Interorganizational Relationships Chapter 5 Interorganizational Relationships

Organizational Ecosystems Interorganizational relationships – resource transactions, flows, and linkages that occur among two organizations Organizational ecosystems – a system formed by the interaction of a community of organizations and their environment

Is Competition Dead? Changing technology and new regulations present organizations with international competition Organizations are involved in complex networks, the number of corporate alliances are increasing Traditional competition no longer exists

Organizational Ecosystem

The Changing Role of Competition In ecosystems, managers move beyond traditional responsibilities Managers must think about horizontal processes The old role of management relied on operation roles and boundaries This is a broad leadership challenge

A Framework for Interorganizational Relationships

Resource Dependence Locking in resources through long-term supplier relationships is a common resource-dependence theory Supply chain management refers to managing the sequence of suppliers and purchasers Large independent companies can have power over small suppliers

Supply Chain for a Retail Organization

Collaborative Networks Collaboration allow risks to be shared Cooperation is a prerequisite for greater innovation Interorganizational linkages provide a kind of safety net that encourages long-term investment and risk Organizations are moving from adversaries to partners

Changing Characteristics of Interorganizational Relationships Traditional Orientation Low dependence Suspicion Monitoring Price, efficacy, own profits Limited information and feedback Legal resolution of conflict Minimal involvement Short-term contracts Limited relationships New Orientation: Partnership High dependence Trust, addition of value Loose performance measures Equity, fair dealing Electronic linkages Mechanisms for coordination Involvement in partner’s production and design Long-term contracts Business assistance beyond contract

Organizational Diversity and Adaption within a Population True transformation is a rare and unlikely event In biology, evolution and selection are used to refer to behavioral processes Evolution explains why certain life forms appear and survive Organizations best fitted to the immediate environment

Population Ecology Organization Form and Niche Organization Form and Niche Form is an organization’s specific technology, structure, products, goals and personnel Each organization attempts to find a niche Process of Ecological Change New organizations are always appearing in the population Strategies for Survival Competitive struggle for resources – struggle for existence

Elements in the Population-Ecology Model of Organizations

Institutionalism Institutional perspective: Institutional Environment Institutional perspective: Manage survival Balance expectations of environment Institutional Environment Norms and values of stakeholders Adopt structures and processes to please outsiders Legitimacy - an organization’s actions are desirable, proper and appropriate

Institutional View and Organizational Design Technical Structure Day-to-day work Technology Operating requirements Governed by norms and rationality of efficiency Institutional Structure Visible to the public Governed by expectations of the public

Institutional Similarity Emergence of common structure and approach among like organizations Mimetic Forces – the pressure to copy or model other organizations Coercive Forces – pressures for organization to adopt structures, techniques or behaviors similar to other organizations. Normative Forces – pressure to adopt standards and techniques of professional community

Design Essentials There has been an evolution in interorganizational relationships Organizations operate within a ecosystem Four perspectives have been developed to explain relationships among organizations Collaboration is an emerging alternative to resource dependence New organizations fill niches left open by established companies The institutional perspective notes that interorganizational relationships are shaped by legitimacy as well as products/services