Stay Dependent: Relational Strategies to Reduce Current and Future Uncertainty

We investigate how organizations that require repeated rounds of funding manage the uncertainty of accessing capital and how they diversify into new services and regions. Building on resource dependence theory and relational embeddedness we propose that organizations can follow two types of strategies to reduce this uncertainty: a relationally broad strategy of approaching multiple sources of funding or a relationally focused strategy of developing long-term relationships with selected resource providers. We argue that while both strategies reduce current uncertainty, only a relationally focused strategy reduces future uncertainty, which fosters diversification. We test our arguments using over 30,000 donations to 845 humanitarian organizations over 18 years. The results support our theory; while both strategies coexist, only moderate levels of the relationally focused strategy facilitate diversification.