Network Organizational Forms Marni Heinz
Core Concepts • What is an Organization? • Two or more people working together towards some common goal • What is an “Organizational Form?” • “…the structural features or patterns that are shared among many organizations” (Fulk & DeSanctis, 1999)
Classic Organizational Forms • Markets vs. hierarchies - viewed in terms of efficiency (Williamson, 1975) • Also known as transaction cost economics • Markets are preferred when… • Transactions/exchanges are straightforward, non-repetitive, and don’t require time, money or energy • Hierarchies are preferred when… • Transactions/exchanges are uncertain, repetitive, and require time, money or energy (which are difficult to transfer)
An Alternative: The Network Organizational Form • Critique: Markets vs. hierarchies approach is too mechanistic, doesn’t reflect reality, and ignores the importance of reciprocity and collaboration in economic exchanges (Powell, 1990) • Instead…network organizational form proposed as an alternative to markets or hierarchies • Emphasis placed on dynamic, multiparty cooperative relationships across geographic boundaries (DeSanctis & Poole, 1997) • Assumes that [economic] action is embedded in social relations (Granovetter, 1985) • Applicable both within (intraorganizational networks) and across organizational boundaries (interorganizational networks)
What Factors Support the Formation and Proliferation of Networks? • Know How: Fields that are highly dependent on a knowledgeable or skilled workforce • Demand for Speed: Industries that require fast access to information, flexibility, and responsiveness to changing tastes • Trust: Work settings where people have a common background (e.g., ethnic, ideological, professional) since this promotes trust
Examples of Network Organizations • Entrepreneurial firms (Nohria, 1992) • Professional services (Eccles & Crane, 1988) • Biotechnology industry (Barley et al., 1992; Powell & Brantley, 1992) • Craft industries (e.g., construction, publishing, film and recording, Powell, 1990) • Strategic alliances (e.g., joint ventures, Gulati, 1998) **Note: Network perspective applies across various levels of analysis – small and large groups, subunits of organizations, entire organizations, regions, industries, and national economies
Network Organizations or… • Virtual organizations (Markus et al., 2000) • Horizontal organization (Castells, 1996) • Hybrid organizations (Powell, 1987) • Dynamic networks (Miles & Snow, 1986) • Post-bureaucratic (Heydebrand, 1989) • Post-industrial (Huber, 1984) • Community (Adler, 2001)
What is the Role of Technology? • Technological Perspective • Network form relies on new technology to enable the emergence of flexible and informal exchange patterns (Nohria & Eccles, 1992) • Organizational Perspective • New technologies are designed or modified to support new organizational forms (Fulk & DeSanctis, 1999) Technology makes network organizational forms possible… and new organizational forms shape technology
More on the Role of Technology • Common misguided assumption: network organizations = electronic networks (Nohria & Eccles, 1992) • Tendency to think that electronically mediated exchanges will replace face-to-face interaction (based on efficiency argument) • Instead, effectiveness of an electronic organization is dependent on a pre-existing social network of face-to-face interaction • Exception: When relations are impersonal, routine, unambiguous, and atomistic
Complementary Perspective: Communities of Practice • “Communities of practice are groups of people who share a concern, a set of problems, or a passion about a topic, and who deepen their knowledge and expertise in this area by interacting on an ongoing basis” (Wenger et al., 2002, p. 4) • Or…unique types of networks in which a shared practice binds members together • Practice: • Includes shared participation in a task, job, or profession, and can extend beyond work to include hobbies, a shared passion about a topic, or a common set of concerns (Brown & Duguid, 2000, 2001).
Study: Collective action in an electronic NoP • Social capital (SC): • A theory that provides a link b/w social structure and action • Def’n: “Social relations that are accessed or mobilized for purposive action” (Lin, 2001, p. 29) • Wasko and Faraj (2005) hypothesize that social capital positively influences individual knowledge contributions to an electronic NoP • Sample: Members of a U.S. legal professional association using an electronic message board • Structural capital operationalized as centrality based on messages posted to a discussion thread • Results: A user’s network centrality predicted volume of contributions
Conceptual Similarities between Networks, CoPs/NoPs, and SC • Cohen and Prusak (2001) describe networks and communities as “the source and shape of social capital in organizations, the primary manifestation of cooperative connections between people” (p. 55). • Community and social capital constructs are “conceptual cousins” (Putnam, 2000, p. 21). • Mutual engagement in a CoP “identifies a condition that is similar to connection in a network but describes such relations as grounded in common interest and activity, rather than mere interaction” (Iverson and McPhee, 2002, p. 262).
