Managing Inter-Organizational Relations

Debates and Cases

by Jörg Sydow, Elke Schüßler & Gordon Müller-Seitz


Click on the letter links below to access definitions of all key terms from the textbook.

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z


Accountability allows the attribution of activites or outcomes to an entity and implies an obligation by this entity to accept responsibility for its conduct, in consequence requiring it to justify activities and outcomes.

Agglomeration describes geographical co-presence and concentration of organizations, in which – in contrast to regional clusters (see below) – there is no need for inter-organizational interaction.

Alliance represents an inter-organizational relationship between two (or more) organizations that collaborate either in a temporary or an open-ended manner. Terms for alliance constellations of greater complexity include multi-partner alliances, alliance systems, alliance blocks, or alliance networks. Often alliances are considered to have strategic importance; therefore they are frequently termed strategic alliances (see below).

Allocation is an important function or practice of managing inter-organizational relations. Resources, tasks, and responsibilities are not only allocated within, but among the organizations that are tied together in a dyad or a network. Allocation already comes along with the selection of a network member that typically has a certain organizational capability that, supported by a particular resource endowment, allows it to take on certain tasks but not others.



Boundary spanning means acting across the boundaries of groups, departments or organizations. In the context of this book, the aim of boundary spanning is typically to coordinate or influence events or activities outside the boundary of ones’ own organization by individuals or groups, so called boundary spanners.

Brokerage means connecting actors who are not yet connected. Such behavior helps to open up closed networks to engage in novel relationships and acquire, as well as diffuse, new, possibly complementary and therefore much needed knowledge across actors. Reputation and trust are important for brokerage to play out well, and both of these factors are more likely to emerge from network closure. Network structures that provide both closure (within cliques) and brokerage (across cliques) are often considered advantageous.

Business process outsourcing (BPO) means moving from “make” (internalization) to “buy” (externalization) or “ally” (quasi-externalization) regarding any business process. Outsourcing entire business processes (like the management of customer relationships) is more complex and demanding than (quasi-) externalizing well-defined functions or activities.



Closed innovation means the generation and capitalization of new ideas within an organization’s own confines, independent of external (re)sources.

Cluster is the short term for a regional cluster, defined as a geographic concentration of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated industries in a particular field that compete but also co-operate (Porter). Going beyond this definition, more recent conceptualizations emphasize the need for organizations to collaborate in and across clusters, leading to the development of networks within clusters or cluster networks.

Cluster networks or networks of clusters comprise linkages on an inter-cluster level that are established with the help of specific governance structures and mechanisms. Such networks can be constituted either permanently or, as in the case of cyclical trade fairs, temporarily.

Competition is the relation between organizations that have conflicting interests and strive for strategic advantage, often at the expense on the other. A particularly severe form of competition is sometimes called “rivalry.”

Cooperation or collaboration describes the engagement of two or more organizations in a form of exchange or coordination that takes the interest of the other party into account. Beyond this, trust and reciprocity are often associated with cooperative inter-organizational relations. Typical drivers for entering cooperative relations with other organizations are: risk reduction, achievement of economies of scale, exchange of knowledge, co-opting or blocking competition, overcoming government-mandated trade or investment barriers, facilitating initial international expansion of inexperienced firms, and vertical quasi-integration advantages of linking the complementary contributions of the partners in a value chain.

Crowdsourcing is used in contexts of open innovation (see below) and means the attempt to outsource activities or tasks to an undefined, initially anonymous large number of volunteers (crowd) that are invited to contribute to solving the respective challenge.



Evaluation is a function or practice of managing inter-organizational relations. With the help of this practice, collaborating organizations assess and reassess not respective interests and capabilities but also the quality of the relationship tmaintained. If there is a perceived inefficiency or lack of fairness, for instance, partners can either try to renegotiate the terms and conditions of collaboration or they can modify their behavior unilaterally. This practice also allows for partners’ reliability and building trust.

Externalization means the transition process (also known as “outsourcing”) that substitutes the hierarchy by the market mode of coordination. If a hierarchical organization is substituted by the network or cooperative mode of coordination, activities are only quasi-externalized as they remain under the (network) control of the respective organization. The reverse process is called internalization or quasi-internalization respectively.



