Organization Size, Life Cycle, and Decline PDF

# Organization Size, Life Cycle and Decline (43-48) ## 7.1. Organization Size The size of organizations is a variable closely related to organizational choices. It influences a number of variables in organizational design, such as the number of employees or the volume of business measured in turno...

# Organization Size, Life Cycle and Decline (43-48) ## 7.1. Organization Size The size of organizations is a variable closely related to organizational choices. It influences a number of variables in organizational design, such as the number of employees or the volume of business measured in turnover or in units produced in a given time. In general, as the size of the company increases, phenomena of labor specialization become possible, from which follows the opportunity to achieve economies of scale and learning (increasing the efficiency through which the organization carries out its processes). Large organizations achieve maximum efficiency in organizations where vertical organization is most efficient: more stable markets that produce results that can be maintained for relatively long time horizons. Furthermore, a large corporation tends to be bureaucratic, as it needs to resort to a series of tools based on planning to coordinate the work of so many specialized units. As the size of the organization increases, the percentage of core operators and top management decreases, while the percentage of professionals and employees (both found in administrative support, ReS) increases. ### Large Organization vs. Small Organization | Large Organization | Small Organization | |---|---| | Economies of scale | Responsive and Flexible | | Global reach | Regional reach | | Vertical hierarchy | Flat structure | | Mechanistic | Organic | | Complex | Simple | | Stable market | Niche finding | | Career longevity and stability | Entrepreneurs | For a company, is it better to be small (agile and flexible) or large (with a wide market and consolidated customers)? It depends on the characteristics of the organization and the environment in which it operates, because for all companies, opportunities and risks are evident in the following graph. ## 7.2. Life Cycle of an Organization The graph below shows the life cycle of the organization in which 4 phases that follow one another over time are highlighted, depending on the company's size growth; all businesses can be born as small businesses and if they are successful they can grow. The passage from one stage to success is perceived as a response to a moment of crisis that could potentially lead to the end of the organization (failure), but if overcome it leads to a new growth cycle that differs from the previous one. ### Organization Stages of Development - **Phase 1: Entrepreneurial**: People believe in the project and invest resources. In the beginning, the company is small and focused on the production of individual products or services; it is a simple organization, informal, organic and non-bureaucratic, characterized by fast and direct communication between the entrepreneur and employees. The source of innovation is the entrepreneur’s idea and the objective is to survive. Then, the company grows until the first crisis (need for leadership): the entrepreneur must choose whether to give up creativity or to give up direct activity and become just a manager. Those who can successfully manage the delegation phase guide the company to the next phase. - **Phase 2: Collectivity:** The entrepreneur focuses on strategic goals and so a group of managers is born who are alongside the entrepreneurs to manage the more strictly operational activities. There is coordination between the strategic leadership and the core operations that requires sharing and communication of objectives. The objective is the company’s growth and the organization is pre-bureaucratic, mainly informal with some procedures, and focused on the production of products or services. Innovation can come from both employees and managers and this role must be charismatic and give directions. If the organization continues to grow, it goes towards a new crisis (need for delegation of power); here the tools are focused on the organization and control. Then the phase 3 starts. - **Phase 3: Formalization:** The organization is bureaucratic with a formal structure, procedures, division of labor and other specializations; it is focused on the production of product lines or services, control is formalized, and innovation can come from different groups. The objective of the company is to expand in the market and to look for stability. There’s a push for internal efficiency by streamlining the organization’s activities. Top management has the task of providing control and delegating, but this focus on control risks overriding the search for effectiveness; the third crisis arrives (rules stifle everything). This leads to Phase 4. - **Phase 4: Elaboration:** The objective is to achieve a horizontal dimension within the organization (which has become too vertical). There can be a new focus on effectiveness or new coordination tools can be introduced, aimed at refocusing attention also on the coordination between parts of the organization which aim at meeting the customers’ needs. The organization is basically bureaucratic, structured in work groups, and focused on the production of differentiated products and lines of services. Innovation comes from research and development departments. The objective is to achieve company reputation and complete organization; top management uses a team approach. (Here we find large multinational companies). After the fourth stage, what happens? There’s a crisis for the need for revitalization. To overcome it, it’s necessary to regain the initiative of the small business. If this stage is overcome (otherwise the company declines), the company can grow to maturity (maintaining a company of large size, paying attention to the needs of individual markets) or there's can be an effort to introduce small business characteristics into large companies. At this point, it’s important to forget. All