Introduction

• Interdependence is central to inter-organisational relationships

• Likely to gain benefits not achievable in arms-length transactions through the market or via vertical integration

E.g. success of British supermarkets due to inter-organisational relationships with suppliers (Frances and Garnsey 1996)

• Develop organically as customer/supplier relationships become more long-term or through formal structures

• Managers must now consider activities and resources outside their company

• May be a mixture of inter-organisational relationships of differing importance

  • i.e. network of interconnected inter-organisational relationships

• Activities and resources so no longer be considered in isolation

Inter-organisational relationships- drivers and trends

• No consensus on the main drivers

  • Some argue environmental shifts

  • Some argue more gradual change

• Main drivers:

  • Globalisation

    • Fierce competition on a worldwide basis

    • Emergence of new business opportunities

    • Collaboration has become important

  • Rapid technological transformation

    • Previously, vertical integration was a successful strategy

    • More difficult to maintain expertise in all areas

      • Makes sense to outsource some

  • Increased technical complexity of the products

    • Deeper coordination between technologies

    • Hard to rely on own R&D

      • Must use suppliers knowledge

        • E.g. Apple relies on Samsung and other display technology providers for knowledge

• Formation of inter-organisational relationships is important for companies to share fixed costs and risks associated with these drivers

  • Creates barriers to entry for competition

• There are 2 general trends:

  • Closer business relationships

    • Illustrated by Cooper and Slagmulder (2004) in their study of buyer-supplier relationships in Japan

      • E.g. Komatsu and supplier Toyo Radiator had become closer over time

      • Integrated product development processes

      • Dedicated engineers worked more closely together

      • Shared machinery and product lines

      • Shared information about future products

    • Development of CRM and KAM (key account management) to support relationships

    • Development of more general managerial tools

      • E.g. JIT management, TBM (time-based management) and TQM (total quality management)

  • Outsourcing

    • Outsourcing has become more popular within large companies – Survey in Sweden (Bengtsson et al. 2005)

    • EVIDENCE: Purchasing costs have increased as a proportion of total costs within western companies

    • Need to focus on core competencies

    • May be necessary to maintain competitiveness by taking advantage of supplier’s technical knowledge

Inter-organisational relationships – dyads and networks

• Two forms of relationships:

  • Dyadic relationships

    • Vertical collaboration in the supply chain or horizontal collaboration between companies targeting the same customers

    • Technology licensing

    • Bi-lateral research consortia

    • Joint ventures

    • E.g. Volvo and Mitsubishi formed Dutch car manufacturing company NedCar

    • Isolated from network

  • Networks

    • Where inter-organisational relationships are interdependent

    • Characterized by the embeddedness of the actors

      • Often talked about – e.g. (Lind and Thrane 2005)

    • Can be bounded or unbounded

      • Bounded is a distinct organizational entity in itself

        • E.g. Consult.Net, a Danish consulting network comprising of nine small consulting firms (Mouritsen and Thrane 2005)

        • Bounded by goals, centre and companies within it attempted to achieve common network goals

      • Unbounded do not form distinct entities and does not have a network centre

        • E.g. Ericsson, and Telia who were interconnected with their own suppliers and competitors (Hakansson Lind 2004)

Inter-organisational control in dyadic settings

• 3 different types of management controls

  • Outcome controls

    • Measure, evaluate and reward the outcome or results of the relationship

    • Accounting measures are important outcome controls

    • E.g. Dekker (2004) identified measurement of cost reductions, goal...

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