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Organizations and Organization Theory

Chapter Three: Interorganizational Relationships

Nowadays, organizations are trying to find the best way to deal with the todays chaotic
environment. The cost of doing business have raised because of the global competition and
rapid advances in technology. In this new economy, webs of organizations are emerging
developing special relationships with the environment. This chapter explores the most recent
trend in organizing, which is the increasingly dense web of relationships among

Organizational Ecosystems:
Interorganizational relationships are the relatively enduring resource transactions, flows, and
linkages that occur among two or more organizations.
Organizations are today evolving into business ecosystem. It is a system formed by the
interaction of a community of organizations and their environment.
Is competition Dead?
Mutual dependencies and partnerships have become a fact of life in business ecosystems.
Companies today may use their strength to win conflicts and negotiations, but in the end
cooperation carries the day.
The Changing Role of Management
In business ecosystems managers learn to move beyond traditional responsibilities of
corporate strategy and designing hierarchical structures and control systems. Managers think
about horizontal processes rather than vertical structures.
Interorganizational Framework
Relationships among organizations can be characterized by whether the organizations are
dissimilar or similar and whether relationships are competitive or cooperative.

Resource Dependence:
It represents the traditional view of relationships among organizations. Resource dependence
theory argues 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. Organizations succeed by encouraging independence and autonomy.
The amount of dependence on a resource id based on two factors:
Importance of the resource
How monopoly power those who control a resource have over its allocation and use
Organizations aware of resource-dependence tend to develop strategies to reduce their
dependence on the environment and learn how to use their power differences.
Resource Strategies: Purchase ownership in suppliers, developing long term contract or joint
ventures to lock in the necessary resources, or building relationships in other ways.
Power Strategies: as large companies can have power over small suppliers

Collaborative Networks :
The collaborative network perspective is a promising option to resource-dependence theory.
Companies join together to become more competitive and to share scare resources.
Why Collaboration?

Sharing risks when entering new markets, innovation, Problem solving, performance.
Interorganizational relations offer safety that encourages long term investment and risk
From Adversaries to Partners:
Traditional Orientation:

New Orientation:

Low dependence
Suspicion, competition, arms length

High dependence
Trust, addition of value to both sides, high

Detailed performance measures, closely

Price, efficiency, own profits

Loose performance measures, problems

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


Short-term contracts
Minimal involvement and up-front
investment, separate resources

Long-term contracts
Involvement in partners product design and
production, shared resources

Population Ecology:
A population is a set of organizations engaged in similar activities with similar patterns of
resource utilization and outcome. Today, organizations meet the new needs of society more
than established organizations that are slow to change. They appear to fill the niches left open
by established companies.
Organizational form and niche:
The population ecology is concerned with organizational forms.
Organizational form is an organizations specific technology, structure, products,
goals, and personnel, which can be selected or rejected by the environment.
Niche is domain of unique environmental resources and needs.
Process of ecological change:
The process of change is the population is defined by three principles that occur in stage:
1) Variation: The appearance of new, diverse form in a population of organizations
2) Selection: Whether a new organizational form is suited to the environment and can
3) Retention: Is the preservation and institutionalization of selected organizational forms.
Strategies for survivals:
Organizations and populations of organizations are engaged in a competitive struggle over
resources, and each organizational form is fighting to survive.
Generalist and specialist strategies distinguish organizational forms in the struggle for
Generalist: companies with wide niche and domain, offer broad range of products or
services or serve a broad market.

Specialist: provide narrower range of goods or services or serve a narrower market.

Institutionalism: => Devenir lgitime : des normes et valeurs

The institutional view argues that organizations need legitimacy from their stakeholders. The
institutional environment is norms and values from stakeholders. This view believes that
organizations adopt structures and processes to please outsiders.
The institutional View and Organization Design:
The institutional view is having technical and institutional dimension:
The technical dimension: The day-to-day work, technology, operating requirements.
The institutional dimension: The part most visible to outside public of the organization.