Interorganizational

relationships
Daniela Pianezzi
daniela.pianezzi@univr.it

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In the previous lessons...

 Organizations studies: theories and key concepts

 Fundamentals of organization structures
 Organization as open systems : the external
environment
 Organization size, life cycle, and decline
 Organization culture and control
 Today's lesson: Interorganizational relationships!

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Learning objectives

 Understanding what is meant by organizational

ecosystem and its importance;

 Understanding the role of management in an

ecosystem;

 Critically understanding the theories of

interorganizational relationship (i.e. resource-
dependence theory, collaborative networks,
population ecology and institutionalism);

 Understanding different practices of

interorganizational relationships;
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The traditional perspective

A recent trend in organizing is the increasingly dense web of

relationships between organizations.

Resource Dependence:
managers in 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

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The traditional role of management

From the perspective of the theory of resource dependence,

managers almost exclusively rely on operational roles:

 Traditional vertical hierarchy

(top-down management)
 Direct control over individuals
and resources

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Resource Strategies

More Property
control  Acquisition/merger
 Joint venture

Formal agreement
 Strategic alliance
 Procurement
 Trade

Informal agreement
Less  Interlocking directorships, where for example
control boards of directors include members of the
boards of supplier companies

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An example

Walt Disney Pictures has acquired Lucasfilm, producer of the Star Wars
films, Disney subsidiaries also include Pixar, Marvel and ABC.

Disney has imposed a number of

restrictions (eg., showing in major
theaters for at least 4 weeks) on
cinemas for the screening of the movie
Star War: The Last Jedi . A breach of
the agreement resulted in the payment
of an additional 5%

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The characteristics of traditional interorganizational
relationships
Detailed
Suspicion,
performance
Low dependence competition, arm’s
measures, closely
length
monitored

Price, efficacy, own Minimal involvement

profits, limited Legal resolution of and up-front
information and conflict investment, separate
feedback resources

Contract limiting the

Short-term contracts
relationship

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Global Challenges

Organizations operate in a complex business environment.

Some decisive changes:
 Globalization: competition and new business opportunities;
 Technological innovation;
 New forms of communication;
 Innovation in transportation systems;

In the public sector: public deficit.

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Organizational change

In recent decades, development and growth of relationships

between organizations.

Interorganizational
relationships are the
relatively enduring resource
transactions, flows and
linkages that occur among two
or more organizations

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New Concepts

A organizational ecosystem is a system formed by the

interaction of a group of organizations and their environment.
An ecosystem cuts across traditional industry lines.

Megacommunity: companies, governments, and non-profit

organizations operating in different sectors come together to
tackle significant and urgent problems of mutual interest, such
as energy development, world hunger or cybercrime.

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 Some examples (1)

The Accelerating Medicines Partnership

group is a public-private partnership
between the National Institutes of Health
(NIH), the U.S. Food and Drug
Administration (FDA), multiple
biopharmaceutical and life science
companies, non-profit and other
organizations to transform the current
model for developing new diagnostics
and treatments.
The competition resumes as soon as the
results are made public.
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Some examples (2)

Komatsu & Toyo Radiator

Cooper and Slagmulder (2004): relationship between the buyer
(Komatsu) and its supplier (Toyo Radiator):

 Information sharing about future products early in the product

development process
 Dedicated team of engineers working closely together to develop
each other’s products
 Managerial tools such as JIT foster a closer and long-term
relationship.

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A new managerial approach

A new form of competition is intensifying but it is one that involves clusters of

businesses competing with other clusters. New managers need to look beyond the
boundaries of their company and build relationships with a network of partners.

Broader leadership role

and collaborative relationships:

 Not always direct authority

 Flexibility and proactivity as new values
 Importance of interpersonal communication
 Managers think about horizontal processes in addition to vertical structures

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New theorical approaches

There are different theoretical

views of interorganizational
relationships which
distinguish:
1. whether the organizations
are dissimilar or similar;
2. whether relationships are
competitive or
cooperative.

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Collaborative
networks
New theoretical approaches
The characteristics of collaborative networks

 Companies join together to become more competitive and to

share scarce resources.
 This model is based on the trust and interdependence of
organizations, and not on their independence.
 It is characterized by massive sharing of information, to provide
feedback and solve problems.

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The public sector has witnessed many changes

In the last decades, OECD countries have started adopting the following
practices:

Open government: Decentralization of

•Development of
performance metrics
•Accountability for results
•From controlling ex-ante to
ex-post monitoring of
outcomes and outputs
transparency, accessibility and responsibilities to lower levels of
consultation/participation government.
More discretion to managers
in the allocation of financial and
Growing use of spending
reviews
non-financial resources
Private and public collaborate closely

The public sector is influenced by the complementary role played by the

private sector.

