Multidisciplinary and Multidimensional Analysis of Organizational Networking Phenomena


The research underway within the DOMINO project addresses networking phenomena in the context of a series of interrelated research projects, aiming to explore multiple facets of network organization management relying on a rich collection of theoretical reference disciplines, e.g., coordination, transaction cost economics, organizational learning, etc., and utilizing multiple research methodologies. The DOMINO methodology relies on a suite of "explore & explain" actions. Both exploration and explanation phases gather theoretical and empirical research, substantiate research targets, seek evidence in real-life business cases, synthesize theoretical and empirical findings, apply and validate them in firms, and finally promulgate actionable guidelines for business exploitation and further research.

However in the effort of providing practitioners with an actionable research framework, we have to ensure that the outcome of DOMINO's project should be valid, coherent, and applicable in the business world. To this end, it is important to apply different levels of network analysis in the focused research projects, adopted by all DOMINO researchers. More explicitly Riemer, Klein, and Selz (2001) propose three levels of analysis to consider when investigating network phenomena: (1) single-firm, (2) network, and (3) environment (market, stakeholder environment) level. In each layer, various themes will be treated individually, whereby the three layers together constitute a comprehensible and consistent system:

  1. Single-firm level: The single-firm is the main entity of interest within the network. Single-firms within the network are the addressees of our research, because they have to take care of management issues, they have to design the network, and often they have to agree with each other on how to manage the value creation within the network.

  2. Network level: This is the central level of interest in the taxonomy. In this level the network consists of several single-firms (the networks nodes) and their relationships (the ties). At the network level we elaborate on the characteristics of a single network in terms of strategy, organization, and technology.

Network strategy is about the aims and goals of partnering within the network and about strategic decisions made by the network initiators and partners regarding the composition of the network and the types of companies to be involved. The network can therefore be characterized in terms of value chain and functional focus of the partnering companies, as well as their size, or their regional and industry focus. Furthermore decisions about internal competition, the possibilities for new network entries, the number of partners involved, and the duration of the partnership characterize the network strategy.

Organization comprises the structure of the network, the governance, the coordination of the value creation (interactions), as well as cultural aspects. Thus, the criteria is mainly concerned with balancing the partners' rights and roles, the coordination of the value creation, and the definition of the network relations and boundaries. Value creation may be organized and coordinated in different manners, by a superior or focal instance or based on informal mechanisms, like simple rules in polycentric networks.

Technology is used to coordinate the intra-network processes. According to Malone and Crowston (1990, p. 365), inter-organizational information systems may fulfill different tasks (distinguished by their complexity): information tasks, communication, group decision making, and (most complex) coordination and management of process flows and interdependencies.

  1. Environment level: The network's environment and its elements are influencing the emergence and the design (in terms of engineering) of a network. They therefore serve as a source of various contingencies, which have to be considered to understand the strategic positioning and goals of a single network initiative, as well as its specific nature and characteristics. Porter (2001, p. 66) argues that, whether an industry is new or old, its structural attractiveness is determined by five underlying forces of competition: the intensity of rivalry among existing competitors, the barriers to entry for new competitors, the threat of substitute products or services, the bargaining power of suppliers, and the bargaining power of buyers. Our assumption is that the nature of industry has great impact on the emergence of networks and the types of networks emerging.

Generic Network Types in DOMINO's Framework

After the introduction of the criteria for networks' classification, we will now present typical and generic network types, as described in the literature. This serves the following purposes:

  • to categorize dynamic organizational forms (please note: our taxonomy therefore consists of: (1) the core definition, based on the specific network variables described above, (2) the catalog of classification criteria, and (3) the generic network types);

  • to illustrate our catalog of classification criteria and its application;

  • to serve as a reference point for the discussion and the following stages of research within the DOMINO project;

  • and last but not least, to create a basic orientation for the understanding of the complexities arisen in the area of networked business organizations.

To this end, we distinguish five generic network types: (1) the strategic alliance, (2) the dynamic, focal network, (3) the virtual organization, (4) the value chain network, and (5) the supply chain hub. In the next paragraph we will classify the types; we then detail a description.

Classification of the Five Generic Network Types

The classification provides a detailed description of each generic network type. Nevertheless we provide a textual introduction afterwards. For the classification we will use only parts of the above introduced criteria catalog.

After classifying the types of networks, each one can be characterized by the combination of its characteristics. In the section bellow, a short description of the five generic network types is presented:

  • Strategic alliance: A strategic alliance is a cooperation of (mainly big) independent companies that are often competitors on the same value chain stage (horizontal cooperation). The goal of this cooperation is to improve their own competitive position in comparison to competitors outside the network. Therefore companies collaborate to profit from synergies, to gain greater, or often global, market access, and to improve their own market position. Their goals may be various: to share investment risks and share technologies (e.g., big UMTS-partnerships), to enhance market scope and service portfolio (e.g., big airline alliances like Star Alliance, Oneworld Alliance, Qualiflyer Group), or even to manage innovations and create new products (e.g., Sony/Ericsson Alliance on new mobile devices). Strategic alliances may therefore have both an internal resource-based focus or a market-based/transactional focus. A strategic alliance is usually a closed network because partners' constellation is one of the competitive advantages. Strategic alliances can deeply change market structures that lead to a competition of alliances ("group-vs.-group"; Gomes-Casseres, 1994).

