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Interorganizational Relationships

Organisational Ecosystems Resource Dependence Collaborative Networks Population Ecology Institutionalism

Interorganisational Relationships
Increasing dense web of relationships among organisations Companies have always been dependent on other

organizations for suppliers, materials and information


How these relationships are managed is vitally important to

the organization affects: - Structure - Management of the environment


Organizational purpose Organizations can choose to build relationships in many

ways, such as appointing preferred suppliers, establishing agreements, business partnering, joint ventures or mergers and acquisitions
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Principles of Transnational Action/interorganizational Organizational relationship


Major restructuration of existing inter-organizational relations will apparently

not be feasible until catalyzed by the next major social crisis (so proposals for change should concentrate on relations between organizations and not on changes to organizations).
Concentration of organizational resources is desirable but cannot be

achieved by centralized coordination of organizations (unless the alienation of many potential collaborators is acceptable).
Informational links should be substituted wherever possible for organizational

links (since the latter tend to become clogged by personality, procedural and status problems).
Participative involvement in programme formulation should replace mobilized

support for programme execution.

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Principles of Transnational Action/interorganizational Organizational relationship Organizational flexibility should replace organizational rigidity (to permit more rapid response to new action opportunities and to permit new organizational configurations to emerge quickly wherever required)
Social realities should be considered more important than legal

and administration fictions (to permit greater response to actionoriented commitment as opposed to status-oriented procedures)
Meetings of organizational representatives should not be

structured to favour consensus formation in plenary, since it is only very rarely that delegates come with a mandate to commit the organizational to any course of action (and most of the other reasons for voting are purely symbolic and a waste of meeting time)
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Organisational ecosystems
Interorganizational relationships are the relatively enduring resource transactions, flows and linkages that occur among two or more organisations An organisation may be forced into interorganizational relationships depending on its needs and the stability of the environment

Organizational ecosystem is a system formed by the interaction of a community of organisations and their environment
A ecosystem cuts across traditional industry lines A company can create its own ecosystem it can be a retailer, a wholesaler, a logistics company and an information services company
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The Changing Role of Management


Within business ecosystems, manager learn to move beyond traditional responsibilities of corporate strategy and designing hierarchical structures and control systems Rather than trying to force suppliers into low prices or customers into high prices, managers strive to strengthen the larger system evolving around them, finding ways to understand this big picture and how to contribute Co-operation and communication are the key elements this ties further into stakeholder theory and having the appropriate structures/people/systems in place to deal with an outside environment where the competition may be collaborators at different times and at the same time!
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Changing Characteristics of Interorganizational Relationships

Traditional Orientation: Adversarial


Suspicion, competition, arms length Price, efficiency, own profits Limited information and feedback

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 partners product design and production, shared resources Long-term contracts Business assistance beyond the contract

Legal resolution of conflict


Minimal involvement and up-front investment, separate resources Short-term contracts Contract limiting the relationship
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Interorganizational Frameworks
Resource dependence rational ways organisations deal with each other to reduce dependence on the environment Collaborative networks where organisations allow themselves to become dependent on other organisations to increase value and productivity Population ecology examines how new organisations fill niches left open by established organisations and how a rich variety of new organisational forms benefit society Institutionalism explains why and how organisations legitimate themselves in the larger environment and design structures by borrowing ideas from each other

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International origins
Why the interest in interorganizational collaboration?

- Sharing risks when entering new markets - Mounting expensive new programmes - Reducing costs - Enhancing organisational profile in selected industries or technologies
Cooperative is a prerequisite (condition/requirement) for greater

innovation, problem solving and performance


Partnerships are a major avenue for entering global markets

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From adversaries to partners changing characteristics

Traditional Orientation Adversarial

New Orientation Partnership

Suspicion, competition, arms length Trust, addition of value to both sides, high commitment Price, efficiency, own profits Equity, fair dealing, all profit Limited information and feedback Electronic linkages to share key information Legal resolution of conflict problem feedback and discussion
Minimal involvement and up-front

investment
Short-term contracts Contract limiting the relationship

Mechanisms for close co-ordination, people on

site
Involvement in partners product design and

production
Long-term contracts
Business assistance beyond the conflict

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Population ecology
Population ecology focuses on organisational diversity and adaptation within a population of organisations Population is a set of organisations engaged in similar activities with similar patterns of resource utilisation and outcomes Organisations within a population compete for similar resources or similar customers, such as insurance companies in the United Kingdom Innovation and change in a population of organisations take place throughout the birth of new forms and kinds of organisation more so than by the reform and change of existing organisations New organisations meet the new needs of society more so than established organisations that are slow to change
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Population ecology
Why do established organisations have such a hard time

adapting to a rapidly changing environment?


