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Chapter Five

Interorganizational Relationships

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A Framework of Interorganizational

Relationships*

*Thanks to Anand Narasimhan for suggesting this framework.

ResourceDependence

CollaborativeNetwork

Institutionalism

PopulationEcology

Organization Type

OrganizationRelationship

Dissimilar Similar

Cooperative

Competitive

Dissimilar

Similar

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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

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Changing Characteristics of Interorganizational Relationships

Traditional Orientation:Adversarial

New Orientation:Partnership

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

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

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Collaborative Network: Dissimilar Organizations Value Chain

Networks Organizations +

Suppliers + Distributors

Trust = Social Capital

Embeddedness

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Collaborative Networks:Similar Organizations Industry clusters or

Constellations Defend against forces

that drain industry profits

Factor networks: joint bargaining for inputs

Producer networks: consolidate & allocate capacity

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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/

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Elements in the Population Ecology Model of Organizations

Variation

Large numberof variationsappear in thepopulation oforganizations

Selection

Someorganizationsfind a nicheand survive

Retention

Survivingorganizationsprosper andbecomeinstitutionalizedin theenvironment

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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

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Niche Width Strategies Specialist

- single-unit - multiunit

Generalist - single-unit - multiunit

Polymorph - multiunit

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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

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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

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What’s a Polymorph? Biological term:

single species with locally adapted sub-species

Example: birds of same species specialized to variations in available food along vertical gradients in habitat

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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

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Three Mechanisms for Institutional Adaptation

Example: Accounting standards, consultant training

Pollution controls, school

regulations

Reengineering, benchmarking

MoralLegalCulturally

supportSocialbasis:

Professionalism—certification, accreditation

Political law,rules, sanctions

InnovationvisibilityEvents:

Duty,obligation

DependenceUncertaintyReasons tobecome similar:

NormativeCoerciveMimetic

Source: Adapted from W. Richard Scott,Institutions and Organizations (Thousand Oaks,Calif.: Sage, 1995).

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Institutionalization: Mimetic Forces The imitation of

organizational 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

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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

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Institutionalization: Normative Forces Pressures to

achieve professional standards

Preferred techniques versus required regulations (coercive)

Legitimacy seeking