INTERORGANIZATIONAL RELATIONS: STRATEGIC ALLIANCES At the organizational level of analysis, network...
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Transcript of INTERORGANIZATIONAL RELATIONS: STRATEGIC ALLIANCES At the organizational level of analysis, network...
INTERORGANIZATIONAL RELATIONS: STRATEGIC ALLIANCES
At the organizational level of analysis, network theories examine interorganizational relations (IOR). Emergent properties arise when orgs interact, exchange, bargain, compete, collaborate, ...
Network theorists try to explain origins and consequences of IOR ties.
Requires new theoretical concepts (e.g., governance forms)?
Are IORs simply the aggregation of individuals’ relations?
Do organizations have motives & emotions, interests & goals? Can orgs trust one another, or is trust only among people?
How do persons occupying role of organizational agent behave differently than when acting as self-interest individuals?
What cross-level person-organization relations are important?
Org’s ties to employees, shareholders, customers/clients
Varieties of Interorg’l NetworksInterorg’l interactions involve many communication & exchange relations, creating various types of interorganizational networks:
► Spot market transactions
► Relational contracting
► Mergers & acquisitions
► Interlocking board directorates
► Joint ventures & IJVs
► Strategic alliances
Network analysts examine relational contents & structural forms among interconnected organizations. They seek to explain:
(1) Which orgs decide to form interorg’l relations & what types of ties?
(2) What are the patterns of interorg’l communication & resource exchanges in those networks? What density, centralization, etc.?
(3) How do networks shape org’l behaviors & performance outcomes?
Where Do IOR Come From?IOR originate in combinations of environmental constraints and endogenous network structures that generate new social-economic relations intended to acquire control of resources & maximize org’l performances (profit, R&D innovation, sales,regulatory autonomy)
Relational Embeddedness
Structural Embeddedness
Positional Embeddedness
Structural Differentiation
Strategic Interdependence
NETWORKFORMATION
Gulati & Gargiulo dynamic model with endogenous feedback loop from present network structure (past alliances, common 3rd parties, joint centralities) to transform future alliances:
Optimizing IOR BenefitsOrgs often cooperate as well as compete with the same orgs. Which network forms optimize an org’s IOR benefits, such as profits, market share, growth, legitimacy, political support?
Network closure – Closely knit ties among org’l set facilitates trust, cooperative exchanges, & collective action; safeguards against information asymmetries & opportunism (deception; “self-interest with guile” - Williamson)
Network diversity – Sparse ties to orgs not linked to current partners span structural holes to gain brokerage benefits, access diverse resources, and learn innovative ideas
Contingency H: Alternative forms of IOR networks are better suit to achieving different organizational objectives:
(1) Close-knit networks optimize benefits from collaboration
(2) Diverse networks optimize gains from competitive benefits
An Org-Field TheoryIOR analyses also focus on explaining relational structures at the complete network level, disregarding individual persons or orgs.
Kenis & Knoke (2002) combined organizational field with network properties to develop a field-net explanation of aggregate change
Communication ties (info exchanges) are the primary IOR, a necessary prerequisite to future interfirm collaborations
Changes in the communication network’s formal properties (density, centralization) alter opportunities for firms to find available partners
Rates of change vary nonlinearly, initially accelerating with changes in communication network structures, then slowing with saturation or ceiling effects
But, given its heavy longitudinal data demands, how testable is this so-called “theory”?
Networks Change AlliancesChanges in the formal properties of an organizational field’s communication network generate nonlinear rates of change in interorganizational tie-formation rates (e.g., strategic alliances):
DENSITY
RECIPROCITY
TIE CONFIRMATION
CONNECTIVTY
CENTRALIZATIONRATE OF STRATEGIC ALLIANCE FORMATION
MULTIPLEXITY
SUBGROUP COHESION
HIERARCHY
Strategic Alliances
Strategic alliance: at least two partner firms that (1) remain legally independent; (2) share benefits, managerial control over performance of assigned tasks; (3) make contributions in strategic areas, e.g., technology or products (Yoshino & Rangan 1995)
Between market relations & org’l hierarchies reside several short-lived, hybrid forms of interorganizational relationships
Hierarchical Relations
---------------------------------------------------------
JOINT VENTURES COOPERATIVES EQUITY INVESTMENTSR&D CONSORTIASTRATEGIC COOP. AGREEMENTSCARTELSFRANCHISINGLICENSINGSUBCONTRACTOR NETWORKSINDUSTRY STANDARDS GROUPSACTION SETS
---------------------------------------------------------Market Relations
SA governance forms vary in the types of legal and social mechanisms that coordinate and safeguard the alliance partners’ resource contributions, allocate their joint administrative responsibilities, & divide the rewards from their collaboration (Todeva and Knoke 2003)
Micro-Managing Alliances
Communication networks can facilitate flows of information among potential partners about alliance opportunities. CEO friendships, board interlocks, professional ties can all serve as intelligence-gathering channels. Because trust among partners is so crucial for success, communicating with partners-of-partners can help to verify past performance or misconduct.
