The book is about how organizational environment affect and constraint organizations and how organizations respond to external constraints. Organizational behavior is constrained and shaped by the demands and pressures of organizations and groups in its environment.

Chapter 1: An external perspective on organizations

To understand the behavior of an organization you must understand the context of that behavior- that is the ecology of the organization (p.1). Organizations survive to the extent that they are effective. Their effectiveness derives from the management of demands, particularly the demands of interest groups upon which the organization depends for resources and support. However, more emphasis in research is laid on deploying resources, than accessing those resources. Every organization requires some transaction with its environment, and this calls for maintaining social legitimacy and political acceptance.

Problems arise not merely because organizations are dependent on their environment, but because this environment is not dependable (p.3). It is important to attend to the contextual variables while understanding organizations. Organizational context shapes the activities and structures of the formal organizations, aka Open-Systems View.

Internal perspectives dominate in social sciences research because: 1) internal processes are more visible, and 2) cognitive bias to attribute causality to actions of individuals.

Organizational effectiveness as ability to create acceptable outcomes and actions. It's an external, socio-political concept, unlike efficiency which is an internal standard of performance.

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Organizational environment comprises of any event that impacts the organization. Organizations might remain immune by the environment, for they might be buffered or may not have noticed an event. Such organizations are loosely-coupled with their environment. Organizational environment are not a given reality, but are created one through a process of attention and interpretation. An organization's connection with its environment determines the kind of information the organization can access.

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Constraints are when one response to a given situation is more probable than another, regardless of the actor responding. Constraints justify that why individual's role in organizational outcome remains small.

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However, the contextual perspective comprises of:

Symbolic role as personification of social causation.•Possibilities of managerial action which guides and controls the processes of manipulating the environment through an understanding of social context and constraints. •

The role of management could be:

Chapter 2: Organization and social context defined

Organizations are mostly defined in terms of goal-orientation, or an instrumental view. However, the authors define organizations as coalitions. Organizations are markets for influence and control. An organizations is viable as long as its available inducements are sufficient to elicit the necessary contribution (which means that a commonly-held goal is not always required, neither is legitimacy a must). Unlike economic markets, markets within organizations are characterized by activities and behavioral exchanges that are stable and repeatable over time. The demand of the coalition partners may not always be consistent, resulting in conflicts and competing demands. In conclusion, organizations are coalitions, maintained by providing inducements (satisfaction) to participants who support the organization (p.29).

An individual can be partially included in an organization and its environment at the same time by his behavior. Organizations include behaviors and not individuals.The organization is the total set of inter-structured activities in which it is engaged at any one time and over which it has discretion to initiate, maintain, or end behaviors

Concentration Munificence Interconnectedness

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The external control of organizations (Pfeffer and Salancik, 1978)Monday, October 13, 2014 2:05 PM

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and behavioral exchanges that are stable and repeatable over time. The demand of the coalition partners may not always be consistent, resulting in conflicts and competing demands. In conclusion, organizations are coalitions, maintained by providing inducements (satisfaction) to participants who support the organization (p.29).

An individual can be partially included in an organization and its environment at the same time by his behavior. Organizations include behaviors and not individuals.The organization is the total set of inter-structured activities in which it is engaged at any one time and over which it has discretion to initiate, maintain, or end behaviors (p.32). (inter-locked or inter-coordinated behaviors)

Organization boundaries may be defined as influence over activities compared to influence over other social actors. Another important construct is effectiveness.Organizational effectiveness is the assessment of the organization's output and activities by each of the various groups or participants. Effectiveness is an external evaluation of what the organization is doing, while efficiency is an internal evaluation of the amount of resources consumed in the process of doing is activities.

Chapter 3: Social control of organizations

Interdependencies shape the way organizations achieve their outcomes. Interdependence could be classified into outcome interdependence (free market) and behavior interdependence (e.g. Poker game). These interdependencies could be either competitive or symbiotic relationships. However, interdependencies needn't always be symmetric or balanced. Interdependencies have a few peculiar characteristics, such as: 1) they vary with the extent is resources available, 2) can create problems of uncertainty, 3) they grow with the level of specialization.

Organizations engage in exchanges and transactions with other groups or organizations. The exchanges may involve monetary or physical resources, information, or social legitimacy (p.43).Social control involves a process in which both the influences and the focal organization act to affect the conditions governing the influence process. An organization's dependence on another could be determined by: 1) importance of resources, 2) discretion over resource allocation and use of an interest group, and 3) concentration of resource control (or substitutability of resources) (p.45-46).Resource importance could be thought in terms of relative magnitude of exchange and criticality of the resource. Dependence measures the potency of the external organizations or groups in the given organization's environment.

On countervailing power and asymmetric dependence: Without asymmetry in exchange relationship neither organization possesses a particular power advantage, reducing the likelihood that one organization will dominate inter-organizational influence. Dependence effects organizational decisions. Constraints in behaviors result from situations of asymmetric interdependencies.

