Chapter Five: Interorganizational Relationships
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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
Organizational Ecosystems
Interorganizational Framework
Resource Dependence
Collaborative Networks
Population Ecology
Institutionalism
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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
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Microsoft’s Organizational
Ecosystem
Information
Communications
Personal
Computers
Consumer
Electronics
Microsoft
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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
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Wolves and caribou
www.thefreedictionary.com
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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
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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
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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
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
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Resource Strategies
Alter the interdependent relationships
Interlocking directorships
Join trade associations
Sign trade agreements
Merge with another firm
Take political action
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Power Strategies
Large, independent companies have power over small
suppliers
Ask suppliers to absorb more costs
Ship more efficiently
Provide more services
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2. Collaborative Networks
Traditional:
Organizations work alone, believe in individualism and selfreliance
Collaborative network:
Companies join together to become more competitive and to
share scarce resources
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Indigo.ca
Bricks-and-mortar
Bought Coles and Chapters
Partnership with Blue Nile and iUniverse
Created a virtual ecosystem
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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
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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
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
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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
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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
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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
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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
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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
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
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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
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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
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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
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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
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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
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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
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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-todate 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