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Relations and Networks of organizations summary lectures and papers

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Tilburg University (UVT)

In this summary you can find all the things you need to know for the exam. It includes the lectures and all papers. Good luck!

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Relations and Networks of Organizations – lectures & papers

Lecture 1: introduction – 8 april
Article 1: Baker – What is social capital, and why should you care about it?
The myth of individualism & the relational basis of success
Social capital = the resources available in a through personal and business networks. Include
information, ideas, leads, business opportunities, financial capital, power and influence,
emotional support, even goodwill, trust, and cooperation.
“Social”: the resources are not personal assets; no single person owns them but reside in
networks of relationships. Access to social capital depends on who you know and who don’t.
“Capital”: it is productive, it creates value. E.g., information, business opportunities, power
trust, … no one can be successful, or survive, without it.

People belief they should be able to get along without social capital. Others pretend to thrive
without social capital and using it secretly. These beliefs and attitudes are rooted in the myth
of individualism: the cultural belief that everyone succeeds or fails on the basis of individual
efforts and abilities. Social capital is an essential part of achieving personal & business
success and a happy and satisfying life.

Social capital is not a feature of an entity (attribute variable), but it is a feature of a
relationship (relational variable)  social capital is assessable thru relationships.
Relational variables (says something about the relationship (trust, norms and values)) often
have an equal/higher explanatory power than attribute variables.

“The friction is that society consists of a set of independent individuals, each of whom acts
to achieve goals that are independently arrived at, and that the functioning of the social
system consists of the combination of these actions of independent individuals.”

IORs and IONs: a relational view of organizations
Interorganizational networks (IONs) are “relatively enduring transactions, flow, and linkages
that occur among and between an organization and one or more organizations in its
environment”
 Enduring (go on for some time) so, a spot transaction is not a relationship, because it is
one time. Things do through the network. Two or more organizations.

Relationships and networks of organizations are about the exchange and flow of resources
between organizations.
For an individual organization, relations and networks mean access to and dependency on
resources (e.g., information, ideas, reputation, trust).
The notion of ‘social capital’ captures the resources available through relationships and
networks, i.e., relational view of organizations.

Social capital and success: multi-level effect
To benefit from social capital, the first task is to unlearn the lessons of individualism, starting
by considering the role of networks in the ‘individual’ attributes people love to claim:
- Talent: nature or nurture? Relations are important for developing talents

, - Intelligence: genetically determined but also developed and
strengthened by relations (social interactions, quality of education)
- Education: writing and reading skills are a result of social interaction.
- Dedication/effort: supportive settings (e.g., friends and family)
- Chance/luck: the importance of ‘spider web networks’

Success is social, it depends on our relationships with others. All the ingredients of success
that we think of as ‘individual’ are intricately intertwined with networks.

Social capital and individual’s quality of life
Well-being: sensemaking work and social relations are important predictors of well-being.
Health: networkers are often healthier
Life expectancy: networkers live longer

Social capital in the economy
- Payment and career development: people who are strongly embedded tend to earn
higher salaries and experience faster career development (‘structural holes’)
- Raising financial capital: informal financial capital market
- Learning in organizations: informal relations and learning
- Marketing: verbal advertising, importance of social networks for diffusion of new
products
- Strategic alliances: importance of relationships between organizations (learning and
reputation effects)

IORs & IONs are the lifeblood of business
Networks are not always good for organizations.
Congo owns the most cobalt, but they are not rich.

Lecture 2: definitions, types and characteristics of relationships between organizations and
networks of organizations – 10 april
Organization & environment: a manager’s perspective
Environment and its components

This analysis is used by organizations to analyze their part in the environment.

Closed versus open systems
An organization is an open system and relates to its environment.
Closed systems do not relate to other organizations.