Global production network (GPN) describes inter-organizational relationships that connect suppliers, mainly in developing countries, with global buyers, mostly in advanced economies. The mode of governance of GPNs varies between those that resemble hierarchies (captive) or markets (modular). In many cases, however, the governance of GPNs is likely to be of a relational nature. It is debated whether GPNs comprise only organizations along the value chain or also state agencies, trade unions and employer associations.

Global value chain (GVC) relates to the activities required to bring a product or service to life, from scratch up until it reaches its final recipient. Any value chain is configured by a set of different main actors such as lead firms, retailers, turn-key suppliers, and component suppliers and can be described along four key dimensions: its input-output structure (i.e. the main segments in the value chain and the kinds of actors in each segment), its geographic scope (concentrated vs. dispersed GVCs), its governance structures, and its institutional context (local, national, and international conditions affecting the GVC).



Hybrid organization is a synonym for a social enterprise that follows at least two conflicting logics: that which is profit seeking as well as that which benefits society.



Impact sourcing (IS) is a relatively new trend that refers to the provision of employment and training opportunities in the outsourcing sector for disadvantaged groups in society. Facilitated by increasing digitalization and commoditization of business processes and driven by the desire to decrease costs, increase speed of service delivery, and gain access to globally dispersed talent, Western firms across industries increasingly outsource business processes to specialized service providers operating across the world, particularly in emerging economies. So-called impact sourcing service providers (ISSPs) adopt IS models by recruiting and training people from disadvantaged backgrounds for global outsourcing jobs.

Innovation networks consist of three or more formally independent organizations that reflexively coordinate at least some of their innovation-related activities in time-space to pursue joint objectives. Innovation networks are thus a specific, thematically focused variant of an inter-organizational network. The organizational members of an innovation network might include not only organizations with complementary capabilities, but also fierce competitors.

Internalization is a particular form of inter-organizational transition that substitutes the market by the hierarchy mode of coordination: buying a good or service on a market may, at least in principle, be substituted by making it internally. The reverse process is called externalization (see above).

Inter-organizational networks comprise at least three formally independent organizations that maintain collaborative rather than competitive open-ended relations. The existence of a third actor gives such constellations a distinct social quality compared to inter-organizational dyads. In contrast to markets and hierarchies, inter-organizational networks are governed relationally and result not from a full internalization or externalization of an economic activity but from a quasi-internalization or quasi-externalization.

Inter-organizational relations comprise either more market-like or – as in the case of corporate groups – more hierarchical relationships between at least two more-or-less autonomous organizations, or are – as in the case of inter-organizational networks – more relationally governed. Relationships between only two organizations are described as dyads; if three or more organizations participate, inter-organizational relationships are characterized as inter-organizational networks.



Joint venture (JV) or equity joint venture is a type of alliance, characterized by a predominantly formal mode of governance. It is based upon equity ownership but is also characterized by the existence of a separate legal entity created by two or more partner organizations, in which either equal or unequal stakes may be held.



Management used to be defined in either a functional or institutional way. Today management is mostly considered an ongoing practice (“managing”) embedded in broader belief systems, professional norms, and legal regulations. This practice aims at steering a social system, usually an organization but – as in the case of inter-organizational networks – also collectivities of organizations. Whereas management functions are static and abstract, management practices are ongoing and contextualized. Managers – together with the tools they use in their practices – constitute the institution of management.

Management practices in the context of inter-organizational relations focus on the selection, reselection and deselection of partners; the allocation and reallocation of tasks, resources and responsibilities among the participating organizations; the negotiation and renegotiation of rules for collaboration (regulation); and the evaluation of the partners and/or the relationships they maintain.

Market is the generic form of governing economic exchanges characterized by discrete and well-specified transactions in which the involved parties act independently according to their own concerns and without influencing each other (arm’s length transaction). Inter-organizational relations in markets are governed mainly by price and considered to be fluid, implying a frequent change of partners.