Diffusion of public-private partnerships (PPPs): greater use of private financing

and management for public sector capital infrastructure.
E.g. Private Finance Initiative (PFI) in UK.

Since the 1980s, diffusion of PPPs in almost all EU countries and in many
sectors (mainly transport projects and urban development).
The rise of public-private partnerships

A PPP is an approach to delivering public services that involves the private

sector.

LONG DURATION ALLOCATION OF

PUBLIC-PRIVATE METHOD OF
FINANCING MAINLY RISKS
COLLABORATION
PRIVATE

The responsibility for the project is ultimately of the public entity that needs to
make sure that the private entity ensure the quality of the service

The contract generally foresees some penalties

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An example : PPPs

The Metro5 of Milan

 In 2006, the municipality of Milan awarded the
company Metro 5 spa with the design, construction
and management of Line 5 of the underground, the
first example of Project Financing Driverless in Italy.
 Project Financing is a Public-Private Partnership
(PPPs) tool that allows the financial participation of
private individuals in project of public relevance.
 Metro 5 SpA is the company established by Alstom
Ferroviaria SpA, Astaldi SpA, ATM SpA, Ferrovie dello
Stato Italiane SpA, Hitachi Rail SpA and Hitachi Rail
STSS.pA

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A collaborative approach

The private entity offers its managerial, commercial and innovative skills,
obtaining a profit.

The public entity obtains a reduction in its overall financial commitment and can
benefit from the capabilities of the private sector in order to improve the quality of
the services provided. 22
Let’s reflect on PPPs

In group, discuss the nature of Public-Private

Partnerships and identify:
- 2 limitations
- 2 advantages
The characteristics of partnerships

Trust, addition of value Loose performance

High dependence to both sides, high measures, problems
commitment discussed

Electronic linkages to
Mechanisms for close
Equity, fair dealing, share key information,
coordination, people
both profit problem feedback and
on site
discussion

Involvement in
partner’s product Business assistance
Long-term contracts
design and production, beyond the contract
shared resources

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The benefits of partnerships

 Risk sharing
 Access to sectors and technologies
 Greater innovation, problem solving and
performance
 Exchange of knowledge
 Access to markets and customers
 Collaborations between large and small
organizations
 Complex problems require complex solutions
(eg Smart city)

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The challenges of the partnership

 Fragmentation of the processes;

 Need to define responsibility and accountability;
 The public entity could lose political power over policy-making and
public services;
 Citizens might become mere 'users'
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An example : PPPs in smart cities
Population Ecology
New theoretical approaches
Let's start with an example ...

Founded in 1865, Nokia was born in

Finland.
 2007: the lost challenge on smartphones.
Apple presents the first Iphone.
 2010: Samsung surpasses Nokia as the top
mobile phone maker.
 2011: the agreement with Microsoft for the
Windows Phone license. The Lumia 800
debuts.
 2013: Microsoft buys Nokia's device division.
 2017: The company launches the Nokia 8.

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Let's start with an example ...

Interesting videos : https://www.youtube.com/watch?v=_xui1EQgAxo ;

https://lab24.ilsole24ore.com/cellulari/

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Population Ecology

The population ecology perspective focuses on organizational

diversity and adaptation within a population of organizations.

A population is a set of
organizations engaged in similar
activities with similar
patterns of resource utilization
and outcomes.

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The Process of Ecological Change

The population-ecology model is developed from theories of natural

selection in biology, and the terms evolution and selection are used to refer
to the underlying behavioural processes.

Variation Selection Retention

Large number of variations Some organizations A few organizations grow large

appear in the population of find a niche and and become institutionalized in
organizations. survive. the environment.

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Variation
From the perspective of population ecology, when looking at a population of
organizations as a whole, it is the changing environment that determines
which organizations survive and which fail.

Innovation and change in a population of organizations take place through

the birth of new forms and kinds of organizations more than by the reform
and change of existing organizations.

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Selection (1)

There are many limitations to organizations' ability to change:

 heavy investments in plants, machinery and specialized
personnel, limited information, deep-rooted opinions of decision
makers, the organization's success story justifying current
procedures, difficulty in changing corporate culture.

No company can consider itself immune to social changes:

 technology has brought about profound environmental changes,
condemning numerous outdated organizations to decline and
leading to a proliferation of new companies.

