SOCI110 Module 5 - INTERORGANIZATIONAL RELATIONS

0.  OBJECTIVES

In this module you will learn about:

1.  ORGANIZATIONAL ECOSYSTEMS

The analogy of an "ecosystem" is used to describe the increasingly dense web of relationships among organizations.  Relationships among large firms in the information industry illustrate the notion of organizational ecosystem.

1.  Is Competition Dead?

Minicase:  Chrysler  (Daft 6the p. 523).  Chrysler transformed supplier relationships from adversarial to cooperative by eliminating supplier bidding and emphasizing long-term contracts

James Moore has noted a trend of decreasing competition in the traditional sense and increasing cooperation across organizational and industry lines, as illustrated by the example of Chrysler.

2.  Changing Role of Management

Evolution from top down management (concerned with the vertical hierarchy) toward horizontal management (concerned with relations across organizational boundaries, including customers and suppliers)

3.  Framework for Interorganizational Relationships

This framework organizes one current organizational trend (collaborative networks) and three theoretical approaches (resource dependence; population ecology; institutionalism) as the product of two dimensions: nature of organizational relationship (competitive <-> cooperative) and similarity of organizational types (similar <-> dissimilar).

Is this framework useful?

2.  RESOURCE DEPENDENCE

1.  Resource Dependence Approach

View that organizations try to minimize their dependence on other organizations for the supply of important resources and try to influence the environment to make resources available.

Dependence on a resource is based on:

  1. importance of the resource to the organization; EX:?
  2. how much discretion or monopoly power suppliers of resource have over its allocation and use; EX:?

2.  Resource Strategies

Strategies available to organizations to minimize resource dependence were examined in Module 4 (The External Environment).  These strategies fall into 2 categories (see Daft E4.8 p. 149):
1.  Interorganizational Linkages
(ownership; contracts & joint ventures [= strategic alliances]; co-optation & interlocking directorates; executive recruitment; advertising & public relations)
2.  Control of the Environmental Domain
(change of domain; political activity & influencing regulation; trade associations; illegitimate activities)

3.  Power Strategies

Large organizations have a power advantage (EX: Walmart vs. Rubbermaid; HMO in Washington State "boycotting" drugs from Merck and Pfizer)

Q - Which theory/approach argues that organizations try to minimize their reliance on other organizations for the supply of important resources and try to influence the environment to make resources available?

3.  COLLABORATIVE NETWORKS

A current organizational trend rather than a "theoretical perspective": tendency of companies to join together to share scarce resources and be more competitive; EX: the Peugeot/Renault/Volvo V-6 engine

1.  International Origins of Collaborative Networks

The keiretsu model; EX: Mitsubishi Minicase:  Mitsubishi  (Daft 6the p. 530).  Prime example of a keiretsu involving hundreds of companies connected through ownership, long term contracts, interlocking directorates, etc.

See also:
Minicase:  Toyota  (Daft p. 174)  Relates how production in Toyota factories had to be shut down after a fire detroyed the only supplier of a critical brake valve.  In a short time 50 companies part of Toyota's keiretsu were able to retool to restore production of the valves.

2.  From Adversaries to Partners

Collaboration trend in U.S. began in non-profit sector (social service and mental health organizations) and later spread to profit sector; EX: Empire Equipment; Volkswagen

Minicase:  Empire Equipment Co.  (Daft p. 176).  By using close technical collaboration with a supplier of filters and long term contracts Empire succeeded in reducing the cost of that component.

Minicase:  Volkswagen  (see Daft p. 177).  Plans for a VW assembly plant in Brazil illustrate an advanced partnership leading to "co-production" or a "modular consortium" involving 12 final assemblers of components; the ultimate collaborative network!

Q - "Keiretsu is a kind of Japanese ketchup."  (TRUE/FALSE?)

Q - Is the following characteristic of interorganizational relationships traditional (T) or new (N)?

4.  POPULATION ECOLOGY

(Perspective associated with the work of Michael T. Hannan and John Freeman, and Howard A. Aldrich at UNC)

1.  Adaptation & Selection

An important hidden assumption in most of the organizational literature: organizations are able to adapt to their environment.

Do they?

The population ecology (or organizational ecology) perspective replies: not always!  Organizations are subject to a lot of inertia that prevent them from adapting quickly to environmental fluctuations (e.g., because of "sunk costs"), and they often do not have enough information to adapt optimally (because of bounded rationality).

Therefore, organizational forms change in part by a process of selection (analogous to natural selection) in which new forms of organizations appear, and organizations that happen to be adapted to their environment (for whatever reasons) survive, while those that are not are eliminated.  EX: minimills in the steel industry

The process of change in a population of organizations is based on mechanisms of competition among organizational forms that can be described by a model of variation-selection-retention analogous to the theory of evolution by natural selection in biology

In explaining the success or failure of organizations, the population perspective emphasizes EX: The TIMEX Co had built clock timers for artillery shells during World War II, based on the pen level movement.  After the war it found a huge niche in the inexpensive watches market (in competition with the more expensive traditional jeweled movement), and captured 50% of the market at some point.  It later lost market share to new electronic watches (until it started making electronic watches too).

Q - (This is a "prospective" question, related to materials we will see later.)  Joan Woodward carried out a famous study of manufacturing firms (see Module 6).  Which finding of Woodward is relevant to the population ecology perspective on the limited role of management in explaining the success or failure of organizations?

2.  Organizational Forms, Niches, and Strategies

A crucial pattern: Specialists can be more efficient at exploiting their narrow niche, while generalists ("jacks-of-all-trades") may be better able to adapt in a rapidly changing environment.

Q - "The basic assumption of the population ecology model is that management competence is the most important factor in the survival of organizations."  (TRUE/FALSE?)

Q - "An organizational niche is a domain of unique environmental resources and needs."  (TRUE/FALSE?)

Q - In the population ecology model, which type of organization - specialist or generalist - is best able to adapt to a changing environment?

Q - Compare the population ecology dimension of specialism versus generalism with the mechanistic versus organic structural dimension.  What is the relationship between these 2 dimensions?

5.  INSTITUTIONALISM

1.  Institutional Perspective

Institutional perspective emphasizes the importance of legitimacy in the institutional environment for organizational survival The institutional perspective uses the concept of legitimacy to answer two major questions:
  1. Why is there so much homogeneity in the forms and practices of organizations?  EX: the ubiquitous bank lobby
  2. Why is part of organizational design apparently not subject to norms of rationality (i.e., a "facade")?  EX: the ubiquitous equal employment office

2.  Institutional Isomorphism

(= emergence of a common structure and behaviors among organizations in the same field)

Mechanisms of institutional isomorphism:

These are 3 main mechanisms causing organizations to become more similar: Q - Reconcile the 2 concepts with the 2 processes: Q - What is "benchmarking"?


Last modified 16 Sep 2001