Thomson Learning © Chapter Five Interorganizational Relationships

Thomson Learning © A Framework of Interorganizational Relationships* *Thanks to Anand Narasimhan for suggesting this framework. Resource Dependence Collaborative Network Institutionalism Population Ecology Organization Type Organization Relationship DissimilarSimilar Cooperative Competitive Dissimilar Similar

Thomson Learning © 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

Thomson Learning © 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

Thomson Learning © Collaborative Network: Dissimilar Organizations Value Chain Networks Organizations + Suppliers + Distributors Trust = Social Capital Embeddedness

Thomson Learning © Collaborative Networks: Similar Organizations Industry clusters Leather/Shoes-Italy Silicon Valley Factor networks: consolidate inputs Producer networks: consolidate & allocate capacity

Thomson Learning © Elements in the Population Ecology Model of Organizations Variation Large number of variations appear in the population of organizations Selection Some organizations find a niche and survive Retention A few organizations grow large and become institutionalized in the environment

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Thomson Learning © 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

Thomson Learning © Niche Width Strategies Specialist - single-unit - multiunit Generalist - single-unit - multiunit Polymorph - multiunit

Thomson Learning © Specialist Strategies Single-unit Seeks exact fit with customer Deep exploitation of market Examples: Ferrari, Sam’s Sushi Multiunit Honed efficiency of routines Scale economies Identical subunits Examples: AAMCO, Benihana

Thomson Learning © 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

Thomson Learning © 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

Thomson Learning © 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

Thomson Learning © Three Mechanisms for Institutional Adaptation Example: Accounting standards, consultant training Pollution controls, school regulations Reengineering, benchmarking MoralLegal Culturally support Social basis: Professionalism— certification, accreditation Political law, rules, sanctions Innovation visibility Events: Duty, obligation DependenceUncertainty Reasons to become similar: NormativeCoerciveMimetic Source: Adapted from W. Richard Scott, Institutions and Organizations (Thousand Oaks, Calif.: Sage, 1995).

Thomson Learning © 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

Thomson Learning © 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

Thomson Learning © Institutionalization: Normative Forces Pressures to achieve professional standards Preferred techniques versus required regulations (coercive) Legitimacy seeking