DBAX 9101 Week 8 Framework Fit Paper Example

Choosing a Lens on Purpose, Not by Habit: Testing Resource Dependence Theory, Trade Credit Theory and the Cash Conversion Cycle Against a Study of How Small Subcontractors Manage Late Payment

Student Name

Walden University

DBAX 9101: Business Research Project Stage 1

Instructor Name

Month Day, Year

Choosing a Lens on Purpose, Not by Habit: Testing Resource Dependence Theory, Trade Credit Theory and the Cash Conversion Cycle Against a Study of How Small Subcontractors Manage Late Payment

Why Compare Frameworks

Framework choice at this stage is often decided by which theory a student met first. A framework should instead be chosen because it explains the phenomenon in the research question and helps organize what the study will look for. This paper tests three candidates against the study's question, which asks how owners of small trade subcontractors cope when the general contractors they work for pay late.

The Candidates

In resource dependence theory, an organization that relies on outside parties for something critical acts to manage that reliance, through diversifying suppliers or customers, negotiating, forming relationships or changing their environment. Hillman et al. (2009) reviewed the theory's development and found it widely used to explain how firms respond to power held by others. Casciaro and Piskorski (2005) distinguished power imbalance from mutual dependence and argued that firms respond differently to each.

Trade credit theory explains why firms extend credit to their customers. Petersen and Rajan (1997) found that firms extend trade credit partly because they have better access to finance than their customers and partly to support sales, and that credit-constrained firms rely more heavily on trade credit from suppliers.

The cash conversion cycle, introduced as a liquidity measure by Richards and Laughlin (1980), measures the days between paying for inputs and collecting from customers. It frames late payment as a lengthening of the cycle that the firm must finance.

Testing Fit

Table 1

Three Frameworks Tested Against the Research Question

Fit judged by the author against the research question; Week 10 critique may revise it.

The Choice

Resource dependence theory fits best. Late payment is, at bottom, an exercise of power by a party the subcontractor depends on for work. The theory predicts that owners will try to reduce that dependence or manage it, and it names the forms that management can take. Those forms give the study categories to listen for in interviews: whether owners spread their work across many general contractors, negotiate terms before signing, build personal relationships with project managers or simply avoid certain contractors. Casciaro and Piskorski (2005) add a useful distinction: where dependence is mutual, as with a general contractor who needs a scarce trade partner, owners may have more room to negotiate than the power imbalance alone suggests.

What the Framework Leaves Out

Resource dependence theory says little about the financial mechanics of surviving delay, such as credit lines and billing schedules. The cash conversion cycle will serve as a supporting concept for that side, without becoming the framework. Trade credit theory explains the broader economics, and the literature review will draw on it, but it is not built to organize what owners say about their choices.

A Rival Reading of the Same Facts

One objection to the choice deserves an answer. A finance-trained reader might say that late payment is simply a working capital problem and that strategies follow from the arithmetic of the cash conversion cycle, so a power-based theory adds nothing. The interviews may support that reading for some owners, especially those who describe delay purely in terms of credit lines and billing timing. But my own experience, and the review by Peters et al. (2019), suggest that owners also make relational choices, such as declining to bid for certain general contractors, that arithmetic alone does not explain. The study will record which kind of strategy each owner describes, so the data can show which reading fits better.

How the Framework Will Be Used

The framework will shape the interview protocol, offering prompts on customer diversification, negotiation and relationships, and the initial coding scheme. It will not limit the analysis: strategies that fall outside its categories will be coded as new, and the study will report where the framework failed to anticipate what owners did.

References

Casciaro, T., & Piskorski, M. J. (2005). Power imbalance, mutual dependence, and constraint absorption: A closer look at resource dependence theory. Administrative Science Quarterly, 50(2), 167-199. https://doi.org/10.2189/asqu.2005.50.2.167

Hillman, A. J., Withers, M. C., & Collins, B. J. (2009). Resource dependence theory: A review. Journal of Management, 35(6), 1404-1427. https://doi.org/10.1177/0149206309343469

Peters, E., Subar, K., & Martin, H. (2019). Late payment and nonpayment within the construction industry: Causes, effects, and solutions. Journal of Legal Affairs and Dispute Resolution in Engineering and Construction, 11(3), Article 04519013. https://doi.org/10.1061/(ASCE)LA.1943-4170.0000314

Petersen, M. A., & Rajan, R. G. (1997). Trade credit: Theories and evidence. Review of Financial Studies, 10(3), 661-691. https://doi.org/10.1093/rfs/10.3.661

Richards, V. D., & Laughlin, E. J. (1980). A cash conversion cycle approach to liquidity analysis. Financial Management, 9(1), 32-38. https://doi.org/10.2307/3665310