Network Organizational Forms

1. Network Organizational Forms Marni Heinz

2. 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)

3. 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)

4. 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)

5. Comparison of Organizational Forms

6. 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

7. 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

8. 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)

9. 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

10. 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

11. 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).

12. Also, Networks of Practice…

13. 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

14. 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).

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.