The exercise of power in inter-organisational relationships in response to changes in the institutional environment: cases from the European automotive industry

Abstract

In response to calls for understanding the functioning of power in inter-organisational relationships, this study develops a framework that explains how organisational partners respond to changes in the institutional environment and as a result revise their relationship strategies and select the type of power to exercise. Based on the longitudinal analysis of two cases from the European automotive industry findings suggest that if the partners make sense of a common opportunity, they will respond to adapt by applying voice (cooperation) relationship strategy and exercise coactive power. If they perceive a common threat, their initial response will be avoidance, and to achieve that they will again apply voice (cooperation) relationship strategy and exercise coactive power. Finally, in case the common threat cannot be avoided and there exists a strong power difference, the powerful partner can perceive an individual opportunity at the expense of the weak partner. Then it will respond with opportunism applying exit (competition) relationship strategy and exercise coercive power, and the weak partner will need to adapt or be a victim of natural selection.