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Selection (2)

An organizational model consists of an organization's specific set

of technology, structure, products, goals, and personnel that can
be accepted or rejected by the environment.
 Each new organization tries to find a niche (a field of action
characterized by characteristic environmental resources and
needs) that is sufficient to support it.
 The niche is usually small in the early stages of an
organization's life, but can grow in size over time if the business
is successful.

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Survival

Generalist model Specialist model

Organizations with a wide niche or Organizations that provide a
domain, that is, those that offer a narrower range of goods or services
broad range of products or services or that serve a narrower market
or that serve a broad market, are are specialists
generalists.
FLEXIBILITY COMPETITIVENESS

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Consolidation

A limited number of organizational forms

becomes a general norm, it becomes
institutionalized within the environment

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Unanswered questions by the population ecology
theory

 How such changes are ‘demanded’ by the environment. What

accounts for the changes and how are the demands conveyed
to organizations?
 How organizations comprise much of the ‘environment’ and
actively exert effects on its development?
Institutionalism
New theoretical approaches
The institutionalism

DiMaggio & Powell,1983

 In the early stages of their life cycle, organizations appear
diverse;
 However, there forces that result in organizations in a similar
population looking like one another;
 Organizations survive and succeed through ensuring
congruence between an organization and the expectations from
its environment, comprising norms and values from
stakeholders.

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The institutional environment

 it is made up of norms and values of the various stakeholders. The institutional

environment reflects what society considers the correct ways of organizing and
behaving.

The legitimacy

• the general perspective that an organization’s actions are desirable, proper and
appropriate within the environment’s system of norms, values and beliefs.

The isomorphism

• it is the process of making organizations facing the same set of environmental

constraints similar to each other.

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Institutionalism at a glance

There are three mechanisms for institutional adaptation:

Mimetic Coercive Normative
Reason to become Uncertainty Dependence Obligation, duty
similar:
Events: Innovation visibility Political – law, rules, Professionalism –
sanctions certification,
accreditation
Social basis: Culturally supported Legal Moral
Examples: Re-enginering, Pollution controls, Accounting standards,
benchmarking school regulations consultant training

In practice it is not easy to distinguish the 3 types of isomorphism (they could be active at the same time)!
© 2021 Maggioli spa 42
Mimetic Institutionalism

Organizations seek to emulate (or copy) practices used by other

organizations that are perceived as innovative and successful.

Uncertainty is a powerful force that

encourages imitation.

Desire to maintain or increase

competitive advantage (in terms of
legitimacy)

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Coercive Institutionalism

Organizations change their institutional

practices due to pressures (both formal
and informal) exerted by powerful
stakeholders - such as creditors,
customers and owners - on which they
depend (resources, laws, etc.) and cultural
expectations in society.

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Normative Institutionalism

Organizations change their institutional practices due to pressures (both

formal and informal) arising from the norms, identities and values of the
professional group.

Professionals have to
compromise with other groups,
auditors, regulators, etc.

‘Normative forces’ might equally be characterized as institutionalized

coercive forces. Their influence is more subtle but no less potent!
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A critical reflection on isomorphic behaviour
Isomorphic processes do not necessarily lead to an increase in
efficiency.

Rewards for being similar to others:

 easier transactions
 opportunity to attract good people
 recognized as legitimate and respectable
 eligibility for grants and public and private contracts

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Takeaway messages of today

 Organizations are thriving through collaborative relationships;

 Inter-organizational relationships require new managerial skills;
 Changes in the environment can pave the way for the
emergence and development of new organizations;
 Organizations seek legitimacy in the external environment;

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In the next lesson...

1. Organizations studies: theories and key concepts

2. Fundamentals of organization structures
3. Organization as open systems : the external environment
4. Organization size, life cycle, and decline
5. Organization culture and control
6. Interorganizational relationships
7. Business ethics & social impact!

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Bibliography

 Cooper, R., & Slagmulder, R. (2004). Interorganizational cost management and relational
context. Accounting, organizations and society, 29 (1), 1-26.
 Daft et al. (2021). Organization Theory & Design. An International Perspective.
Singapore, Seng Lee Press.
 Broadbent, J., Gill, J., & Laughlin, R. (2003). Evaluating the private finance initiative in the
National Health Service in the UK. Accounting, Auditing & Accountability Journal , 16 (3),
422-445.
 DiMaggio, PJ, & Powell, WW (1983). The iron cage revisited: Institutional isomorphism
and collective rationality in organizational fields. American sociological review , 147-160.
Daft, RL (2019) . Business organization, Cap . 5

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