Chapter Five

Interorganizational Relationships Thomson Learning © 2004 5-1

A Framework of Interorganizational Relationships* Organization Type Dissimilar Similar Organization Relationship Competitive Cooperative *Thanks to Anand Narasimhan for suggesting this framework.

Resource Dependence Dissimilar Collaborative Network Similar Thomson Learning © 2004 Population Ecology Institutionalism 5-2

Organization Strategies for Controlling the External Environment

 Establishing Interorganizational Linkages:  Ownership   Contracts, joint ventures Cooptation, interlocking directorates   Executive recruitment Advertising, public relations  Controlling the Environmental Domain:     Change of domain Political activity, regulation* Trade associations* Illegitimate activities*  * Cooperative / Similar Orgs Thomson Learning © 2004 5-3

Changing Characteristics of Interorganizational Relationships Traditional Orientation: Adversarial Suspicion, competition, arm’s length Price, efficiency, 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 Orientation: Partnership Trust, addition of value to both sides, high commitment Equity, fair dealing, both profit Electronic linkages to share key 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 Thomson Learning © 2004 5-4

Collaborative Network: Dissimilar Organizations

    Value Chain Networks Organizations + Suppliers + Distributors Trust = Social Capital Embeddedness Thomson Learning © 2004 5-5

Collaborative Networks: Similar Organizations

    Industry clusters or Constellations Defend that drain industry profits against forces Factor networks: joint bargaining for inputs Producer networks: consolidate & allocate capacity Thomson Learning © 2004 5-6

Collaborative Networks: Similar Organizations

    Innovation networks: upgrade products vs. substitutes Scale Agglomeration: force entry scale higher Mutual Forbearance: reduce rivalry by agreement Social Action & Legitimation: polices actions and image http://www.fscus.org/ Thomson Learning © 2004 5-7

Elements in the Population Ecology Model of Organizations Variation Large number of variations appear in the population of organizations Selection Some organizations find a niche and survive Thomson Learning © 2004 Retention Surviving organizations prosper and become institutionalized in the environment 5-8

Thomson Learning © 2004 5-9

Niche Width Theory

    Hannan & Freeman (1977, 1989) Specialist/Generalist Narrow, deep resource exploitation vs. broad exploitation with some contingent capability Do-nut shop or steak house vs. full menu restaurant Thomson Learning © 2004 5-10

Niche Width Strategies

   Specialist - single-unit - multiunit Generalist - single-unit - multiunit Polymorph - multiunit Thomson Learning © 2004 5-11

Specialist Strategies

         Single-unit Seeks exact fit with customer Deep exploitation of market Examples: Harold’s Auto Service, O-Sho Multiunit Honed efficiency of routines Scale economies Identical subunits Examples: AAMCO, Benihana Thomson Learning © 2004 5-12

Generalist Strategies

         Single-unit Single approach to average customer at center of market Broad exploitation with some embedded contingent slack Examples: L.L.Bean, Joe’s Eats Multiunit Center of market but efficient delivery emphasized Scale economies Identical subunits Examples: Wal-Mart, Denny’s Thomson Learning © 2004 5-13

What’s a

Polymorph

?

  Biological term: single species with locally adapted sub species Example habitat : birds of same species specialized to variations in available food along vertical gradients in Thomson Learning © 2004 5-14

What’s a

Polymorph

?

  Organizational term: multiunit structure (chains, franchises) with locally adapted outlets or units Example : Best Western hotel chain - smaller units stress local character Thomson Learning © 2004 5-15

Three Mechanisms for Institutional Adaptation Mimetic Coercive Normative Reasons to become similar: Uncertainty Dependence Duty, obligation Events: Innovation visibility Political law, rules, sanctions Professionalism— certification, accreditation Social basis: Culturally support Legal Moral Example: Reengineering, benchmarking Pollution controls, school regulations

Source:

Adapted from W. Richard Scott,

Institutions and Organizations

(Thousand Oaks, Calif.: Sage, 1995). Thomson Learning © 2004 Accounting standards, consultant training 5-16

Institutionalization: Mimetic Forces

   The imitation of structures, techniques or behaviors from other organizations This modeling is done without any clear proof that performance will be improved Generally takes place under conditions of high uncertainty Thomson Learning © 2004 5-17

Institutionalization: Coercive Forces

  External pressures exerted upon organizations to adopt structures, techniques, or behaviors similar to other organizations Government, regulatory agencies and/or powerful firms Thomson Learning © 2004 5-18

Institutionalization: Normative Forces

   Pressures to achieve professional standards Preferred techniques versus required regulations (coercive) Legitimacy seeking Thomson Learning © 2004 5-19