procedures, rules, and standards that are drawn up and the phase of formalization can be defined with the following expression: “organizational knowledge base” (provided by the set of rules that constitute shared knowledge, i.e., explicit knowledge available to all the members with the skills to understand it). This allows for the sharing and passing down of the organization's knowledge, regardless of the people present; a clearly positive point. However, in an organization nothing is only positive or negative; the negative aspect of accumulating rules is that consolidated knowledge creates organizational inertia, as it offers solutions that have proven successful in the past, therefore hindering the search for new solutions. It is only by forgetting what is already known that there is the incentive to explore new paths. ## 7.3. Tools for adapting bureaucracies to changes in the external environment The bureaucratic solution isn’t the only one that can guarantee control; it is best suited for stable situations, but there are market or clan solutions that allow control even when the reference environment is less predictable. The main solutions for adapting a bureaucratic company to the changing external environment are: - **Decentralization:** The peripheral units are allowed to respond autonomously to changes that affect a peripheral part of the organization. This is possible only if, in parallel, there’s a focus on providing employees with the necessary professional skills; therefore, investment in professional training is necessary, even at the operational level, and this obviously comes at a price. - **Incident Command System ICS:** It is a temporary organization-parallel structure that comes into play when external conditions change and the organization needs to respond to a crisis situation, therefore requiring innovation and flexibility. This crisis can be environmental, due to a drop in demand (therefore necessitating the ability to re-convert), the supplier is no longer able to provide (a reaction is needed if there are other contacts), or at the level of the company (for example, a fire: the organization trains its employees to recognize it and to activate themselves before it happens). The organization is therefore structured in two structures; one for regular operation and one for times of crisis. This is an attempt to predict and structure what will happen in a crisis situation (intervening with intuitions that hopefully prove to be correct); however, this only concerns certain aspects of the crisis, not all, but there's an attempt to standardize the response to a period of collapse. ## 7.4. Decline of organizations We can distinguish 5 phases of decline in an organization: - **Phase 1: Blindness:** The decline can start from the fact that the organization doesn’t notice or can’t grasp signs of deterioration; it manifests itself in a lack of awareness about change. You need to know how to monitor the environment to monitor crises and if you are able to gather this information, you need to be good at implementing it (move on to 2). - **Phase 2: Inactivity:** It’s clear what is wrong (what the problematic situations are), but no corrective action is implemented and the decline continues. There’s a standstill of inertia when in fact corrective actions should be taken. - **Phase 3: Wrong actions:** Corrective actions may not be good and the decline continues. This is avoidable only if there is a sort of monitoring that can identify the wrong choices and adjust them. - **Phase 4: Crisis:** The misalignments are clear and the organization is no longer able to function properly. Here the environment comes into play: if it’s hostile (it requires a quick response) the decline is rapid and pronounced, while if it allows time for a response, there’s a slower erosion of performance. Therefore, to counter it, a structural change in the organization is required. If you don’t change, you move on to phase 5. - **Phase 5: Disintegration/dissolution:** The company does not change again and enters a phase in which nothing can be done. If the environment is hostile, the company dies quickly, while if it’s indulgent, it disappears slowly. The 3 causes of organizational resizing, i.e., what makes it blind to certain information, are: - **Organizational atrophy:** The organization is no longer able to function correctly, and this may manifest itself in few or many organizational units. It may be due to the fact that the company does not maintain the updating of skills in different units. - **Vulnerability:** The organization finds itself vulnerable compared to certain hostile factors present in the environment; for example, the organization has not developed adequate skills relative to a new technology that has been adopted by other companies in the competitive context. - **The company operates in a niche market for which the demand is shrinking over time**. The decline can also be caused by the entry of new competitors who, by introducing innovations, manage to erode market share. Guidelines for implementing resize are: focusing on communication, supporting laid-off employees, supporting “surviving” employees. ## 8. Decision-making processes (49-54) Organizations are continuously required to identify and pursue new opportunities to anticipate and resolve new challenges. Decisions fall into two main categories: - **Planned:** These are repetitive decisions that involve issues that arise periodically within organizations. Therefore, these decisions can be made once and for all, are based on established routines, procedures, consolidated data collection systems and past experience. Therefore they have a high probability of success. - **Unplanned:** They involve problems that have never been addressed or are already addressed but in a long time or under very different conditions. It is not even clear what information is needed and there is a high risk of failure. In both cases, the decision-making process can be broken down into two components: - **Problem solving** in which the objective is to implement a solution that solves the problem . - **Problem setting** in which the objective is to diagnose the problem that needs to be addressed. In planned decisions, the setting phase is more automated and less subject to changes between decision cycles. Repetitive problems are much more frequent than non-repetitive ones. We tend to neglect setting in favor of solving. However, when faced with non-repetitive problems, we still focus on solving, neglecting the idea of setting because we tend to take it for granted. **Decision-making = Problem setting + Problem solving** *The output of the problem setting is the diagnosis of the problem and, consequently, the problem solving will depend on this.