Managing Inter-Organizational Collaborations

Process Views

Jörg Sydow, Hans Berends, Jörg Sydow, Hans Berends

• Publisher: Emerald Publishing Limited
• Year: 2019
• ISBN:
  9781787565937
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

This volume contains two Open Access Chapters.
Volume 64 of Research in the Sociology of Organizations takes stock of research on processes of inter-organizational collaboration and explores new topics that call for inquiry. It shows that inter-organizational collaboration is becoming more varied and fluid. Traditional strategic alliances and consortia are still around, but these are complemented with new forms of collaboration, often enabled by emerging digital technologies.
The volume is organized in three parts. The first set of chapters focus on relational dynamics of inter-organizational collaboration. Process views of inter-organizational collaboration investigate the relational embeddedness of interactions, the development and change of relations, and how relationships are constituted as processual phenomena. The second part of this volume addresses organizational dynamics in collaboration processes. Organizations themselves are not stable in any collaboration: just as collaboration is fluid, also organizations continuously change, and intra-organizational dynamics are key to understand external collaboration. Third, this volume addresses new phenomena in the changing landscape of inter-organizational collaboration, thereby laying out directions for future inquiry.

PART I

RELATIONAL DYNAMICS IN INTER-ORGANIZATIONAL COLLABORATION

CHAPTER 1

RELATIONAL BONDS UNDERLYING COOPERATIVE INTER-ORGANIZATIONAL RELATIONS IN DIFFERENT SOCIETAL CONTEXTS

Peter Smith Ring and Andrew H. Van de Ven

ABSTRACT

This chapter examines three kinds of relational bonds (trust-based commitments, forbearance-based commitments, and apprehension-based commitments) on which parties rely in the processes employed in negotiating, committing, and executing their cooperative inter-organizational relationships (CIORs). It also considers three different societal contexts with strong, moderately strong, and weak exogenous governance safeguards in which these relational bonds are employed. The authors propose a process theory of relational bonds that fit different contexts. Specifically, our central proposition is that parties to CIORs are more likely to achieve their goals when they rely on relational bonds that fit their societal contexts in which they engage in economic exchanges.

Keywords: Relational bonds; commitment; cooperation; process theory; trust; society

INTRODUCTION

Literature reviews reveal significant gaps in what is known about the nature of commitments underlying economic exchange between parties from different institutional cultures and countries (de Rond, 2003; Grandori, 2018; Parkhe, 2004). Most of our theories of economic exchange rely either on institutional rules (North, 1990; Williamson, 1985) and/or trust among parties (see, e.g., Bachmann & Zaheer, 2006; McEvily, Zaheer, & Kamai, 2017) to govern their commitments, and most of the research on cooperative inter-organizational relationships (CIORs) has focused on firms from countries with the same or similar institutional governance structures. Largely missing from this analysis are studies of what relational bonds parties might rely upon when they come from contexts with different institutional governance structures and different cultural understandings of trust. In this global economy, there is growing need to examine the roles of culture and institutions in decisions of whether and how to undertake economic exchanges, and what kinds of commitments to rely upon in binding relationships.

Our primary focus in this chapter is on the processes employed by parties associated with CIORs, which have become increasingly varied in their objectives, in the blend of partners, and in their governance. They are taking place between firms from very different cultures and national institutions (Khanna & Palepu, 2000; Steensma, Tihanyi, Lyles, & Dhanari, 2005). CIORs involve governance as diverse as pledges, joint ventures, minority investments, and relational or recurrent contractual relationships (Gulati & Singh, 1998; Zhou & Poppo, 2010), and have been called everything from strategic alliances, partnerships, coalitions, joint ventures, franchises, and research consortia to various forms of networked organizations (Gulati & Nickerson, 2008).

Three social and economic trends require the need to examine the institutional governance arrangements of varying societal contexts in which parties negotiate, commit, and execute CIORs. First, in the face of explosive growth in near-shoring, off-shoring, outsourcing, strategic alliances, and networks, reliance on long-term, stable relationships are an increasingly important, even essential, organizing principle for doing business (Bertrand & Mole, 2013; McEvily, Perrone, & Zaheer, 2003; Mishra, Sinha, & Thirumalai, 2018). Reliable partners in such circumstances are likely to be at a premium. Thus, assumptions in theories such as agency, transaction costs, and resource dependence (among others) that posit the existence of purely competitive market-like conditions for most economic exchanges need to be tested in particular cases. Parties to CIORs, increasingly, come from markets that are not purely competitive.

Second, despite the immense appeal and importance of trust as a relational bond for inter-organizational relationships, extensive evidence indicates that “trust” is often not present in economic exchanges (e.g., Ariño & de la Torre, 1998; Parkhe, 1998). In fact, manifestations of distrust frequently are present (Lewicki, McAllister, & Bies, 1998; McEvily et al., 2017). Further, trust appears to be declining in many societies and organizations (see, e.g., Bruhn, 2001; Harrington, 2017).

For example, in a survey conducted in 1995 by the Washington Post, Harvard University and the Kaiser Family Foundation find that America is becoming a nation of suspicious strangers. This mistrust was seen as a major reason Americans had lost confidence in the federal government and virtually every other major institution – health professions, corporate business, education, churches, and Wall Street (Brossard, 1996; Bruhn, 2001, p. 35). It also observed that: “Changes in the work environment over the past 2–3 decades have significantly altered how we trust organizations, our bosses and coworkers.” In the past, there was such a thing as lifetime employment. Corporations assumed responsibility for career development, and employees believed that their employer would act in their best interests. Having experienced massive restructurings, mergers, layoffs, outsourcing, growing wage disparities between executives and workers, excessive greed by executives and investors, employment has become more transactional in the so-called “sharing economy” where the security of employment is being replaced by independent contractors (Tomi, Pfeffer, Rong, & Van de Ven, 2019). We will argue that the kinds of “relational bonds” assumed to be operating in particular exchanges need to be more clearly spelled out.

