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Chapter Five: Interorganizational RelationshipsJennifer Lee-Plevnik and Krystle Vlasman
+Overview of the Chapter
Organizational Ecosystems
Interorganizational Framework Resource Dependence
Collaborative Networks
Population Ecology
Institutionalism
+Organizational Ecosystems
Interorganizational Relationships – the relatively enduring resource transactions, flows, and linkages that occur among two or more organizations
Organizational Ecosystem – a system formed by the interaction of a community of organizations and their environment
+Microsoft’s Organizational
Ecosystem
Microsoft
Consumer Electronics
Information Communications
Personal Computers
+Is Competition Dead?
Traditional Competition – a distinct company is competing for survival and supremacy with other stand-alone businesses
Coevolution - the evolution of two or more species that interact closely with one another, with each species adapting to changes in the other1
Wolves and caribou
1 www.thefreedictionary.com
+The Changing Role of
Management
Think about horizontal processes rather than vertical structures
Suppliers and customers are now becoming a part of the team through horizontal linkages
Use coevolution to work with them
+Interorganizational Framework
Helps managers switch from top down to horizontal management
Characterization: Whether the organizations are similar or dissimilar Whether the relationships are competitive or cooperative
Managers can study their environment and adopt strategies to suit their needs
+Interorganizational Framework
Resource Dependence
Population Ecology
Collaborative Network Institutionalism
Organization Type
Dissimilar
Org
an
izati
on
al
Rela
tion
ship
Competitive
Cooperative
Similar
+1. Resource Dependence
Traditional view of relationships
Try to minimize their dependence on other organizations
Amount of dependence is based on two factors: Importance of the resource Monopoly power
+Resource Strategies
Alter the interdependent relationships
Interlocking directorships
Join trade associations
Sign trade agreements
Merge with another firm
Take political action
+Power Strategies
Large, independent companies have power over small suppliers Ask suppliers to absorb more costs Ship more efficiently Provide more services
+2. Collaborative Networks
Traditional: Organizations work alone, believe in individualism and self-
reliance
Collaborative network: Companies join together to become more competitive and
to share scarce resources
+Indigo.ca
Bricks-and-mortar
Bought Coles and Chapters
Partnership with Blue Nile and iUniverse
Created a virtual ecosystem
+Why Collaboration?
Sharing risks when entering new markets
Reducing costs of expensive new programs
Enhancing organizational profile
Competition can be fierce in some areas while they are cooperating in others Like competing with a sibling
Encourages long term investment
+From Adversaries to Partners
Traditional: Adversarial New: Partnership
* Low dependence* Suspicion, competition, arms length
* Detailed performance measures, closely monitored* Price, efficacy, own profits* Limited information and feedback
* Legal resolution of conflict
* Minimal Involvement and up-front investment, separate resources
* Short-term contracts* Contract limiting the relationship
* High dependence* Trust, value added to both sides, high commitment* Loose performance measures, problems discussed* Equity, fair dealing, both profit* Electronic linkages to share information, problem feedback, and discussion* Mechanisms for close coordination, people on-site* Involvement in partner’s product design and production, shared resources* Long-term contracts* Business assistance beyond the contract
+Example: Bombardier
Building a business jet with organizations from all over the world
Rely heavily on suppliers for design support and shared development costs and market risks
30 different suppliers
500 design members (250 are from outside suppliers)
$250 million invested by Bombardier
+3. Population-Ecology
Perspective
Population-Ecology Perspective focuses on organizational diversity and adaptation within a
population of organizations
Population a set of organizations engaged in similar activities with
similar patterns of resources utilization and outcomes
+Why do New Organizations
Form?
Adaptation of older organizations limited
New organizations bring innovation and change
Established organizations become antiquated
New organizations form that “fit” the environment
+Limitations of Organizational
Change
Hannan and Freeman said organizations don’t change because: Heavy Investment in:
Plants Equipment Specialized Personnel
Limited Information Established POV of Decision Makers Historical Organizational Success Difficulty changing organizational culture
+Organizational Form and Niche
Organizational form: organization’s specific technology, structure, products, goals, and personnel, which can be selected or rejected by the environment
Niche: domain of unique environmental resources and needs
+Elements in the Population-
Ecology Model of Organizations
Variation
Large number of variations appear in
the population
of organization
s
Selection
Some organization
s find a niche and survive
Retention
A few organizations
grow large and become
institutionalized in the
environment
+Population Ecology Model
Assumption: new organizations are always appearing in the population
Population change defined by 3 principals: Variation: appearance of new, diverse forms in a population
of organizations Selection: whether a new organizational form is suited to
the environment and can survive Retention: preservation and institutionalization of selected
organizational forms
+Strategies for Survival
Struggle for existence: organizations are engaged in a competitive struggle over resources, and each organizational form is fighting to survive
Birth/survival of new organizational are based on several factors: Urban area % of immigrants Political turbulence Industry growth rate Environmental variability
+Strategies for Survival
Generalists vs. Specialists Strategy
Generalists: organizations with a wide niche or domain, that is, those that offer a broad range of products or services or that serve a broad market
Specialists: organizations that provide a narrower range of goods or services or that serve a narrower market
+4. Institutionalism
Institutional Perspective: organizations survive and succeed through congruence between an organization and the expectations from its environment
Institutional Environment: composed from norms and values from stakeholders
Legitimacy: organization's actions are desirable, proper, and appropriate within the environment’s system of norms, values, and beliefs
Argues organizations need legitimacy from their customers
+Institutional View and Organizational Design
Organizations have 2 essential dimensions: Technical Dimension: governed by norms of rationality and
efficiency Institutional Dimension: governed by expectations from
external environment
+Institutional Similarity
Institutional Similarity (or Institutional Isomorphism) is the emergence of a common structure and approach among organizations in the same field
Three core mechanisms:
1. Mimetic Forces: pressure to copy or model other organizations Explains why fads occur in business world
+Institutional Similarity
2. Coercive Forces: external pressures exerted on an organization to adopt structures, techniques, or behaviours similar to other organizations Influenced by:
Law New regulation Another organization
+Institutional Similarity
3. Normative Forces: pressures to change to achieve standards of professionalism, and to adopt techniques that are considered by the professional community to be up-to-date and effective Universities, consulting firms, trade associations, and
professional training institutions develop norms among professionals
Companies accept norms through a sense of obligation to have high performance standards
Norms almost have a moral/ethical requirement