  • Dynamic, focal network: The dynamic, focal network type is grouped around one dominating central entity, which hierarchically coordinates value-creation activities. The scope of the network is to create value for the customer that is market oriented by combining products and services of network participants. Therefore, the central actor, who is called "the broker," picks the best services out of the pool of partners and different value chains (cherry picking) and initiates specific value chains to fulfill market/customer specific tasks. However, an internal dynamic competition among the partners competing for the participation in a specific value chain (or project) may emerge. The functioning of the network is illustrated using the value Web example by Selz and Klein (2001).

  • Virtual organization: One of the most popular network types is the virtual organization, which is a network of generally small and medium-sized companies collaborating to realize projects that would not be possible to derive without their cooperation. The members want to enhance scope in terms of achieving "virtual size" by maintaining their small-firm flexibility at the same time. The individual partners build a stable and mainly trust-based network structure, which can be called the "pool." The pool is able to cover a wide range of competencies, while each member concentrates on particular core competencies. The virtual organization provides customers with individual services and is therefore market oriented. The products and services provided by a virtual organization often depend on innovation and are strongly customer based (Bultje et al., 1998). In case of an incoming customer order, a specific network project is implemented to process the customer order. Relating to the classification, the virtual organization can be characterized as a mainly vertical cooperation, where each partner concentrates on its core competencies. But it can also have horizontal characteristics, since there may be several partners providing the same competencies to guarantee sufficient capacities. This leads to increasing coopetition between actors (long-term coopetition). Furthermore, the virtual organization is polycentric (partners have mainly equal rights), open (semi-open, because the pool is based on trust to achieve some sort of stability), and mainly consisting of small and medium-sized companies (Riemer et al., 2001).

  • Value chain network: The value chain network type is a long-term oriented network of mainly equal-righted partners along a value chain to serve a specific market or customer orders. It is concerned with the production of goods or services and focuses on value-chain-wide process calibration and integration with interfirm information processing practices. Regarding its goals, the value chain network is efficiency driven, namely concerned with the improvement of its time to market, the reduction of costs, and the improvement of services to better address customer needs. The IT-driven concept of supply chain management (SCM) is central to this network type: the alignment, integration, and coordination of processes using concepts like efficient consumer response, just-in-time delivery, continuous replenishment, etc. At this point, we should make clear that a value chain network is a vertical cooperation with a certain market view. It is also strategic, because the information-sharing relationships require high investments and the benefits can only be seen over time. Besides, the partner constellation is stable regarding the specific single value chain. A value chain network is usually closed (entries are not easily possible) and polycentric. Well-known examples of big value chain networks come from the retail and consumer goods industry, where big retailers collaborate with their suppliers—big producers of consumer goods—to better integrate and align their customer-oriented value chain processes in logistics and marketing. These initiatives are well known under the label of "efficient consumer response" (ECR). One cross-country initiative is this of Henkel KgaA, a German consumer goods company, and the big Spanish retailer Eroski.

  • Supply chain hub: The supply chain hub concept is similar to the above-illustrated value chain network. But here, one (mostly big) company is the central entity of interest. Supply chain hubs are characterized by the strategic leadership of one focal company "the hub firm" (Sydow, 1992) with direct and indirect relationships to other companies that are clearly defined by vertical structures. The dominant (big) player tries to coordinate the value chain and its (SME) partners with mainly hierarchically structures. The network therefore consists of the focal company and its suppliers on different supply chain stages (first-, second-, third-tier suppliers). Wildemann (1997) refers to this type of network as a "hierarchical-pyramidal network" because of its characteristic structure of a tree-net or pyramid (on each tier level, the number of suppliers increases). The focal company tries to coordinate the whole value chain, but has to set up cooperative structures and to take care of calibrating the partners' interests, because its potential for hierarchical coordination is not unlimited (otherwise, this type of network would not be within the "white area" of DOMINO research). Typical examples for this type of network come from the automotive sector: supplier networks by Volkswagen, BMW, German Motors, etc. Especially interesting is the Japanese car industry (Cusumano & Takeishi, 1991). Synonyms for this type of network are: "supply chain collaboration," "supplier networks," and "supplier-buyer relationship networks."




Social and Economic Transformation in the Digital Era
Social and Economic Transformation in the Digital Era
ISBN: 1591402670
EAN: 2147483647
Year: 2003
Pages: 198

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