* *There are several contrasts to be resolved which arise from a number of constraints within the organization. The sources of these constraints are for example:* - **Limited rationality:** Decision-makers have limitations (both in terms of time, information, and resources) to deal with complex problems and multidimensional issues. - **Organizational constraints:** Conflicts arise within the organization because different organizational units have different assessment parameters and therefore pursue different objectives. A shared perspective, common values, agreements, and company culture could help achieve a common ground. - **Personal constraints:** While aiming for the company’s goals, each person’s personal objectives are crucial. Everyone has a natural desire to achieve personal goals in terms of prestige and success, therefore hindering decisions that go against their personal interests. *Decisions that emerge within an organization are the outcome of a compromise between these constraints. Therefore, choices are not always based on rigorous scientific rationality.* ## 8.1. Models of organization decision-making (50) - **Managerial Science:** They refer to rational decision-making processes based on quantitative techniques, therefore, on objective data measured through quantitative parameters that aim to provide reliable information (e.g., simulation, operations research). These approaches are useful when defining the problem, the important variables can be identified and measured (e.g., position selection, test program). The issue is that it is not always possible to measure all the variables that have an impact. - **Carnegie Model:** It’s based on the idea that creating a coalition is the most important step towards reaching a solution. It’s necessary to identify people who share the same values and priorities. Therefore, the focus is placed on negotiation between decision-makers. The main emphasis is not in the downstream phase; the solution that emerges from these situations is a solution that satisfies the members of the coalition. This solution may not be the best since it may be inapplicable in case it doesn’t satisfy one or more members of the coalition; however, it’s better to have a workable solution than a perfect solution that’s inapplicable. This model is appropriate when identifying the problem is complex. - **Incremental decision-making process (Henry Mintzberg):** It is a decision-making process that is broken down into a number of sub-phases, which are developed through an incremental process that may require continuous checks that may involve a feedback loop to one or more phases upstream. The focus here is on tasks that are required by the solution to the problem. It’s useful when the solution to the problem is uncertain. - **Garbage Can Model:** In ambiguous circumstances (vague or unknown objectives), organizations can be described as “organized anarchy”, characterized by fuzzy preferences, problematic technology, and fluid participation. The decision-making process result from the combination of independent flows (slides. Ask if they do slides 9/12). It assumes that in the decision-making process there are four elements: problems, solutions, participants, and opportunities for choice. Participants recognize problems, develop solutions, and choose them. The pairing of the four elements is not necessarily rational, rather it’s random. There is no guarantee that the choices made will lead to solutions to problems; the pairing between choices and problems is often random. Sometimes, solutions are suggested for problems that do not actually exist. Decision-making processes are not always about solving problems but are sometimes about demonstrating commitment from group members. Therefore, even if actions are taken to solve the problems, they may or may not actually be solved. ## 8.2. A special type of decision-making process: organization change (52) The type of change goes from incremental change (marginal aspects such as changing part of the organization, improving technology and production) to radical changes with massive effects (transformation of the entire organization, creating a new structure and management and introducing new products and new markets). ### Elements of successful change - **Environment:** Suppliers, professional associations, consultants, research literature, customers, competition, legislation, regulations, and labor force. - **Organization:** *Ideas* are a crucial component, as well as the *needs* that emerge from a company's environment, *perceived problems or opportunities*, the availability of *resources*, and the willingness of the company to *adopt* and *implement* the change. To ensure a successful change, various components need to be taken into account: - The change proposal must allow the alignment of the organization and its environment. - The changes adopted must respond to real needs while considering the constraints present within the organization in terms of available resources. - The ideas must make sense for the organization; they must be compatible with the environment and resources, and they must be implemented correctly. The change brings about a conflict within the organization since it means altering routine processes. It's best to adapt to changes within stable situations, but when a change occurs, the company needs to adapt by becoming more organic. Routine processes tend to push toward a more mechanistic organization. Therefore, we