Chapter Five
Interorganizational Relationships
Thomson Learning
© 2004
5-1
A Framework of Interorganizational
Relationships*
Organization Type
Dissimilar
Similar
Competitive
Organization
Relationship
Resource
Dependence
Population
Ecology
Dissimilar
Cooperative
Collaborative
Network
Institutionalism
Similar
*Thanks to Anand Narasimhan for suggesting
this framework.
Thomson Learning
© 2004
5-2
Organization Strategies for
Controlling the External
Environment

Establishing
Interorganizational Linkages:
 Ownership
 Contracts, joint ventures
 Cooptation, interlocking
directorates
 Executive recruitment
 Advertising, public relations

Thomson Learning
© 2004
Controlling the
Environmental Domain:

Change of domain
Political activity, regulation*
Trade associations*
Illegitimate activities*

* Cooperative / Similar Orgs



5-3
Changing Characteristics of
Interorganizational Relationships
Traditional Orientation:
Adversarial
New Orientation:
Partnership
Suspicion, competition, arm’s length
Trust, addition of value to both sides, high
commitment
Price, efficiency, own profits
Equity, fair dealing, both profit
Limited information and feedback
Electronic linkages to share key information,
problem feedback and discussion
Legal resolution of conflict
Mechanisms for close coordination, people on-site
Minimal involvement and up-front
investment, separate resources
Involvement in partner’s product design and
production, shared resources
Short-term contracts
Long-term contracts
Contract limiting the relationship
Business assistance beyond the contract
Thomson Learning
© 2004
5-4
Collaborative Network:
Dissimilar Organizations




Value Chain
Networks
Organizations +
Suppliers +
Distributors
Trust = Social
Capital
Embeddedness
Thomson Learning
© 2004
5-5
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
Thomson Learning
© 2004
5-6
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/
Thomson Learning
© 2004
5-7
Elements in the Population Ecology
Model of Organizations
Variation
Large number
of variations
appear in the
population of
organizations
Selection
Retention
Some
organizations
find a niche
and survive
Surviving
organizations
prosper and
become
institutionalized
in the
environment
Thomson Learning
© 2004
5-8
Thomson Learning
© 2004
5-9
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
© 2004
5-10
Niche Width Strategies

Specialist
- single-unit
- multiunit

Generalist
- single-unit
- multiunit

Polymorph
- multiunit
Thomson Learning
© 2004
5-11
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
Thomson Learning
© 2004
5-12
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
© 2004
5-13
What’s a Polymorph?


Biological term:
single species with
locally adapted subspecies
Example: birds of
same species
specialized to
variations in
available food along
vertical gradients in
habitat
Thomson Learning
© 2004
5-14
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
© 2004
5-15
Three Mechanisms for Institutional
Adaptation
Mimetic
Coercive
Normative
Uncertainty
Dependence
Duty,
obligation
Events:
Innovation
visibility
Political law,
rules, sanctions
Professionalism—
certification,
accreditation
Social
basis:
Culturally
support
Legal
Moral
Reasons to
become
similar:
Example:
Reengineering, Pollution controls,
benchmarking school regulations
Source: Adapted from W. Richard Scott,
Institutions and Organizations (Thousand Oaks,
Calif.: Sage, 1995).
Thomson Learning
© 2004
Accounting
standards,
consultant
training
5-16
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
© 2004
5-17
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
© 2004
5-18
Institutionalization:
Normative Forces



Pressures to achieve
professional
standards
Preferred techniques
versus required
regulations
(coercive)
Legitimacy seeking
Thomson Learning
© 2004
5-19