The Global network
Organization of the Future
The Rising Governance
Mechanism Between Bureaucracy
and Contractual Relationships
Provocations
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The prevailing wind of global networking
organization supplanted internal hierarchical
structure?
The governance structure of global e-business
firm will be shaped by non-market forces as well
as market forces.
The globalization will be hindered by local
traditions, economies, cultures, business
practices, and regulations.
Dees the principle of economies of
scale still work in the global
management?
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In a dynamic global marketspace
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Quickly clustering among the specialized but
interdependent assts and competences toward the
emerging opportunities
The network organization for new businesses as a spider’s
web—constituting a value network, or a value constellation
which is usually operating neither by arm’s-length marketbased transaction nor internal hierarchy.
Loose coupling and cooperative competition based on the
necessary level of mutual trust, respect, and shared
collective outcomes expired after the task was done.
The death of hierarchy?
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ICT pervades everywhere and
deconstructs all the traditional practices?
Non-market institutions interact with the
ICT assimilation
Uncertainties and complexities still exist
and need managerial monitoring,
coordination, and hierarchical task
partition, specialization, and integration
Markets
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Normative basis: contracting property rights
Means of communication: prices
Methods of conflict resolution: haggling—resort
to courts (public orders) for enforcement
Degree of flexibility: high
Amount of commitment among parties: low
Tone or climate: precision and suspicion
Actor preferences or choices: independent
Mixing of forms: repeat transactions; contracts
as hierarchical documents
Hierarchies
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Normative basis: employment relationship
Means of communication: routines, procedures,
commands
Methods of conflict resolution: administrative fiat—
supervision
Degree of flexibility: law
Amount of commitment among parties: medium to high
Tone or climate: formal , bureaucratic
Actor preferences or choices: dependent
Mixing of forms: informal organization; market-like
feature: profit centers, transfer pricing, tournament
Networking relationships
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Normative basis: complementary strengths
Means of communication: relational
Methods of conflict resolution: norm of reciprocity—
reputational concerns
Degree of flexibility: medium
Amount of commitment among parties: medium to high
Tone or climate: open-ended, mutual benefit
Actor preferences or choices: interdependent
Mixing of forms: status hierarchies, multiple partners;
formal rules
Features of dynamic
networking organizations
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Vertical disaggregation—disaggregation
for forming new aggregation/fusion
among diversities
Brokers—linkage between complements
Market mechanisms—encourage interunit competition for partnership control
Full-disclosure information systems—
instantaneous mutual verification
Contracting hazards of global
networking business
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Confronting different circumstances &
atmosphere
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Uncertainty
Opportunism
Bounded rationality
Information compactedness/asymmetry
Holdup problem under small number/assets specificity
Transaction cost analysis between firms/entities
Agency cost/loss arises from the responsibility
delegation and accountability problem between
the principal and agents
Non-market factors
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From the perspective of institutional economics /
institutionalism
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Politics, culture, ideology, history, economy, regulation,
social norm, IPR regime, etc.
Path dependence, lock-in effect, structural inertia,
switching cost, self- or mutual-reinforcing mechanism,
increasing returns (s), network effects (d)
The co-evolutionary process between technological,
market and non-market influencers.
Complementarities between formal rules and
informal/derivative rules
Intertwined arrangement between public- and private
order
Social network perspective
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Loose-coupling temporary co-optition
relationships
Learning and participation purpose
A co-development process of social
capital among peers
Managerial implications
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Recognize the institutional differences
The firm governance for encouraging the
networking collaboration and controlling the
efficiency
Arrangement for taking national comparative
advantages and protecting from risks
Free culture of networking entrepreneurship
supplemented with prudential mechanisms
Extending readings
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Galbraith, J. R. (1994), Competing with Flexible Lateral Organizations, AddisonWesley, Reading, MA.
Powell, W. W., and P. J. DiMaggio (eds.) (1991), The New Institutionalism in
Organizational Analysis, The University of Chicago Press, Chicago.
North, D. (1990), Institutions, Institutional Changes, and Economic Performances,
Cambridge University Press.
Jensen, M. C., and W. H. Meckling (1976), “The Theory of the Firm: Managerial
Behavior, Agency Costs and Ownership Structure,” Journal of Financial Economics,
pp.305-62.
Williamson, Oliver (1975), Markets and Hierarchies: Analysis and Antitrust
Implications, Free Press, NY.
Cohen, M. D., J. G. March, and J. P. Olsen (1972), “Garbage Can Model for
Organizational Choice,” Administrative Science Quarterly, 17(1), pp.1-25.
Hayek, F. A. (1945), “The Use of Knowledge in Society,” American Economic
Review, 35(4), pp.519-30.
Coase, R. (1937), “The Nature of the Firm,” Economica, vol.4, pp.386-405