Network administrative organization (NAO) represents a form of network governance that differs from, but may complement a lead organization on the one hand and shared governance on the other (Provan and Kenis). The NAO is a formal entity installed to support and monitor the activities of the whole network, possibly comprising a large number of partners with potentially diverging interests. This form of network governance allows for a compromise: while it does not suffer from the heavy influence of a lead organization, it is also more subject to collective steering efforts than the shared governance form. At best, an NAO enhances the management capacity for the whole network. However, as with the other two forms of network governance, this is not at all guaranteed, especially as NAOs differ significantly with regard to their influence on strategic decision processes.

Network evaluation embraces the more formal procedures for monitoring and assessing the contributions of individual partners to the performance of the whole network, as well as the quality of the inter-organizational relations in terms of, for instance, compliance with the contractual arrangement or the achieved level of trust.

Network governance refers to the way a network (as a social system) is controlled and regulated. The three main forms of network governance are: lead organization, shared goverance, and network administrative organization.

Network management is the deliberate attempt to manage processes in inter-organizational networks by the execution of management practices. It aims at initiating and facilitating interaction processes between organizational actors, creating and changing network arrangements for better coordination or creating new content by, for instance, exploring new ideas and guiding interactions.

Network management tool describes a more or less formalized method, set up to support network management in order to make network development possible and legitimate decisions (e.g. evaluation forms). Such tools help to institutionalize network management as a practice.



Offshoring refers to moving productive activities from a domestic to an overseas location, usually a lower-cost emerging economy. The production overseas can be conducted by foreign suppliers as well as by ones’ own subsidiaries. Thus it must be distinguished from outsourcing.

Open innovation describes – in contrast to closed innovation (see above) – the collaboration with external partners through the management of in- and outbound flows of knowledge to foster innovation and generate market opportunities (Chesborough). The concept of open innovation holds that single organizations – as well as project and innovation networks – need to look outside their boundaries for ideas and intellectual property, because lead users, but also rival companies or academic institutions, can not only be sources of innovation but also marketers of ideas developed internally or in collaboration with such organizations.

Organization is considered a mainly formal social system governed by hierarchical authority and exhibiting a certain degree of institutionalized reflexivity that, for this very reason, allows it to sustain at least some degree of autonomy from the environment.

Organizational field is understood as comprising all those organizations that are mutually aware of each others’ activities in a specific domain.

Organizational form delineates the way an economic activity is governed. Classical forms are market and hierarchy, but also networks and communities.

Outsourcing is short for outside-resource-using. Often, however, it is used for moving from “make” to “buy” (or “ally”) regarding any business task, process (see above), or function, i.e. in the sense of exter­nalization (see above) or quasi-externalization.



Path dependence describes the persisting development of a technology, institution, organization, or inter-organizational network or field set in motion by one or more contingent actions or events. A path-dependent process is subsequently intensified by self-reinforcing mechanisms so that the options for action are constrained ever more greatly. A path-dependent development of a technology, social system or a particular practice leads finally, at least potentially, to a lock-in which, although possibly still efficient in the short term, must already be regarded as problematic from a strategic viewpoint.

Plural form means a simultaneous use of different modes of governance (e.g. company outlet and franchise arrangements) in the same or different value chains. This combination allows management to meet conflicting demands for uniformity and a common identity, as well as for system-wide adaptability. Plural or concurrent sourcing is useful to maintain knowledge that is crucial for selecting and evaluating suppliers and to avoid “hollowing out.”

Partnership describes a specific type of relationship between two organizations, based on trust and reciprocity. In a vertical partnership both parties are mutually dependent and committed to collaboration beyond a sequence of buying-selling transactions. While this notion is very popular among practitioners, synonyms like alliance or network are used more frequently in research as they are more neutral.

Project as a temporary system denotes a specific task to carried out by either an individual or, more commonly, a team in a certain timeframe. Although projects in reality tend to run overtime, they have an institutionalized beginning and ending. The intensive focus in a project is supposed to lead to some kind of transition. Although the latter property is debated, this understanding is often referred to as the 4T model (Lundin and Söderholm).

Project network is a form of collaboration of three or more organizations that pursue joint objectives on a more than temporary basis, but their primary mode of collaborating is through projects, understood as being a temporal collaborative arrangement. Unlike isolated inter-organizational projects, project networks have a built-in coordinative mechanism that makes continued collaboration beyond the single project likely.



