Organizational Design, Diagnosis, and Development Session 9 Interorganizational Designs

Objectives To clarify what Interorganizational Design (IOD) is and how it functions. To review the reasons for increased use of IODs To distinguish between IOD designs with and without shared ownership To consider management issues regarding IODs

Joint Ventures, Networked Organizations & Virtual Organizations The networked organization has a common board Joint ventures and virtual organizations involve the development of an organizational form two or more independent organizations which are often competitors. The parent companies stay separate.

Virtual Organizations VOs are more limited in participation and time, more temporary than other IODs Creation of a complementary resource base of different organizations by a project team Co-operation of partners by common business understanding Integration of resource base by transaction governance system Formulation of a common network strategy and Socialization by trust between involved partner. (Siebert, 1998)

Coordinating Mechanism Total control Ownership control (mergers, acquisitions, joint ventures, minority investments) No ownership control (coordinated contracting, franchises, licenses) Markets

Enabling Factors for IODs Environment Technology Size

Designs with Ownership Mergers & acquisitions Joint ventures Minority investments

Designs without Ownership Coordinated contracting Coordinated revenue links –Franchising –Licensing agreements

Management Issues Pitfalls –Sharing in a competitive environment –Outsourcing Other issues –Purpose for formation –Boundaries –Value creation –Stability and Control

Backwards & Forwards Summing up: Today we considered many variations of interorganizational designs: those that specify ownership such as joint ventures and minority investments; no ownerships such as coordinated contracting, franchises and licensing agreements; and the concept of virtual organizations. Managerial issues for such designs were discussed. Looking Ahead: Nest time we begin the examination of organizational diagnosis and development with a look at the change process in organizations.