Transcript Chapter Five: Interorganizational Relationships

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