Regulation comprises the formulation and implementation of rules of inter-organizational collaborations. These rules may also shape the other three practices of network management: allocation, evaluation and selection. Regulation, like allocation, often changes when a new member enters a network.

Resilience is a concept taken from natural sciences referring to the capacity of systems to respond to shocks, disturbances, and perturbations. A resilient organization or inter-organizational network, troubled with unsettling events, will not only be able to cope with them but return to its orginal state. A lack in resilience can lead to an entity’s termination.



Selection of partners as a function or practice of network management is the basis for forming an inter-organizational relationship. Selecting the “right” partner makes the management of inter-organizational relations or networks easier, whereas selecting the “wrong” one could make it much more difficult. Thus, selection acts as an important control mechanism for the other management functions or practices.

Social network analysis (SNA) comprises a methodology widely used today in management and organization research and feeds the development of network theory, i.e. theoretical ideas explicitly referring to the particular structural quality of networks among individual or organizational actors. SNA is typically used to establish the structure of networks in terms of centrality, multiplexity, holes or cliques.

Strategic alliance can be understood as an inter-organizational relationship of strategic value to at least one of the collaborating partners. While there is little consensus about what exactly constitutes a strategic alliance, four main types are typically distinguished: contractual alliances, equity-supported alliances, and joint ventures (which are all three characterized by a predominantly formal mode of governance), as well as informal alliances (which are largely based upon informal relations).

Strategic network can be conceived as three or more organizations that maintain collaborative inter-organizational relationships. More often than not, such networks are strategically led by one or more organizations. Based on such an understanding, the global airline alliances (e.g. Star Alliance) would be more appropriately described as strategic networks rather than strategic alliances.

Structuration is a term from a practice theory introduced by sociologist Anthony Giddens that takes an explicitly processual and dialectical perspective and is often applied in understanding the practice of managing organizations or inter-organizational networks. The perspective is processual because it highlights the importance of structures, i.e. rules and resources that require either reproduction or transformation through interaction in order to remain effective; it is dialectical as it focuses on the tensions and contradictions to be managed in this process.

Supply chain management (SCM) is a set of approaches and techniques to strategically and operationally manage – ideally – the whole value chain from “upstream” (supplier of raw material) to “downstream” (customer). In reality, most approaches and techniques are confined to only one link of the chain. Moreover, in most cases speaking of managing supply networks may be more adequate than the notion of SCM, not only because of the complexity but also the processual nature of management practices.



Temporary clusters are knowledge-exchanging mechanisms similar to those in traditional regional clusters (see above), albeit only on a temporary basis. This dynamic is particularly true for global events such as trade fairs, where organizations from a related industry or technological field interact and observe each other over a short period of time and learn about markets or technologies. Such events are typically not singular happenings within an industry or field, but occur repeatedly in different locations and at fixed points in the business year.

Temporary organization is an organizational form for accomplishing an ex ante determined task with a predetermined termination point. Thus, temporary organizations have limited lifespans. The most prominent temporary organization is the project (see above). They can be formed intraorganizationally within a non-temporary, i.e. permanent organization as well as inter-organizationally as joint collaboration.

Trust is a relational concept, describing the ties between individuals (interpersonal trust) or organizations (inter-organizational trust) or any other abstract system. Although trust is often juxtaposed to control, trust without any control is hardly imaginable as the latter helps to collect necessary knowledge – e.g. about the benevolence and/or competence of a trustee; knowledge that is then “overstretched” (Luhmann) leading to the risk that is considered constitutive for any trust relationship.



Varieties of capitalism (VoC) highlights institutional differences of capitalist society, arguing against the assumption that the forces underlying capitalist economies will lead to homogeneity of formal and informal institutions. Organizations in different countries develop different competencies with regard to such institutional differences, depending on the kinds of relationships they establish with employees internally as well as with external actors such as suppliers, clients, stakeholders, trade unions, business associations, and governments.



Whole networks are goal-directed networks of three or more organizations that all monitor each other’s activities. While serendipity may play a role in the emergence of such inter-organizational networks, organizations are assumed to increasingly reflect and act with regard to the whole network.