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<p>Interorganizational interactions involve many communication</p><p>Interorganizational Networks, Relational Contracting, Mergers, Acquisitions, Interlocking Boards of Directors, Charlie Dane, Transnational Business Community, Strategic Alliances, Simulation</p><p>Interorganizational Networks, Organization and Society, Sociology, David Knoke, Minnesota State University, USA<br /></p>
Typology: Lecture notes
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Spot market transactions ►
Relational contracting ►
Mergers & Acquisitions ►
Interlocking board directorates ►
Joint ventures & IJVs ►
Strategic alliances
(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?
A typical small interfirm production network is NYC better dress industry:
SOURCE: Brian Uzzi. 1997. “The Sources and Consequences of Embeddedness for the Economic Performanceof Organizations: The Network Effect.”
American Sociological Review
61:674698.
Do mergers worsen an acquirer’s economic performance?Media mergers have been particularly lousy performers:^ ►^ However, Boston Consulting Group study of 705 firms 1992-2002 found:Highly acquisitive companies had annual shareholder returns of 11.5%, aboutsame as 11.3% of firms with organic growth. The mixed-strategy group faredonly a little worse, with a 10.9% annualized return (vs. S&P 500’s 9.3%).
Vivendi bought Universal: stock price fell by 80% ► AOL-Time Warner: Shares -77%, $50B written off ► Vodaphone bought Mannesman: stock collapsed ► Disney bought, then wrote off several dot-coms
Other People’s Money^ Watch scenes from
Other People’s Money
(1991) starring
Gregory Peck, Penelope Ann Miller, and Danny DeVito.Larry “the Liquidator” Garfield tries a hostile takeover ofPeck’s money-losing New England Wire & Cable Co. Hewages a proxy fight to win control, but plans to sell-off themill. If successful, Larry and his backers will reap bigprofits but the W&C employees will all be put out of work.
A Transnational Business Community? Are transnational interlocks creating a “global capitalist class”?
The 176 largest global corps show modest interlocking:“… from 1970s to 1990s an Atlantic business systemdeveloped. However, Japanese firms were notintegrated into this network.” (Carroll & Fennema)For 1996, Figure 3 shows “…less of a concentration ofinterlocking among a few firms, and more inclusion ofFrench, Swiss, British & North American companies.”
Does a growing global concentrated of financial power viainterlocking corporate boards threaten popular control ofgovernments and economies in democratic nation-states?Could communication among interlocked directors lead tocollusion & illegal behaviors (price-fixing, stock manipulation)?
Strategic alliance:
An agreement among partnering firms that:
(1) remain legally independent;(2) share managerial control over performance of assigned tasks;(3) make resource contributions in strategic areas, e.g., inventing
technologies, manufacturing, or penetrating new markets; (4) agree on how to distribute any benefits resulting from their alliance.
Communication networks
can facilitate the
flow of information among potential partnersabout alliance opportunities. CEO friendships,board interlocks, professional ties can all serveas intelligence-gathering channels.Because
trust among partners
is so crucial for
success, communicating with partners-of-partners can help to verify past performance ormisconduct.
1: Simulation Master randomly assigns students to 3-person color-
coded orgs. Meet to decide your org’s division of labor – choosea CEO, Accountant, and Alliance Negotiator. 2: Negotiators communicate with other orgs’ CEOs to obtain
information about what resources they hold and their interest informing a strategic alliance. (How many of their resources wouldCEO be willing to exchange for the resources your org holds?) 3: Your org’s members meet to process information gathered by
your Negotiator. Identify possible target org(s) with which yourorg could form strategic alliance(s). 4: Negotiators form alliance with target org(s) CEO, by exchanging
resources (colored papers) to complete an alliance deal(s). 5: When time’s up, Accountants count acquired resources & report
to Simulation Master, who tallies results and declares a Winner.
Interorganizational networks take a variety of forms for different purposes.Drawing from the readings, lectures, videos, discussions, and/or yourparticipation in the Strategic Alliance Simulation, discuss EITHER:
(^ A) How can organizations use their communication networks toexchange information about other orgs’ resources, their interestsin forming a collaborative project, and their behavior in previousstrategic alliances? How could information acquired through suchnetworks help to improve organizational performance? OR
(B) How might interlocking directorates among large corporations,at the national and transnational levels, create a cohesivecapitalist class? In what ways could organizations belonging tosuch interlocking board networks obtain competitive advantages?
DUE in class Thursday, November 1
PAPER SPECS: Maximum word limit = 500, typed double-spacedwith one-inch margins, 12-point Times Roman font. Include yourname and student ID, Assignment #, and “Word Count = 000”