Interorganizational Relations and Collaborations

Conceptual Overview

Through IRCs, organizations can share resources in order to pursue their strategic objectives. These resources can include information, knowledge, expertise and experience, financial resources, management and managerial control systems, and complex dynamic capabilities such as leadership, access to networks, governance structures, processes, and so on. As such, IRCs appear as alternative modes of organizational development to more traditional internal or external modes of development. Organizations involved in IRCs can gain access to and share resources without bearing the cost and risks of internal or external development.

The use of IRCs has grown during the past decades due to a number of drivers. The first driver is globalization; the opening of the world economy has brought with it the necessity to compete globally. Hence, many companies choose IRCs in order to reduce the scope and/or to outsource some of their activities. A second driver is the importance of fixed costs, such as research and development investments or market entry costs necessary in some industries. Such costs are usually associated with the rapidity of technological evolution and diffusion. A third important driver is that of economies of scale that are sometimes required when operating in narrow or uncertain markets. The pooling of resources, skills, knowledge, and expertise allows organizations to build upon and highlight their strengths and cover their weaknesses. This means that considerations such as joint developments and innovations between partners from different industries, or possessing and accessing complementary resources, are also strong drivers for IRCs. Industries such as the pharmaceutical industry or the computer industry are typically underpinned by such drivers; thus, it is not surprising that the level of IRC is especially high in these two industries. Another critical driver for IRCs is the constant development of information technologies and the Internet as a market, thus leading to increased possibilities of collaborative work and engendering interorganizational virtual networks through collaborative computer mediated communications.

Underpinning each and every one of these drivers is the attempt for organizations to reduce the risk, complexity, and ambiguity they face in an ever increasingly complex world. IRCs are, for the most part, a response to risk.