Evolutionary processes induce IOR as repeated experiences raise partners’ familiarity. Growing trust [among org agents?] lowers transaction costs by eliminating the need for written contracts as safeguards against opportunism (Ring & Van de Ven 1994; Gulati 1995)
o NYC dress firms used embedded social ties to conduct business transactions requiring coordinated, nonmarket problem-solving (Uzzi 1997)
o Cellular firms found potential new partners through interpersonal contacts of their managers participating in technical committees (Rosenkopf et al. 2001)
o In alliance implementation, institutionalized procedures build trust and mutual obligations vital for success of projects governed jointly by autonomous firms (Larson 1982)
Strategic Alliance NetworksRepeated alliances among orgs create strategic alliance networks
Strategic alliance network “set of orgs connected through their overlapping partnerships in different strategic alliances” (Knoke 2001:128; Todeva & Knoke 2002). Firms are closely tied to one another through many direct alliances or many indirect ties through third firms (i.e., partners-of-partners).
A firm’s strategic alliance network ties increases probability of accessing and using valuable resources held by the firm’s partners, including their:
Financial resources, credit extensions
Knowledge, information, technologies and patents
Marketing expertise, country/culture penetration
Organizational status, corporate, & brand reputations
Trustworthiness & lower risk (but also moral hazards)
Global Information Sector
Basic CSC concepts could help to explain the evolution of the strategic alliance network in the Global Information Sector (GIS). This sector increased collaborative agreements exponentially 1990-2000, creating a complex web of overlapping partnerships.
Five NAICS info subsectors (publishing; motion pictures & sound recording; broadcasting & telecomms; info services & data processing) plus computer, telecomm, semiconductor manufacturing industries
145 multinational corporations: 66% USA, 16% Europe, 15% Asia Alliance & venture announcements in news media, 1989 to 2000 Total of 3,569 alliances involving two or more GIS organizations
Next two figures show mean strategic alliances among 30 most-active firms & MDS distances/clusters on dyads’ # of annual partnerships.
Altho Japanese firms have higher probability of mobilizing resources from compatriots, what difficulties may they be creating for themselves by concentrating their strategic alliances so heavily among other Japanese firm partners?
GIS Core Alliances in the Triad
J apan-Europe
Europe-USA
USA-J apan
Europe
J apan
USA
ME
AN
AL
LIA
NC
ES
6
5
4
3
2
1
0
Y R91
Y R95
Y R00
1991 GIS (MDS Stress = 0.102)
1.5.5-.5-1.5
1.0
0.0
-1.0
TOSHIBA
TI
SUN
SONY
SIEMENS
PHILIPS
ORACLE
NTT
NOVELLNEC
MOTOROLAMITSUBISHI
MICROSOFT
MATSUSHITA
INTEL
IBM
HP
HITACHI
FUJITSU
FT
ERICSSON
COMPAQ
CISCO
BT
BS
BCE
ATT
APPLE
SAMSUNG
1995 GIS (MDS stress = 0.142)
1.81.51.31.0.8.5.3.0-.3-.5-.8-1.0-1.3-1.5-1.8-2.0-2.3
1.5
1.0
.5
0.0
-.5
-1.0
-1.5
TOSHIBA
TI
SUN
SONY
SIEMENS
SAMSUNG
PHILIPS
ORACLE
NTT
NOVELL
NEC
MOTOROLA
MITSUBISHI
MICROSOFT
MATSUSHITA
INTEL
IBM
HPHITACHI
FUJITSU
FT
ERICSSON
COMPAQ
CISCOBT
BS
BCE
ATT
APPLEAOL
2000 GIS (MDS stress = 0.137)
2.01.51.0.50.0-.5-1.0-1.5-2.0
2.0
1.5
1.0
.5
0.0
-.5
-1.0
-1.5
TOSHIBA
TI
SUN
SONY
SIEMENSSAMSUNG
PHILIPS
ORACLE
NTT
NOVELL
NEC
MOTOROLA
MITSUBISHI
MICROSOFTMATSUSHITA
INTEL
IBM
HP
HITACHI
FUJITSU
FT
ERICSSON
COMPAQ
CISCO
BT
BS
BCE
ATT
APPLE
AOL
Gulati, Ranjay and Martin Gargiulo. 1999. “Where Do Networks Come From?” American Journal of Sociology 104:1439-1493.
Kenis, Patrick and David Knoke. 2002. “How Organizational Field Networks Shape Interorganizational Tie-Formation Rates.” Academy of Management Review 27:275-293.
Knoke, David. 2001. Changing Organizations: Business Networks in the New Political Economy. Boulder, CO: Westview.
Todeva, Emanuela and David Knoke. 2002. “Strategische Allianzen und Sozialkapital von Unternehmen.” (“Strategic Alliances and Corporate Social Capital”) Kölner Zeitschrift für Sociologie und Sozialpsychologie. Sonderheft 42:345-380.
Yoshino, Michael Y. and U. Srinivasa Rangan. 1995. Strategic Alliances: An Entrepreneurial Approach to Globalization. Cambridge, MA: Harvard University Press.
References