Why do different theories of the firm exist Essay - 1

Why do different theories of the firm exist - Essay Example It is also not easy to adopt all the theories but it is necessary to learn about all the theories. As it helps in making a firm progressive. Organizational analysis is relatively new among the sciences as a field of study, coming out of the latter years of the 19th century as industrialization became more technological (Pheby, 2000). Originators of organizational management, among them Taylor, Weber and Mayo, believed there was one best way to manage an organization, and all recommended single, universal solutions to management problems, though they did not agree on what the solutions should be (Buchanan, 1997). Organizations were considered to be the setting in which work was carried out, and were not considered to have self-interest of their own. It was in the 1920's when Mary Follett wrote about the "law of the situation", that the notion of organizations taking direction from outside themselves began to take root. In her way of thinking, it is the situation that an organization exists in that dictates the orders of what needs to be done (Buchanan, 1997). Further development of these concepts by thinkers such as Woodw ard, Thompson and Perrow over the next few decades, lead the way for supporters of the contingency approach. That an organizations' structure and management was effected by, and actually contingent upon, factors other than the whim of the owner, and that there clearly was no one best way to be a successful organization, contributed to the development of this new field of study (Buchanan, 1997). The novel concept that organizations interact with their environment and with each other, as social units within and without, sparked interest in the field that has become known as organizational sociology, and led to a broadening and a deepening of theory in the field (Pheby, 2000).. Resource Dependency Theory The key concept of the resource dependency perspective is that organizations are not self-sufficient. Instead, an organization's activities and outcomes are accounted for by the context in which the organization is embedded (Pfeffer & Salancik, 1970.)Dependence is determined by three factors (Pfeffer & Salancik, 1978): the importance of the resource, the degree of discretion others have over allocation and use of the resource, and the concentration of the resource. Without it the organization cannot operate and will cease to exist.. This is in keeping with resource dependency theory as it predicts that organizations will seek to reduce their dependence by expanding into other domains, thereby decreasing their reliance on any single exchange partner (Davis & Powell, 1992).In order to coordinate the actions of the members of the network and the Foundation toward this goal, linkages have been used. These have especially taken the shape of interlocks among board members and shared social norms. Such linkages and interlocks, as described by