to other

contemporary theories, such as population ecology (Hannan & Freeman, 1977).

Figure 7—Typology of relationships and strategies

Source: Frooman (1999, p. 200).

Frooman (1999) furthermore emphasised that the organisation’s relationships with

stakeholder can affect the strategies the organisation and the stakeholder apply. He proposed four arguments in this regard, as follows:

1) ‘When the relationship is marked by stakeholder power, the stakeholder will choose a direct withholding strategy to influence the firm.

2) ‘When the relationship is marked by firm power, the stakeholder will choose an indirect usage strategy to influence the firm.

3) ‘When the relationship is one of high interdependence, the stakeholder will choose a direct usage strategy to influence the firm

4) ‘When the relationship is one of low interdependence, the stakeholder will choose an indirect withholding strategy to influence the firm’ (Frooman, 1999, p. 202).

The consequences of these four arguments are as follows. First, if the organisation’s dependence on the stakeholder is high, one stakeholder is capable of using a restraining strategy, exercising high-intensity measures (Frooman, 1999). Second, if the organisation has dominance over the stakeholder, the stakeholder is only capable of use an indirect usage strategy while searching for alliances with other stakeholders. The stakeholders exercise

low-Tabell 1

Is the stakeholder dependent on the organization?

Yes No

Is the organization dependent on the stakeholder?

intensity measures. Third, if there are high exchanges between the stakeholder and the organisation, the stakeholder aims to use direct usage strategies, implying lower-intensity measures than the direct restraining strategy. Fourth, if the exchange between the stakeholder and the organisation is low, the stakeholder uses an indirect restraining strategy to intimidate the resource needed by the organisation with measures to balance organisation power by cooperating with other stakeholders (Frooman, 1999).

Power. Pfeffer and Salancik (2003) analysed the sources and consequences of power in inter-organisational relations and addressed questions such as the sources of power and dependence and how those who run organisations use their power and manage their dependence. Central to RDT is the argument that dependence leads to power, and power consists the control over vital resources (Ulrich & Barney, 1984; Davis & Cobb, 2010). If one organisation is dependent on another, the latter is the one with power. In other words, power is more a structural variable than an attribute of organisations (Frooman & Murrell, 2005; Pfeffer &

Salancik, 2003).

According to Casciaro and Piskorski (2005), the notion of resource interdependence is quite vague as it combines a variety of dimensions that should be distinguished. This argument is crucial as it changes the predictions of RDT. The theory traditionally states that a high level of interdependence results in cooperation between firms (by alliances or mergers). Pfeffer and Salancik (2003), however, emphasised that a high power imbalance in a dyad is connected to a reduced likelihood of creating an alliance as the powerful partner has advantages in an alliance with the weaker partner. Such an alliance would implicate that the powerful partner shares its competitive advantage and gains nothing, diminishing its power and sharing its favourable conditions. However, if the mutual dependence is high, both organisations have good reasons to cooperate (Casciaro & Piskorski, 2005).

Figure 8—Interdependence, strategy options and power

Figure 8 is an attempt to visualise the relations between the interdependent organisations (A and B), and how the socio-political system can exert political and social power over the organisation and how market power is the force between the organisations and their competitors. All of these relations are met with strategical manoeuvres and the resource interdependence between organisations A and B is considered as an asset leading to power for them both.

Malatesta and Smith (2014) pointed out that RDT’s key constructs, such as the power-dependence effect that emerges in diverse inter-organisational relationships, are not that easy to measure. Matters evolve, and a relationship can be hard to distinguish from a partnership or a joint venture.

Organization A Organization B

Socio-political System

Competitors Resource Interdependence

Power

Strategy