References Adler, P. (2001). Market, hierarchy, and trust: The knowledge economy and the future of capitalism. Organization Science, 12(2), 215-234. Barley, S., Freeman, J, & Hybels, R. (1992). Strategic alliances in commercial biology. In N. Nohria & R. G. Eccles (Eds.), Networks and organizations: Structure, form, and action (pp. 365-394). Boston, MA: Harvard Business School Press. Brown, J.S., & Duguid, P. (2000). The social life of information. Boston: Harvard Business School Press. Brown, J. S., & Duguid, P. (2001). Knowledge and organization: A social-practice perspective. Organization Science, 12(2), 198-213. Castells, M. (1996). The rise of the network society. Oxford, UK; Blackwell Publishers. Cohen, D., & Prusak, L. (2001). In good company: How social capital makes organizations work. Harvard Business School Press: Boston, MA.
References (continued) DeSanctis, G., & Poole, M. S. (1997). Transitions in teamwork in new organizational forms. Advances in Group Processes, 14, 157-176. Eccles, R. G., & Crane, D. B. (1988). Doing deals: Investment banks at work. Boston: Harvard Business School Press. Fulk, J. & DeSanctis, G. (1999). Articulation of communication technology and organizational Form. In G. DeSanctis & J. Fulk (Eds.), Shaping organizational form: Communication, connection, and community (pp. 5-32). Thousand Oaks, CA: Sage Publications. Granovetter, M. (1985). Economic action and social structure: The problem of embeddedness. The American Journal of Sociology, 91(3), 481-510. Gulati, R. (1998). Alliances and networks. Strategic Management Journal, 19(4), 293-317.
References (continued) Heydebrand, W. (1989). New organizational forms, Work and Occupations, 16(3), 323-357. Huber, G. P. (1984). The nature of design of post-industrial organization. Management Science, 30(8), 928-951. Iverson, J. O., & McPhee, R. D. (2002). Knowledge management in communities of practice. Management Communication Quarterly, 16(2), 259-265. Markus, M. L., Manville, B., & Agres, C. E. (2000). What makes a virtual organization work? Sloan Management Review, 13-26. Miles, R. E., & Snow, C. C. (1986). Network organizations: New concepts for new forms. California Management Review, 28(3), 62-73.
References (continued) Nohria, N. (1992). Is a network perspective a useful way of studying organizations? In N. Nohria & R. G. Eccles (Eds.), Networks and organizations: Structure, form, and action (pp. 1-22). Boston, MA: Harvard Business School Press. Nohria & Eccles (1992). Face-to-face: Making network organizations work. In N. Nohria & R. G. Eccles (Eds.), Networks and organizations: Structure, form, and action (pp. 288-308). Boston, MA: Harvard Business School Press. Powell, W. W. (1987). Hybrid organizational arrangements. California Management Review, 30, 67-87. Powell, W. W. (1990). Neither market nor hierarchy: Network forms of organization. Research in organizational behavior, 12, 295-336. Powell & Brantley, (1992). Competitive cooperation in biotechnology: Learning through networks? In N. Nohria & R. G. Eccles (Eds.), Networks and organizations: Structure, form, and action (pp. 365-394). Boston, MA: Harvard Business School Press.
References (continued) Putnam, R. (2000). Bowling alone:The collapse and revival of American community. New York: Free Press. Wasko, M. M., & Faraj, S. (2005). Why should I share? Examining social capital and knowledge contribution in electronic networks of practice. MIS Quarterly, 29(1), 35-37. Williamson, O. (1975). Markets and Hierarchies. New York: Free Press. Wenger, E., McDermontt, R., & Snyder, W.M. (2002). Cultivating communities of practice: A guide to managing knowledge. Boston, MA: Harvard Business School Press.