Third, in an increasingly global and sharing economy, the parties engaged in many business relationships are from countries and regions, and are embedded in different institutional cultures, that rely on relational bonds other than trust-based commitments (Hyder & Gebrekidan, 2006; Parkhe, 2004). Research on CIORs, in general, and trust-based commitments, in particular, have largely ignored the importance of newly emerging differences in cultural and geopolitical contexts. As a consequence, little effort has been made to determine if the types of relational bonds and associated commitments employed in economic exchanges among parties from different cultures. This “new world” suggests that old assumptions about these topics need to be reexamined and a new mapping of them may be required.

The three trends just addressed represent significant challenges, as well as opportunities, for advancing our understanding of the nature and types of relational bonds that underpin the governance and management of economic exchanges. This chapter develops a conceptual framework of relational bonds that take these trends into consideration. The framework examines three kinds of relational bonds (trust-based commitments, forbearance-based commitments, and calculative apprehension-based commitments). It also considers three different societal contexts with strong, moderately strong, and weak exogenous governance safeguards in which these relational bonds are employed. As illustrated in Fig. 1.1, we propose a process theory of CIOR relational bonds that fit different contexts. Specifically, the central proposition that we will argue is the following.

P1. Parties to CIORs are more likely to achieve their goals when they rely on relational bonds that fit their societal contexts in which they conduct their economic exchanges, as follows: (a) trust-based commitments in strong established institutions, (b) forbearance-based commitments in moderately strong emerging institutions, and (c) apprehension-based commitments in contexts with weak legally enforced exogenous institutions.

Fig. 1.1. Relational Bonds and Contexts in Which They May Be Employed.

We begin our discussion of these aspects of economic exchanges involving CIORs with a review of our process theory of CIORs (Ring & Van de Ven, 1994; Van de Ven & Ring, 2006). It relies on the existence of an exogenous context providing strong institutional safeguards for CIORs. Then, we examine other forms of relational bonds (forbearance and apprehension) on which parties may rely to negotiate, commit, and execute their CIOR. This will be followed by a discussion of the impact that contexts might have on relationships between bonds, commitments, and economic exchanges as well as in dealing with breaches to bonds. We close with a discussion of implications for scholars, managers, and policy makers.

PROCESS MODEL OF INTER-ORGANIZATIONAL RELATIONSHIPS (CIORS)

The conceptual foundations of the arguments set forth in this chapter emerged over 25 years ago in our initial papers on structures and processes of CIORs (Ring & Van de Ven, 1992, 1994). Consistent with John R. Commons’s (1950) original formulation of transactions, we proposed a process model that views the development and evolution of a CIOR as consisting of a repetitive sequence of negotiation, commitment, and execution activities, each of which is assessed in terms of equity or trust in the goodwill of parties when the other is vulnerable. We noted that the three activities may overlap and occur almost simultaneously in simple transactions and that the duration of negotiations, commitments, and executions varies with the uncertainty of exchange issues involved, the reliance on trust among the parties to a CIOR, and the role relationships of the parties.

• While negotiating activities, the parties develop joint expectations about their motivations, possible investments and perceived uncertainties of entering into a relational or recurrent contract. Underlying these negotiations are formal contractual bargaining proceedings and informal social-psychological processes of sensemaking that lead otherwise independent parties to enter negotiations with each other.
• When parties make commitments, the “wills of the parties meet” (Commons, 1950) as they reach an agreement on the obligations and rules for future action in the relationship. At this point, the terms and endogenous governance structure of the relationship are established and specified in either a formal relational contract or informal understanding. These commitments assume the existence of an exogenous governance structure provided by the institutional culture in which the CIORs are embedded.
• In the execution stage, the commitments and rules of action are carried into effect; the parties give orders to their subordinates, buy materials, pay the amounts agreed upon, and otherwise administer whatever is needed to execute the agreement. Through a series of formal role interactions, the parties may become familiar with one another as persons, and may begin to increasingly rely on interpersonal, as opposed to inter-role, relationships.

To carry out a business deal, the CIOR may need to remain in effect for a long time. With time, misunderstandings, conflicts, and changing expectations among the parties are inevitable, these factors may lead the parties to rethink the terms of their CIOR and to what extent their relationship can rely on bonds of trust. These renegotiations may lead to new supplemental agreements to resolve contested issues, while other terms and understandings contained in the relational contract remain in effect. In this way, the ongoing CIOR is preserved. In the final cycle of the process, the parties may terminate the CIOR when business objectives are reached or when breaches in the relationships cannot be repaired. However, most economic exchanges experience significant time constraints that limit the extent to which the parties can make “investments” in their commitments to each other and in their relational bonds. As a result, economic actors may need to rely on relational bonds other than those that flow from trust-based commitments.

Fig. 1.2 illustrates this CIOR process model where negotiations, commitments, and execution activities are assessed on the basis of trust a...

Table of contents

• Cover
• Title
• Introduction: Process Views on Inter-organizational Collaborations
• Part I. Relational Dynamics in Inter-organizational Collaboration
• Part II. Organizational Dynamics Forming and Dissolving Collaboration
• Part III. Dynamic Collaboration Beyond Organizations
• Index