Chapter Five

IntroductionRecent trends in organizing; increasing dense web of relationships among organizations.Dependence of companies on each other for supplies, materials and information.The issue at hand is how these relationships are managed.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

5-2Changing nature of CompetitionNo company can go it alone under constant onslaught of international competition, changing technology, and new regulations.Companies now need to coevolve with others in the ecosystem so that everyone gets stronger. Current perspectives: resource-dependence, collaborative networks, population ecology, and institutionalism.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

5-3Definition of Terms Ecology - natural balanceInstitutionalism: a social theory that focuses on developing a sociological view of institutions, the way they interact and the effects of institutions on society2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

5-4Changing Role of ManagementWithin business ecosystems managers learn to move beyond traditional responsibilities of corporate strategy and designing hierarchical structures and control systems.In this new world, mangers thinkabout horizontal processes rather than vertical structures.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

5-5Changing Role of ManagementRich environment of opportunities that grow from cooperative relationships with others.In this way, suppliers and customers become partners in business rather than adversaries.

2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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5-7A Framework of Interorganizational Relationships**Thanks to Anand Narasimhan for suggesting this framework.ResourceDependenceCollaborativeNetwork InstitutionalismPopulationEcologyOrganization TypeOrganizationRelationshipDissimilarSimilarCooperativeCompetitiveResource DependenceResource-dependency theory: organizations try to minimize their dependence on others for supply of important resources; thus pursue a path of independence and autonomy.Organizations do not want to become vulnerable to other organizations because of negative effects performance.2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

5-8Resource StrategiesReach out and control external sectors that threaten needed resources.Influence the domain by engaging in political activity, joining trade organizations, 2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

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5-10Changing Characteristics of Interorganizational RelationshipsTraditional Orientation:AdversarialNew Orientation:PartnershipSuspicion, competition, arms length

Price, efficiency, own profits

Limited information and feedback

Legal resolution of conflict

Minimal involvement and up-front investment

Short-term contracts

Contract limiting the relationshipTrust, addition of value to both sides, high commitment

Equity, fair dealing, all profit

Electronic linkages to share key information, problem feedback and discussion

Mechanisms for close coordination, people on-site Involvement in partners product design and production

Long-term contracts

Business assistance beyond the contract2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

5-11Elements in the Population Ecology Model of OrganizationsVariationLarge numberof variationsappear in thepopulation oforganizationsSelectionSomeorganizationsfind a nicheand surviveRetentionA feworganizationsgrow large andbecomeinstitutionalizedin theenvironment2000South-Western College PublishingCincinnati, OhioDaft, Organization Theory and Design 7/e

5-12Three Mechanisms for Institutional AdaptationExample:Accounting standards, consultant trainingPollution controls, school regulationsReengineering, benchmarkingMoralLegalCulturallysupportedSocialbasis:Professionalismcertification, accreditationPolitical law,rules, sanctionsInnovationvisibilityEvents:Duty,obligationDependenceUncertaintyReasons tobecome similar:NormativeCoerciveMimeticSource: Adapted from W. Richard Scott,Institutions and Organizations (Thousand Oaks,Calif.: Sage, 1995).