ABSTRACT:
In spite of the ubiquitous reference to Pfeffer and Salancik's (1978) classic volume,
empirical support for predictions stemming from resource dependence theory is
surprisingly limited. We argue that the explanatory power of resource dependence theory
can be enhanced with a theoretical model recognizing that organizations may be
motivated, but not always capable to take actions to manage external dependencies. In
contrast with the original formulation of resource dependence theory, we show how a
dyadic conceptualization of power yields two distinct theoretical dimensions of resource
dependence--power imbalance and interdependence--that have opposite effects on an
organization's ability to take action to reduce environmental dependencies. Results from a
study of inter-industry mergers and acquisitions among U.S. public companies during the
period 1985-2000 indicate that a key driver of M&A is interdependence, with unbalanced
power acting in fact as an obstacle to M&A formation. We conclude that a dyadic
specification of the mechanisms through which dependence affects inter-firm behavior
constitutes a significant theoretical advancement of resource dependence explanations of
organizational action.