can speak of [ambidextrous](https://en.wikipedia.org/wiki/Ambidextrous_organization) organizations - companies that are successful in managing both routine processes and changes in products and processes. This can be achieved by separating the two types of activities: on the one hand, there are established routines (production processes leverage knowledge exploitation) and on the other hand, there are units focused on learning, where coordination is horizontal (organic) and the objective is to continuously seek new opportunities. Here’s how organizational change in products and processes can be supported: - **Switching Structures:** Implementing the ICS for product/process changes. - **Creative units:** They are part of the main organization. , - **Units that are separate from the main organization (Ventures Teams)**, which are dedicated to exploring particularly innovative themes. This can be achieved by establishing new companies controlled by the main organization, known as skunkworks (teams dedicated to innovative themes that are kept separate from the organization and whose importance is not known to the rest of the organization). - **Introducing champions** - groups of employees with an entrepreneurial spirit who identify opportunities to revitalize activity within the company. Innovation requires learning, hence horizontal connections within the company are required. ## 9. Strategic alliances, cooperative agreements, and organization networks (54-61) As complexity and uncertainty increase, the issue of how a company interacts with other companies in its operating environment comes to the fore. The relationships between companies in a “traditional” business context are characterized by conflict. This stems from the fact that companies depend on the same resources and the division of value created depends on companies’ ability to overcome the common resources. The focus is on competition, which is defined as horizontal or vertical. - **Horizontal competition:** This involves companies that offer the same product or, at the limit, substitute products. Relationships are confrontational because companies fight over the same resources (both input and output), competing for the customers they need to sell their products. - **Vertical competition:** This concerns relationships between companies positioned at different stages of the value chain. Companies compete for the largest share of added value. This vision is simpler because the boundaries of the company are clear and it obtains the resources it needs to carry out all the operations it chooses to perform internally. *In the context of highly information-intensive relationships between companies*, the focus shifts from competition to cooperation. However, companies do not switch to cooperation, but they can no longer ignore the existence of external actors, who are not merely competitors, but also partners to collaborate with over long or short time periods. To achieve their objectives, companies need internal resources as well as external resources. Sustained access to these external resources requires partnership with companies possessing complementary resources. The idea of complementarity arises (due to the sharing of objectives and processes between companies): when complementary resources are available, the result of cooperation is greater than the sum of individual results, as if each company were to use its resources in isolation. The distribution of the value created depends on inter-company cooperation. ## 9.2. The Network Firm (55) The crisis of the traditional organization has led to successful solutions involving inter-organizational networks. The idea that there are networks of companies, i.e., groups of companies, individuals, or groups, that engage in stable relationships over a significant period of time, thanks to the development of social relationships between organizations, has arisen. These networks are created between independent entities with the objective of generating profit and achieving a competitive advantage that is achievable for the group, but not individually. *A business network is characterized by three elements:* - **Structure:** This includes two components: *nodes* represented by organizations and the *relationships* that connect the members of the network, defining the network’s typology (star with decentralized authority or central authority). Network participants are not fixed in time and continue to evolve, and the relationships within the alliance are dynamic. - **Rules and procedures:** These govern and characterize the network. They can be formal or informal. Examples include rules on cost and benefit allocation, planning, coordination, and control procedures. - **Objectives:** They define the reason for the network’s existence, determining its evolution and justifying its existence. The objective guides the willingness of partners to participate in the network, based on their acceptance of the shared goal, and allows for an assessment of benefits derived from the alliance. Furthermore, thanks to information technology (ICT) and the lesser importance of physical distance, the cost of interdependence between organizations is reduced; companies no longer necessarily need to own a resource in order to access it. It becomes easier to negotiate access to external resources for cost savings. However, the disadvantage is that you do not have full control over the resources you have. You can combat market risk with a solution that falls somewhere between the market and the hierarchy. This is the solution of relatively stable relationships between independent entities (the business network). Outsourcing a part of the company’s processes that are essential to its operation exposes the company to vulnerability. Therefore, a level of trust between network participants is necessary. Trust, however, isn’t a discrete dimension (it either exists or doesn’t). It’s a gradual variable and the question is “what level of trust do we want to have in our network partners to accept a strong dependence on an external party?” This question has an impact on the relationship