Relationship among dimensions of organizational environment (p.68)

Chapter 4: The organizational environment, and how it is knownEnvironment of an organization can effect organization's outcomes without affecting its behavior. Environment can be thought of as having three levels: 1) the entire system of interconnected individuals and organizations who are related to one another and to a focal organization through the organization's transactions, 2) set of individuals and organizations with whom the organization directly interacts; and 3) the level of organization's perception and representationof the environment- its enacted environment.

Concentration (the extent to which power and authority in the environment is widely dispersed)•Munificence (the availability or scarcity of critical resources)•Interconnectedness (number and pattern of linkages or connections among organizations)•

There are three dimensions of the environment (p.68):

The greater the level of connectedness, the more uncertain and unstable the environment for given organization. Organizationsadopt a variety of strategies for bringing stability and certainty to their environments.

Enactment process and enacted environment: "human create the environment to which the system then adapts. The human actor does not react to an environment, he enacts it" (Weick, 1969: 64).

Planning is based on a theory of the past, and when plans go awry, it is the theory and not the environment that is wrong (p.73).The information systems present in an organization shapes the enactment process. Such information systems not only focus attention but also behavior of the organizational members. The problem in enacting the environment could arise from: 1) firm's incomplete understanding of all it dependencies on the external environment (i.e. misreading the potential potency of a particular interest group), 2) organization may misread the demand imposed by the environment (owing to information filters adopted by the organization), 3) commitment to past entrenched in physical and managerial structure, and 4) conflicting demands the organization is posed with.Some of the recommendations of better assessing the external demands include: 1) determining interest groups based on providers of critical resources and activities, 2) weighing the interest groups as their relative power, 3) identifying criteria or values by which each group evaluates the organization, and 4) gauging the impact of actions on the criteria.

Chapter 5: Managing environmental demands: Adaptation and avoidance

The focal organization's dependence on important critical resource exchanges•The control which other organizations might possess over the exchange of that resource. •

The two major components of organizational power are (p.108):

Concentration Munificence Interconnectedness

Conflict Interdependence

Uncertainty

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The control which other organizations might possess over the exchange of that resource. •

The density and interconnectedness of inter-organizational fields today derives from adaptations to past problems. Compliance to the demands of the environment is a short-term measure, as one's vulnerability can increase as the organization is further exploited. Organization must be prepared to avoid influence. The organization must either choose which of the various competing demands to address to or somehow avoid the conflict or demands. Balancing conflicting demands forestall some problems of lost autonomy. Some of the mechanisms of avoiding compliance are: 1) providing sequential attention to demands of various interest groups, and 2) playing one group off another explicitly.

Ways of managing the conditions of social control, include: 1) control of demands by making the information about the demand obscure, avoiding expression of demand, creating illusion of satisfaction of demand, controlling communication channels; 2) controlling the definition of satisfaction; 3) controlling the formation of demands through public relations; 4) lowering the observability of compliance and increasing the discretion of the focal organization by notpossessing the capacity to comply (often by illegal means or social norms), or 5) by maintaining secrecy and obscurity about organization's operations. If avoidance isn't an option, then the organization can have two responses: 1) acting as environmental requirement taker and responding to demands (adapt org. structure), or 2) attempting to operate on that environment (say by demand creation or market segmentation). Avoidance for resource dependence could be achieved through buffering against instability, or by controlling the rules of trade through formal or informal means, or taking control of the organization providing needed resources, or altering the organization itself to hedge its risk through building substitutable exchanges or diversification. The influence of control could be reduced though anti-trust lawsuits, coopetition, or acquiring countervailing controls.

Chapter 6: Altering organizational interdependence

Vertical integration represents a method of extending organizational control over exchanges vital to its operation; that horizontal expansion represents a method for attaining dominance to increase the organization's power in exchange relationships and to reduce uncertainty generated from competition; and that diversificationrepresents a method of decreasing the organization's dependence on other, dominant organizations (p.114).

Organizations engage in merger to control interdependence. Authors empirically demonstrate that there is a relative importance of sales or purchase interdependence for explaining merger activities by an industry. Other causes of mergers, viz. random, profitability attraction or concentration aren't that critical factors. Firms operating in highly concentrated industries use mergers more to cope with exchange dependence with respect to organizations providing inputs. By diversification, on the other hand, firms may avoid previous patterns of dependence or diminish their importance. Such moves are pronounced when there is a dependence on single customer or when exchanges are very concentrated, such as selling to the government. Diversification is an attempt to address the loss of autonomy. Authors argue that growth is consequence of interdependence, such as uncertainty or external control. Growth increases organizational control over critical activities and reduces problematic dependence (p.138). Monopolistic power enjoyed by large business enterprises is taken in the form or risk avoidance or uncertainty reduction rather than in the form of increased profits (p.138).

