Week 5

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Chapter5.InterorganizationalRelationships.pptx

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Chapter 5 Interorganizational Relationships

Organization Theory and Design

Thirteenth Edition

Richard L. Daft

Chapter

Learning Objectives

Describe an organizational ecosystem and the changing role of management in interorganizational relationships.

Identify types of resource-dependence relationships and their power implications.

Explain the role of collaborative networks and the interorganizational shift from adversaries to partners.

Describe key concepts of the population ecology perspective, including organizational form and niche and the process of change.

Compare three mechanisms that lead to institutional similarity identified by the institutional view of organizations.

Organizational Ecosystems

Interorganizational relationships are the relatively enduring resource transactions, flows, and linkages that occur among two or more organizations

An organizational ecosystem is a system formed by the interaction of a community of organizations and their environment

Is Competition Dead?

Organizations have a constant onslaught of international competitors, changing technology, and new regulations

Traditional competition no longer exists, and organizations both support and depend on others for success—and perhaps for survival

An Organizational Ecosystem

The Changing Role of Management

In ecosystems, managers must move beyond traditional responsibilities and build relationships with a network of partners

Managers must think about horizontal processes rather than vertical processes

The old role of management relied on operation roles, boundaries, and direct control of resources

Collaborative roles are becoming more important for success

A Framework for Interorganizational Relationships

Resource Dependence

Organizations minimize their dependence on other organizations for the supply of resources and try to influence the environment to make resources available

Organizations alter interdependent relationships through mergers/acquisitions, joint ventures, strategic alliances, supply chains, trade associations, and board interlock

Resource Dependent Relationships

Collaborative Networks

Companies join together to become more competitive and to share scarce resources

Key reasons for collaboration include sharing risks when entering new markets, mounting expensive new programs and reducing costs, and enhancing the organization’s profile in selected industries or technologies

Companies can share risk and cooperation is a prerequisite for greater innovation, adaptation, problem solving, and performance

Changing Characteristics of Interorganizational Relationships (slide 1 of 2)

Traditional Orientation: Adversarial

Low dependence

Suspicion, competition, arm’s 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

Changing Characteristics of Interorganizational Relationships (slide 2 of 2)

New Orientation: Partnership

High dependence

Trust, addition of value to both sides, high commitment

Loose performance measures; problems discussed

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

Population Ecology

The population-ecology perspective focuses on organizational diversity and adaptation within a population of organizations

Large, established organizations often have difficulty adapting to a rapidly changing environment

New organizational forms that fit the current environment emerge, fill a new niche, and over time take away business from established companies

The process of change in the population occurs in three stages: variation, selection, and retention

Elements in the Population-Ecology Model of Organizations

Strategies for Survival

The struggle for existence is competition

Generalist strategies are used by organizations that have a wide niche or domain, a broad range of products, or services to a broad market

Specialist strategies are used by organizations that have a narrow range of goods or services that serve a narrow market

Institutionalism

The institutional perspective describes how an organization survives and succeeds through congruence between the organization and the expectations of its environment

An institutional environment is composed of:

Norms and values of stakeholders

Structures and processes that please outsiders

Legitimacy is the perception that an organization’s actions are desirable, proper, and appropriate

Institutional View and Organizational Design

Technical Dimension

Day-to-day work

Technology

Operating requirements

Governed by norms and rationality of efficiency

Institutional Dimension

Parts of the organization that are visible to the outside public

Governed by the expectations from the external environment

Institutional Similarity

Institutional similarity is the emergence of a common structure and approach among organizations in the same field

The core mechanisms for adaptation are mimetic forces, coercive forces, and normative forces

Three Mechanisms for Institutional Adaptation

	Mimetic	Coercive	Normative
Reason to become similar:	Uncertainty	Dependence	Duty, obligation
Events:	Innovation visibility	Political―laws, rules, sanctions	Professionalism—certification, accreditation
Social basis:	Culturally supported	Legal	Moral
Example:	Reengineering, benchmarking	Pollution controls, school regulations	Accounting standards, consultant training

Organizational Design Essentials (slide 1 of 2)

Organizations may compete and collaborate at the same time, depending on the location and issue.

Four perspectives that explain relationships among organizations are resource dependence theory, collaborative networks, population ecology, and institutionalism.

Power relationships among organizations are always changing. Some organizations increase their power while others become less influential.

The new partnership mindset emphasizes trust, fair dealing, and achieving profits for all parties in a relationship.

Organizational Design Essentials (slide 2 of 2)

Through the process of variation, selection, and retention, some organizations will survive and grow while others perish.

A company may adopt a generalist or specialist strategy to survive in the population of organizations.

The need for legitimacy means that organizations will adopt structures and activities that are perceived by external stakeholders as valid, proper, and up to date.