Chapter Five

Interorganizational Relationships

2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organization Theory and Design 7/e

5-

Introduction
Recent 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.

2000
South-Western College Publishing
Cincinnati, Ohio

5-2

Changing nature of Competition

No 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: resourcedependence, collaborative networks,
population ecology, and institutionalism.

2000

South-Western College Publishing

Cincinnati, Ohio

5-3

Definition of Terms
Ecology - natural balance
Institutionalism: a social theory that
focuses on developing a sociological view
of institutions, the way they interact and
the effects of institutions on society

2000
South-Western College Publishing
Cincinnati, Ohio

5-4

Changing Role of Management

Within 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.

2000
South-Western College Publishing
Cincinnati, Ohio

5-5

Changing Role of Management

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

2000
South-Western College Publishing
Cincinnati, Ohio

5-6

A Framework of
Interorganizational Relationships*
Organization Type
Dissimilar
Similar

Competitive

Resource
Dependence

Population
Ecology

Collaborative
Network

Institutionalism

Organization
Relationship
Cooperative

*Thanks to Anand Narasimhan for suggesting

this framework.

2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organization Theory and Design 7/e

5-7

Resource Dependence
Resource-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.

2000
South-Western College Publishing
Cincinnati, Ohio

5-8

Resource Strategies
Reach out and control external sectors that
threaten needed resources.
Influence the domain by engaging in
political activity, joining trade
organizations,

2000
South-Western College Publishing
Cincinnati, Ohio

5-9

Changing Characteristics of
Interorganizational Relationships
Traditional Orientation:
Adversarial
Suspicion, competition, arms length
Price, efficiency, own profits

New Orientation:
Partnership
Trust, addition of value to both sides, high
commitment
Equity, fair dealing, all profit

Limited information and feedback

Legal resolution of conflict

Electronic linkages to share key information,

problem feedback and discussion
Mechanisms for close coordination, people on-site

Minimal involvement and up-front

investment
Short-term contracts

Involvement in partners product design and

production
Long-term contracts

Contract limiting the relationship

Business assistance beyond the contract

2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organization Theory and Design 7/e

5-10

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

A few
organizations
grow large and
become
institutionalized
in the
environment

2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organization Theory and Design 7/e

5-11

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
supported

Legal

Moral

Pollution
controls, school
regulations

Accounting
standards,
consultant
training
5-12

Reasons to
become
similar:

Example:

Reengineering,
benchmarking

Source: Adapted from W. Richard Scott,

Institutions and Organizations (Thousand Oaks,
Calif.: Sage, 1995).

2000
South-Western College Publishing
Cincinnati, Ohio
Daft, Organization Theory and Design 7/e