Chapter 7: The negotiated environment

Most direct method of controlling dependence is to control the source of that dependence. There are several informal mechanisms and semiformal inter-organizational linkages, including: cooptation, trade associations, cartels, reciprocal trade agreements, coordinated councils, advisory boards, boards of directors, joint ventures, and social norms (p.144). Cooptation also serves the purpose of legitimacy. These are when the organization partially absorbs the uncertainty in the environment. Interpersonal linkages play a psychological role in reducing uncertainty. Social uncertainty leads to emergence of norms, however, norms decay slowly as new persons enter a group and the original group members leave. The norm formalizes a recognized need for stability and predictability in organizational operations. Joint ventures are consequences of resource limitations, uncertainty reduction, and risk mitigation. Hence, the primary considerations of JVs are uncertainty reduction and interdependence management.

As for role of board of directors, the proportion of inside directors would be reduced the larger the organization, the higher the proportion of debt in the capital structure, and if the organization were deregulated. Intermediate concentration of industries lead to prominence of joint ventures and director interlocks. Board is primarily used to provide linkage to the environment (p.169).Joint ventures and inter-locking of boards is feasible in case of fewer interdependencies, but as the number of external players grow, more formal mechanisms are practiced, including trade associations and cartels. Environmental munificence appears mainly responsible for firms shifting between cooperation and conflict.

Chapter 8: The created environmentFaced with otherwise unmanageable interdependencies, organization, though political mechanisms, attempt to create for itself an environment that is better for its interest. Environment is not only a given, to be absorbed, avoided or accepted; it is itself the dynamic outcome of the actions of many formal organizations seeking their own interest (p.190).Organizations often leverage social power of the state to benefit its operating environment. On legitimacy: On occasions, the social responsibility that comes with legitimacy may be more important than economic viability. Legitimization is a retrospective process, and involves social justification of firm's goals and means. Firms can manipulate social legitimacy to maintain social support. On regulations: When organizations are regulated by the state, the economic environment diminishes in importance as the importance of the political and administrative environment increases. Regulations impact organizations, and even organizations can demand more/ continued regulations, similar to the formation of cartels. Benefits of regulations include: providing direct subsidy to organizations; offering entry restrictions; effect on substitutes and complements; and fixing price legally to coordinate and manage competition. The political system becomes relevant for the organization when the system begins to affect organizational outcomes. Some of the organizational reactions are lobbying, and trade legislations.

Environment(source of uncertainty, constraint, contingency)

Distribution of power and control within the organization

Selection and removal of executives

Organizational actions and structures

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Chapter 9: Executive successionThe organization-environment linkage is broadly discussed by two theories: 1) adaptation- change; and 2) natural selection. However, because relationship between organization and it environment is indeterminate, none of the explanations are compelling. The organization- environment link is important, yet is loosely coupled. The following diagram depicts how change in environment effects the change in control within the organization.

The organizational actions result from political process within organizations through redistribution of control, and change in management power. Drawing on the contingency theory, the authors propose that "the environmental context partially determines the distribution of power within the organization" (p.230).The sub-unit with greatest resources and influence on the environment assumes most power within the organization. Power can often be institutionalized within the organization once it responds to environmental changes/ demands. Administrative succession could be thought of as a political process of contested capability, where the contest is resolved by subunit power. The length of an administrator's tenure in office is likely to be less when there is visible evidence of his inability to cope with critical contingencies and he is unable to institutionalize control (p.242). The organizational actors in turn mold organizational activities driven by their discretion(which is rarely unilateral or as shaped by the subordinates). Executive succession, hiring and movement is a strategic response to environmental contingencies, as they often lead to inter-organizational linkages and enhances communication between organizations. If organizations face uncertainty and instability deriving from competitive inter-dependence, then it is likely that these organizations will select new executives from within the industry, from competing firms, in an effort to reduce this competitive uncertainty (p.252). Median concentration and rapid growth are related to uncertainty, and will likely lead to more turnover.

Chapter 10: The design and management of externally controlled organizations

Organizations are other-directed, involved in a constant struggle for autonomy and discretion, confronted with constraints and external control (p.257).Power in an organization organizes around critical and scarce resources.

The possession of some resources by social actor1.The importance of the resources to the focal organization; its criticality for the organization's activities and survival2.The inability of the local focal organization to obtain resources elsewhere3.The visibility of the behavior or activity being controlled4.The social actor's discretion in the allocation, access and use of the critical resources5.The focal organization's discretion and capability to take the desired action6.The focal organization's lack of control over resources critical to the social actor7.The ability of the social actor to make its preferences known to the focal organization8.

Social control of the organization happens through:

Symbolic (no influence on environment. Acts as a scapegoat)•Responsive (processing and responding to organizational context. implements organizational adaptation )•Discretionary (processes information. takes actions to modify the environment. )•

There are three possible role of the manager:

Scanning the environment ( knowing the type of information required, making information widely available, mitigating perceived threat to power and status of individuals, )

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Loosening dependencies (through discretion, diversification)•Coping with conflicting demands (diversification, structural differentiation, slack resources, )•Chief executive position (differentiation in executive position, decentralization of authority)•Organizational and political structures (structural parallels with political organizations)•

Designing externally controlled organizations:

The book emphasizes on the need for an organization to remain as autonomous as possible and suggests mechanisms thought which its dependence on others' can be reduced.

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