that the company has with the external world. Companies that seek a high level of trust tend to be located in a stable network with well-defined boundaries: this is what happens in a [industrial district](https://en.wikipedia.org/wiki/Industrial_district), i.e., a group of companies located in the same area, at various stages of the same [value chain](https://en.wikipedia.org/wiki/Value_chain), and therefore sharing costs and risks; this helps them to achieve a greater benefit. The problem, however, is that if the network is stable and well-defined, there’s resistance to change; the company is less reactive to changes in the external environment, less proactive in seeking opportunities for growth. A possible solution is to create more open and dynamic networks where participants are constantly rotating: *benefit*: opportunities are created as new ideas emerge, and new proposals are introduced. *Drawback*: the risk is greater because the partners involved and trust levels are lower. The theme of trust arises in different types of networks. First, we can have a cooperative network where there is collaboration between independent organizations. On the other, we have a modular organization because the members of the network are not independent, they share hierarchical control. Business networks have experienced a growing rate of diffusion in recent decades: the number of companies participating in alliances is increasing and the benefits of interdependence are increasingly recognized by the financial markets. ## 9.3. Inter-organizational cooperation agreements (57) “Inter-organizational cooperation agreements” encompass various modalities of governance ranging from licensing to joint-venture equity ownership. The solutions provide a hybrid approach between market and hierarchical relationships. Below is a list that shows examples of the growing scope of inter-company relations. - **Licensing:** The lightest form of cooperation is the *granting of licenses*, which can be *unilateral* or *bilateral*. This agreement allows the temporary transfer of intellectual property rights from one company to another. Company A purchases a license package from Company B, and Company B also acquires the right to use the intellectual property of Company A. Companies are considered a form of alliance because they involve a resource exchange. - **Alliance:** This is a voluntary agreement between a group of companies that aims to achieve a specific objective that is declared within the agreement, and requires mutual collaboration amongst participants. The reasons behind an alliance often involve achieving innovation (either a new product, service, or technology). We talk about a **strategic alliance** when this agreement is one of the tools that allow the company to continue its journey toward its long-term goals. The **objective of the alliance ends once it is achieved**. - **Networks or consortia:** This is a formal or informal agreement between companies that aims to pursue a common objective. Typically included are a larger number of participants. The objectives are renewed over time and can be reused after they are achieved. The difference between an alliance and a network/consortium is the same as between a task force (alliance) and a committee (consortium). - **Joint venture:** This is the strongest type of cooperation. It involves a permanent commitment in terms of finances on the part of participants: a *joint venture* (joint company). It represents the creation of a new entity whose [share capital](https://en.wikipedia.org/wiki/Share_capital) is a contribution of the parties in the agreement. In other words, this signifies the establishment of a new independent company held by two or more partners. ### 9.3.1. Classification of inter-organizational agreements Knowing that an inter-organizational agreement encompasses all of the features described below, it can be classified on the basis of: - **Scope of the agreement:** Agreements focused on operational activities (e.g., commercial cooperation in the form of marketing agreements) or those focused on developing new knowledge (e.g., cooperation in R&D). - **Number of participants in the agreement, or the location of participants in the value chain**: in terms of the number of participants, we can have a bilateral or multilateral agreement. In terms of the type of participants, we can have vertical agreements (suppliers and customers), [horizontal](https://en.wikipedia.org/wiki/Horizontal_integration) (competitors), or research agreements (with external players such as universities or public/private research institutions). - **Structure of agreement governance**: in terms of the degree of formalization, the types of agreement can be formal or informal. In terms of commitment and involvement, we can differentiate between fair and unfair involvement of participants. ### 9.4. What is driving the growth of inter-organizational cooperation agreements? Many factors are contributing to the increasing prevalence of inter-organizational cooperation agreements (if you have slides 15, please also mention them). Here are a few key drivers: - **Changes in the law and deregulation at a global and national level** (examples include the deregulation and re-regulation of sectors that were previously regulated, such as utilities, banking, finance, or aviation). - **High rate of technical change and a new emphasis on knowledge management:** For instance, in the biotechnology sector, traditional stakeholders have become allies of smaller innovators with strong technological expertise. Cooperation offers a strategic solution to the need for multiple sources of technology and knowledge for complex products. - **Changes in the production and distribution processes** (e.g., faster delivery times, greater flexibility preferred over cost reduction, smaller-scale production). Companies participate in a cooperation agreement: - **To acquire skills through learning and outsourcing:** They aim to develop new skills and competencies to remain competitive against rivals and complementary companies. - **To access complementary resources**: This allows for the achievement of goals that would otherwise be unattainable and enables the development of new capabilities. ## 9.5. Benefits and disadvantages of cooperation (59) ### Benefits: - **Flexibility:** Access to complementary resources without having to invest in developing them directly. Access can even be temporary. - **Sharing costs and risks:** This is a critical aspect in the development phase of a cooperation agreement, especially in the world of constant technological innovation and increasingly demanding consumers. - **Possibility of leveraging synergies** - the generation of complementarities between specialized resources among partners. The result obtained from pooling resources is greater than that which can be obtained by individual entities. - **Increased availability of resources for individual companies**: This stems from the transfer and development of knowledge. Sharing knowledge translates into a transfer of competence and provides an additional benefit. - **Easier entry to new markets **- both in a geographical and a product sense. ### Disadvantages: - **Managing an agreement costs money and time**: High investments are required in terms of time and resources for labs and workshops. These are sunk costs (non-recoverable?). - **Entering into a cooperation agreement involves surrendering part of the organization's independence**: One must be prepared to relinquish a portion of decision-making authority over partners. This necessarily means accepting certain decisions made by the partner that one does not agree with. - **Each partner is exposed to the risk of opportunistic behavior on the part of other participants in the agreement**: This occurs when a partner exploits the efforts or information provided by others for their own benefit. This risk is always present when the desired outcome depends on the combined effort. Opportunism can also involve the acquisition of knowledge: a partner joins the agreement with the intent of gathering information and then using it for their own benefit. (This can lead to leaks). Based on certain conditions, a company should internalize activities or purchase resources or inputs through the market. The deciding factors are **uncertainty** (stemming from information asymmetry between participants, which raises the risk of opportunistic behavior), **frequency of transactions** (more frequent transactions favor internalizing; less frequent transactions favor the market) and **the extent of specific relationship investments** (high investments favour a hierarchy; low investments favour the market). In ambiguous situations where uncertainty is neither high, nor low, the appropriate course of action is cooperation between companies. ## 9.6. Life cycle of cooperation Typically, there is a formalization of cooperative objectives, the selection of partners, a phase of negotiation and planning, implementation, and a closing phase of the collaboration. This is a linear and sequential development; however, it does not necessarily reflect reality, since the phases may overlap. ### 9.6.1. Choosing partners It's crucial to determine who will be involved in the agreement, as this will contribute to its success. Entering into a cooperation agreement is synonymous with shared interests. Therefore, it is important that every party clearly identifies their goals. These should be those that can be achieved through cooperative activity but that do not benefit other parties. It is, however, difficult to gather information about prospective partners that would allow one to identify the ideal partner and ensure a successful partnership. Gaining information about a potential partner’s dependability before activities begin is a significant challenge. ### 9.6.2. Negotiation and planning The objective is to create the best possible conditions for the next phase. This involves minimizing future points of contention, disagreement, or dissatisfaction. Establishing clarity about the goals and expectations among different partners helps to reach an agreement (a plan of action, rules, and the governance model). This will contribute to the satisfaction of all parties. However, since trust is not yet established, negotiators tend to withhold information. This limits the scope of negotiations concerning objectives. ### 9.6.3. Operational stage The collaborative process begins with new partners. At this stage, it’s only when you begin to interact with them that you truly get to know them. This phase is characterized by learning cycles, assessments, and adjustments of expectations concerning the contributions of different partners. Each participant starts with a set of initial conditions, which may hinder effective learning during the initial phase. Through the learning process, you gain a clearer understanding of whether the planning process was adequate. The evaluation of the conditions under which the cooperation takes place follows. This assessment includes adjustments to the situation, as well as a re-evaluation of commitment. The latter decreases if the agreement has not met expectations or it increases (if the agreement offers new opportunities). This leads to a new situation that triggers the evolution of the alliance (it’s dynamic, not static). **What facilitates positive development in a cooperation agreement?** These organizational tools are a good start: - **Effective communication between partners** - including leadership and decision-making power sharing. - **Strong trust**: This is reinforced when the same group of people from the alliance remains involved throughout the duration of the agreement. - **Knowledge transfer:** Experience gained from collaborative projects should be transferred to future projects. - **Legitimacy of the strategic leadership:** This is crucial to support the participation of partners. The more involved partners feel, the more justified they feel, and the greater their motivation. *I covered 9.6/9.6.1/9.6.2/9.6.3 based on my notes alone. Please confirm whether the slides (19-29) were also covered. Also, please look for additional material to cover the S-LCD and Alpha cases.*