,Article 2 – Stern, Mitsuhashi & Oliver: Research on Interorganizational Relations (IORs) in
Administrative Science Quarterly (ASQ)
Social networks: a researcher’s perspective
The interorganizational problem
There are important differences between (social) networks within (intra) and between (inter)
organizations.
- Networks between business units inside one firm (intra) vs networks between
different firms (inter)
IORs display absence of ‘true’ hierarchy
- Absence of ‘boss’ >>> Implications for coordination, ownership, profit-sharing etc.
 when organizations work together it is hard to say who is in charge (is the boss).
An ad-hoc approach when there is no hierarchy = there is a boss and there are rules.

Inter organizational relations (IORs) = relationship between or among organizations that
involve the concrete exchange of products, services, and resources.

IORs & IONs as dependent variable
- Why do organizations form relationships with other organizations?
- How do IORs form, develop, dissolve and how are they managed?
- Which factors explain changes in network structure over time?
 Why, when and how organizations form linkages with other organizations.
IORs & IONs as independent variable
- What are the effects of IORs and IONs on the behavior / strategies of organizations?
- What are the effects of IORs on the outcomes of organizations?
- To what extent do different network structures impact on project success?
 why and how IORs determine organizational performance.

Why are IORs & IONs common? (Levine & White)
IORs are important for running organizations and achieving their goals. Why?
- Organizations lack all the necessary resources to attain their goals = resource deficit
o Resource deficit drives organizations to form ties with other organization to
obtain resources
o Organizations exchange resources (form IORs) to achieve mutual benefit
- These are the main elements of the exchange theory of IORs  if you give a gift you
also want something in return.

What factors affect interorganizational exchange relations?
- Organizational goals/functions (what resources do organizations ‘need’ for achieving
their goal?)
- Access to the necessary resources from outside the system  form ties based on the
needs
- If there is domain consensus: to what extent is there agreement on their claims to
pursue particular goals?  agree about the purpose when you work together.

IORs offer a way of reducing environmental uncertainty (Thompson)
Uncertainty is caused by limited control over external environment. Two ways for eliminating
environmental uncertainty:

, 1. Internal: designing organizational structures to produce a closed and stable system in
the core technology component.
2. External: organizations can make relations with other organizations more reliable and
predictable. Function of IORs: reduction of uncertainty in the task environment.
Two strategies to deal with environmental uncertainty/interdependency:
- Cooperative strategy  IORs: more demand then supply, minimize uncertainty,
adapt and mitigate. More benefit.
o To obtain reliable commitments from other actors (this requires making a
commitment in return).
o While such commitments reduce uncertainty, they also place constraints on
future action.
The principle of this strategy is to make relations with organizations in one’s task
environment more certain and more predictable by obtaining reliable commitments
form them: ‘an agreement between A and B, specifying that A will supply and B will
purchase, reduces uncertainty for both’.
- Competitive strategy  more economic
o Maintaining alternative resources (prevents concentration of power over the
organization)
o Seeking more power or prestige (gaining power without increased
commitment)
Since other organizations are interested in establishing and maintaining exchange
relationships with prominent organizations with an expectation that such relationship
endorse the quality of their products and services, prominent organizations are able
to exercise power over them and are thereby less likely to become dependent on
them.

Resource dependence theory (Pfeffer & Salancik)
Organizations are not self-sufficient and need to manage resource dependencies to reduce
uncertainties in their environment.
- Actors in the environment hold resources that the organization needs
- The greater the organization’s dependence on the resources of other actors, and the
lesser the availability of alternative sources, the greater the power of these actors
over the organization
- The actors use the political power to impose their interests & demands on the
organization.
 Power = the organization ability to force the organization that it doesn’t do otherwise.
Having access to resources gives power but can also create conflict. Can be coercive or not.

IORs & IONs aim (buffering and bridging):
- To access resources
- To stabilize outcomes / market rents
- To prevent environmental control
- To coordinate the respective interests of actors

Organizations, institutions and networks (DiMaggio & Powell)
Organizations compete for resources and customers, but also for political power, institutional
legitimacy (acceptance), social and economic fitness.

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