Inherent limitations

Heavy investment in plant, equipment and specialised personnel Limited information Established viewpoints of decision markers The organisations successful history Difficulty of changing corporate culture
True transformation is a rare and unlikely event in the face of all

these barriers

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Organisational form and niche


Organisation form is an organisations specific technology, structure, products, goals and personnel which can be selected or rejected by the environment

Each organisation tries to find a niche a domain of unique environmental resources and needs sufficient to support it
The niche is usually small in the early stages of an organisation but may increase in size over time if the organisation is successful. If a niche is not available, the organisation will decline and may perish From the viewpoint of a single firm, luck, change and randomness play important parts in survival

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Process of Ecological Change


The population ecology model assumes that new organisations are always appearing in the population
The process of change in the population is defined by the principles that occur in stages: variation, selection and retention Variation new organisations forms continually appear in a population of organisations some forms may be conceived to cope with a perceived need in the external environment organisational variations are analogous to mutations in biology and they add to the scope and complexity of organisations forms in the environment Selection some variations will suit the external environment better than others. Some prove beneficial and this are able to find a niche and acquire the resources from the environment necessary to survive only a few variations are selected in by the environment and survive over the long run

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Process of Ecological Change

Retention Retention is the preservation and institutionalisation of selected organisational forms. The retained organisational form may become a dominant part of the environment

Variation Large number of variations appear in the population of organisations

Selection Some organisations find a niche and survive

Retention
A few organisations grow large and become institutionalised in the environment

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Process of Ecological Change From the population ecology perspective, the environment is the important determinant of organisational success or failure. The organisation must meet an environmental need or it will be selected out. The process of variation, selection and retention leads to the establishment of new organisation forms in a population of organisations

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Strategies of Survival
Another principle that underlies the population ecology model is the struggle for existence, or competition In the population ecology perspective, generalist and specialist strategies distinguish organisational forms in the struggle for survival Organisations with a wide niche or domain, that is, those that offer a broad range of products or services or that serve a broad market are generalists Organisation that provide a narrower range of goods or services or that serve a narrower market are specialists Specialists are generally more competitive than generalists in the narrow area in which their domain overlap. However, the breadth of the generalists domain serves to protect it somewhat from environmental changes Managers impact on company success often comes from selecting a strategy that steers a company into an open niche in the environment
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Institutionalism
Institutionalism perspective describes how organisations survive and succeed through congruence between an organisation and the expectations from its environment Institutional environment is composed of norms and values from stakeholders The institutional view believes that organisations adopt structures and processes to please outsiders, and these activities come to take on rule-like status in organisations. The institutional environment reflects what the greater society views as correct ways of organising and behaving

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Institutionalism
Legitimacy is defined as the general perspective that an organisations actions are desirable, proper and appropriate within the environments systems of norms, values and beliefs Institutional theory concerned with the set of intangible norms and values that shape behaviour, as opposed to the tangible elements of technology and structure. Organisations must fit within the cognitive and emotional expectations of their audience The institutional view also sees organisations as having two essential dimensions technical and institutional. The technical dimension is the day-to-day work technology and operating requirements. The institutional structure is that part of the organisation most visible to the outside public
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Institutional Similarity
Organisations have a strong need to appear legitimate Many aspects or structure and behaviour may be targeted towards environmental acceptance rather than towards internal technical efficiency Interorganizational relationships thus are characterised by forces that cause organisations in a similar population to look like one another Institutional similarity is the emergence of a common structure and appearance among organisations in the same field. Isomorphism is the process that causes one unit in a population to resemble other units that face the same set of environmental conditions This occurs through three ways mimetic, coercive, normative

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Three Mechanisms for Institutional Adaptation


Mimetic Reason to become similar Events Uncertainty Innovation, visibility Culturally supported Coercive Dependence Political law, rules, sanctions Legal Normative Duty obligations Professionalism certification, accreditation Moral

Social basis

Example

Reengineering benchmarking

Pollution controls, school regulations

Accounting standards, consultant training

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