Reminders n If you choose not to participate in a team project, you need to let me know by Friday. n I need your team roster and target organization by next Wednesday. n Monday’s class devoted to your team meeting. No case due!

Competition, Cooperation, Collaboration, Coopetition, Coevolution, and Organizations BA 152

Inter-organizational Relationships n Intra-organizational relationships are established by structures, systems, and processes within an organization. n Inter-organizational relationships are established across organizations in a variety of different ways for a variety of different reasons.

How might we explain these inter-organizational relationships?

Explanations for Inter-organizational Relationships DissimilarSimilar Competitive Resource Dependence Cooperative Organization Type Organization Relationships

Explanations for Inter-organizational Relationships: Resource Dependence n Firms attempt to minimize their dependence on others for resources n They attempt to influence their environments to make resources available

n Level of dependence a function of – The importance of the resources – The control suppliers have over resources Explanations for Inter-organizational Relationships: Resource Dependence

n Strategy Implications: – Reduce the firm’s dependence on the environment – And/or exercise power over suppliers by establishing a variety of inter-organizational relationships. n The presumption here is the more powerful takes advantage of the less powerful. Explanations for Inter-organizational Relationships: Resource Dependence

But what has been happening in some industries? n The auto industry, for instance, has – Gone from driving profits down for many, many suppliers – putting some out of business... – To building supportive and collaborative relationships with fewer suppliers.

But what has been happening in some industries? n Independent book sellers have – Either fought tooth and nail against each other, individually, and against the big stores, and/or – Formed a collaborative effort called

Collaborative Network Explanations for Inter-organizational Relationships DissimilarSimilar Competitive Resource Dependence Cooperative Organization Type Organization Relationships

Competition n Typically marked by – Suspicion – Price wars – Limited/no information exchange – Short-term contracts – Conflicts resolved by legal action

Managing Competitive Relationships n Parties tend to compete away the profits. n Or parties try and build a bigger pie. n Parties try and control access to entry with third-party assistance - trade associations, licensing boards, etc. n Parties try to reduce competition via strategic alliances, mergers and/or acquisitions. n Parties collude and/or develop cartels - illegal in this country.

Collaboration n Typically marked by – Trust – Equity, fairness in exchanges – Maximal information sharing – Close coordination – Long-term contracts – Mutual resolution of conflicts

n Reputation and trust n Co-optation - giving another group a stake in some activity that neutralizes their opposition n Long-term contracts/Licensing n Networks n Minority ownership - a la keiretsu n Joint ventures/strategic alliances n Mergers and/or acquisitions Ways to Collaborate

Why Collaborate? n To reduce the cost of technological development or market entry n To reduce the risk of development or market entry n To achieve economies of scale in production n To reduce the time taken to develop and commercialize new products

Competition vs. Collaboration n Options/Strategies for developing (or not) a global MBA program at UNC – Stay out of the market – Go it alone – Find appropriate partners

- Sao Paulo, Brazil Competition vs. Collaboration

Risks with Collaboration n Leakage of proprietary information n Differential quality/delivery of product/service n Loss of control or ownership n Divergent aims & objectives, resulting in conflict and/or dissolution

Managing Successful Collaborations n Collaboration must be perceived as important by all partners. n Collaboration “champions” must exist at the top of the partner organizations. n A substantial degree of trust must exist between parties. n Clear planning and task milestones must be established.

n Frequent communication must occur between partners. n The partners must contribute as expected. n Collaboration benefits must be perceived as equitably distributed. Managing Successful Collaborations

What comes after collaboration? n Co-evolution or co-opetition – Development of shifting/dynamic webs of relationships (inside and outside the firm) – These webs exploit fresh opportunities for organizational improvement and/or drop deteriorating ones. – Collaboration and competition may well co-exist within a single firm as well as between and among multiple firms.

n Vail Ski Resorts – Formed by a 1997 merger of Vail, Breckenridge, Keystone, and Beaver Creek ski areas to take advantage of branding with the Vail name. – Initially, too much collaboration. Vacationers wanted unique resort experiences, not four “would-be Vail” destinations. Co-evolution

n So now each resort adapts its image to evolving and potentially competing markets. – Beaver Creek – Family skiing – Breckenridge – Western-motif and youth focus – Keystone – Meetings and conferences – Vail – Upscale skiing Co-evolution

From Eisenhardt, L. and Galunic, D., “Coevolving: At Last, a Way to Make Synergies Work,” Harvard Business Review, Jan-Feb 2000, pp Collaboration vs. Coevolution Content and number of collaborative links Content of collaboration Focus Collaborate and competeCollaborate Internal Dynamics Growth, agility, and economies of scope Efficiency and economies of scale Objectives Shifting webs among businesses Frozen links among static businesses Form of collaboration Coevolution Traditional Collaboration

From Eisenhardt, L. and Galunic, D., “Coevolving: At Last, a Way to Make Synergies Work,” Harvard Business Review, Jan-Feb 2000, pp Collaboration vs. Coevolution Self-interest, based on unit performance Varied Incentives Against competitors’ growth, share and profits Against budgets or preceding year Business Metrics Drive and execute collaboration Execute collaboration Business Role Set collaborative contextDrive collaboration Corporate Role Coevolution Traditional Collaboration

Population Ecology Collaborative Network Explanations for Inter-organizational Relationships DissimilarSimilar Competitive Resource Dependence Cooperative Organization Type Organization Relationships

n An attempt to explain why there are so many different kinds of organizations and relationships in the world today. n Uses an evolutionary approach – Variation - large numbers of firms appear – Selection - only some find niches and survive – Retention - a few grow large and continue to succeed n To be “selected in” firms can adopt a specialist or a generalist approach Explanations for Inter-organizational Relationships: Population Ecology

Population Ecology n Specialist – Concentrates skills in a single niche – Develops core competencies – Can provide better customer service and superior products, but – Can be in trouble if the niche disappears or others enter.

Population Ecology n Generalist – Spreads skills across many niches, often via inter-organizational relationships – Provides greater brand recognition – Can succeed when the environment is uncertain, if risks are spread across a number of niches with multiple partners

Institutionalism Collaborative Network Explanations for Inter-organizational Relationships DissimilarSimilar Competitive Resource Dependence Cooperative Organization Type Organization Relationships Population Ecology

n An attempt to explain why there are so many similar organizations and relationships in the world today. n Isomorphism is the answer: – The process whereby entities start to resemble each other in similar environments as a way of gaining or maintaining legitimacy. Explanations for Inter-organizational Relationships: Institutionalism

Institutionalism n How does isomorphism occur? – Mimetic isomorphism: Imitation is the sincerest form of flattery. Usually occurs in reaction to uncertainty.

Institutionalism n How does isomorphism occur? – Coercive isomorphism: Do it this way, or else! Reaction to political or regulatory influence.

Institutionalism n How does isomorphism occur? – Normative isomorphism: Professionals do it this way. Results from common training and professionalism.

Today’s Take-aways 1.While competition is important, there is more than simply competition to the success of today’s organizations. 2.There are a variety of ways to explain inter- organizational relationships 3.Co-evolution may be the wave of the future. Stay tuned.