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The present study examines the application of Resource Dependence Theory and Institutional Theory relative to company involvement in an important voluntary, governmentally sanctioned employee safety program that goes by the acronym VPP Utilizing this combined theory approach, the study empirically demonstrates, through a design incorporating correlation and multiple regression analysis, that Institutional Theory is useful for predicting program prevalence within a given industry, though Resource Dependence Theory complements the former by offering an accounting of strategic firm behavior. Companies consider adoption of beyond compliance safety programs as a strategy to manage the expression of resource control power on the part of powerful stakeholders, while Institutional Theory helps to explain the mechanisms by which such programs proliferate through a given institutional field.
Introduction
The present study explores the efficacy of Resource Dependence Theory (RDT) and Institutional Theory (IT) as a theoretical foundation for understanding why organizations participate in beyond compliance safety and health programs. These two theories have frequently been used in concert in various attempts to explain organizational phenomena (Lucas, Avi-Itzhak, Robinson & Morris, 2005; Peng, 2004) due, in part, to the shortcomings in each of the two perspectives that the other is capable of satisfying. Institutional theory, for instance, has been criticized in the past for focusing primarily on organizational adaptations resulting from institutional pressures including social values, norms and expectations imposed by the external environment without a great deal of consideration given to the influence of active agency and external exchange relationships that play a part in driving organizational change (Oliver, 1991; Pfeffer & Salancik, 1978; Abernethy & Fong, 1996). RDT, on the other hand, complements Institutional Theory in that active agency is essentially a fundamental tenet of the theory which also focuses specifically on exchange relationships with the external environment as they relate to resource inter dependence between the firm and various stakeholder groups (Oliver, 1991; Pfeffer & Salancik, 1978).
The present paper considers the marriage of these two theoretical perspectives as they relate to the emergence and growth of beyond compliance safety and health (S&H) programs within institutional fields. The focal program evaluated in this study provides governmental recognition to employers for exemplary performance in their safety and health endeavors. This program, known as OSHA's Voluntary Protection Program (VPP) was created by the Occupational Safety and Health Administration (OSHA) in the early 80s and requires that employers go well beyond what is minimally expected of them by OSHA standards (OSHA, n.d. (a)). Participants, for instance, are required to implement sophisticated health and safety management programs similar to those found in management systems prescribed to enhance product quality such as ISO quality standards, Six-Sigma, and Malcolm Baldridge Award criteria (Levine & Dyjacka, 1997; Manuele, 2003). The intent behind VPP, therefore, is to provide recognition to employers that successfully protect their employees from workplace injuries and illnesses through the utilization of sophisticated management systems.
Thus, consideration for the employee stakeholder group weighs heavy in the decision to participate in VPP. However, participation also impacts the perception of the firm by other stakeholders having power to control resources important for firm survival. These include not only employees, but also the government, local community, customers, suppliers and other important stakeholder groups as well. Likewise, VPP has become a recognized, legitimate socially responsible endeavor and has proliferated within a number of industries. This proliferation in certain industries makes VPP a good candidate for evaluation from an institutional perspective. The combined explanatory efficacy of RDT and Institutional Theory will subsequently be utilized in the present paper to explore the phenomena of VPP proliferation within industries.
Literature Review
Resource Dependence Theory
Resource Dependence Theory grew out of the work of Pfeffer and Salancik and was first clearly explicated in their seminal book on the topic published in 1978 (recently republished in 2003). The theory is essentially based on the premise that resource interdependence relationships exist between organizations and their stakeholders. An imbalance in this relationship, where one actor is disproportionately more dependent on the other, creates a resource dependence power imbalance. Thus, a given resource dependence relationship can be one where the firm and stakeholder are highly dependent on each other, or one where circumstances create an imbalance resulting in one of the actors having resource control power over the other (Pfeffer & Salancik, 1978).
In their book, Pfeffer and Salancik (1978) describe firm strategies for dealing with resource dependence ranging from mergers and acquisition to co-opting and lobbying powerful stakeholders. Since the publication of this book, a number of studies have been published attesting to the explanatory efficacy of RDT for understanding strategic decision-making in the firm. Jawahar and McLaughlin (2001), for instance, argue that companies choose from among several different strategies (ranging from proactive to reactive) for dealing with different stakeholders, depending on the organization's resource needs, which may fluctuate according to the developmental stage in the lifecycle of the firm. In another interesting paper, Jeff Frooman (1999) used RDT to propose a range of strategies that might be used by external stakeholders to control the resources of the firm depending on the degree to which a given firm is dependent on a given stakeholder group for resources necessary for survival. This perspective is consistent with the present paper in that we argue firms will themselves undertake strategy to influence relationships with stakeholders that could act to impinge upon the flow of resources through the firm.
Institutional Theory
Not unlike RDT, Institutional Theory views the firm as being influenced by, or more appropriately, embedded in an external environment. However, rather than focusing on power relationships, Institutionalism focuses on the existence of institutions external to the firm--such as laws, regulations, and norms--and the influence these institutions have on molding organizations in search of social legitimacy (Scott, 1995; Prakash, 2001).
DiMaggio and Powell (1983) further argued that organizations subjected to similar environments or 'fields' (such as firms within an industry), will respond to similar pressures in similar ways and may subsequently begin to resemble each other structurally or, in other words, become more homogenous or "isomorphic" in response. The authors termed this phenomenon 'institutional isomorphism' and proposed three primary mechanisms to explain why isomorphism occurs. These include coercive, mimetic, and normative mechanisms.
Coercive isomorphism "results from both formal and informal pressures exerted on organizations by other organizations upon which they are dependent and by cultural expectations in the society within which organizations function" (DiMaggio & Powell, 1983). Mimetic isomorphic mechanisms include the tendency for companies to model other organizations when faced with an environment of ambiguity and uncertainty. Essentially, organizations will tend to model successful firms, or model strategies that are universally accepted by most firms in a particular sector. Normative isomorphism refers to professional influences on the firm resulting from professional training and education and influence from involvement with organizations such as professional associations outside the firm (DiMaggio & Powell, 1983).
RDT and Institutional Theory as Complementary Theories
Christine Oliver (1991), in one of the earlier attempts at combining resource dependence theory with institutional theory, pointed to differences in the fundamental underpinnings or foci of the two theories and described means by which the two theoretical perspectives could be combined to account for difficulties posed by a purely institutional viewpoint that arguably lacks means of accounting for active choice behaviors on the part of the firm. Thus, by incorporating a resource dependence perspective into the institutional framework, an accounting of strategic responses to the institutional environment can be made (Oliver, 1991).
Empirical Studies
Only a handful of empirical attempts have been made in the past decade demonstrating combined explanatory efficacy of the two theories in support of Oliver's framework. RDT and institutional theory, for instance, have been used to provide a theoretical basis for demonstrating strategic implications of incorporating accounting control systems as a part of overall management control systems. (Abernethy & Fong, 1996). Other studies have been recently been published using RDT and IT as a theoretical basis for framing empirical research as well (Peng, 2004), including one such investigation which utilized the combined theory approach to establish a theoretical foundation for demonstrating the extent to which the external environment influences adoption of Total Quality Management initiatives in nursing homes (Lucas, Avi-itzhak, Robinson & Morris, 2005). This latter study is instructive in that it provides an evaluation of the proliferation of a prescribed, beyond compliance management system within a highly regulated industry based on a combined RDT / institutional framework.
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