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)
–

Markets are preferred when…
–

Also known as transaction cost economics
Transactions/exchanges are straightforward, nonrepetitive, 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)
Comparison of Organizational Forms
Key Features
Market
Prices
Means of
Communication
Hierarchy
Network
Routines
Relational
Actor Choices
Independent
Dependent
Interdependent
Methods of
Conflict Res.
Haggling –
resort to courts
for enforcement
Administrative
fiat –
Supervision
Norm of
reciprocity –
Reputation
concerns
Normative
Basis
Contract –
Property Rights
Employment
Relationship
Complementary
Strengths
Degree of
Flexibility
High
Low
Medium
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-toface 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).
Also, Networks of Practice…
Key Features
CoP
NoP
Shared Practice
Strength of Ties
Strong
Weak
Spatial
Characteristics
Physical copresence
Geographically
dispersed (strangers)
Form of
Communication
Direct/Face to face
Indirect/Mediated (e.g.,
listserves, newsletters,
conferences)
Reciprocity
High
Low
Coordination
Easy
Difficult
Study: Collective action in an
electronic NoP

Social capital (SC):
–
–



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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


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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), 323357.
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.