Resource Dependency Perspective on Budgets Budgets are pervasive in organizations because they help clarify internal resource dependencies. Often the hierarchy of budgets reveal organizational priorities and dependencies better than formal organizational charts. Since departments are usually dependent on budgets for general operations, those who control budgeting control resources. Budget planners and approvers can exploit these asymmetric dependencies to accumulate power. The budget planning process at a given level is often a zero-sum game where politics and influence is most evident.
Budgets are also useful control mechanisms because there are more flexible than contracts.
Unlike contracts, you can quickly change a budget to affect a sub-group's activity. A good budget can lower internal transaction costs by minimizing uncertainties, hindering opportunism, and mediating internal disputes. Organizational involvement in budget preparation can help clarify future transactions between sub-groups. For example, defining advertising budgets for each product line helps the marketing department plan activities more efficiently. Carefully scrutinized budgets and spending limits can reduce the potential of opportunism.