Resource Dependence, Managerial Discretion and Stakeholder Performance

Abstract

Despite its remarkable rise in popularity, theory continues to be criticized for a dearth of empirical studies as well as ambiguity in the underlying theory. Several scholars have argued that resource dependence theory provides a useful lens through which to view firm-stakeholder relationships (Frooman 1999; Mitchell, Agle, & Wood 1997; Rowley 1997). There may, however, be reason to question the extent of this proposed theoretical bolster due to differences in assumptions and prescriptions between the two theories. To test this proposed linkage, we introduce stakeholder as a measure of how well stakeholders are treated by the firm. We develop resource dependence-based hypotheses concerning performance based on Boyd's (1990, 1995) operationalization of the three dimensions of environmental uncertainty identified by Dess & Beard (1984): munificence, dynamism, and complexity. As anticipated, these initial tests returned equivocal results. We follow up these results by considering the effects of different levels of managerial discretion (Hambrick & Finkelstein 1987) on performance. We find that, under conditions of greater managerial discretion, performance increases. Differences between resource dependence and theory are elaborated and implications for future research are discussed.