New Organizational Forms for Competing in Highly Dynamic Environments: the Network Paradigm
| Author | Shannon H. Shipp,Nigel F. Piercy,David W. Cravens |
| Published date | 01 September 1996 |
| Date | 01 September 1996 |
| DOI | http://doi.org/10.1111/j.1467-8551.1996.tb00115.x |
British
Journal
of
Management,
Vol.
7,
203-218
(1996)
New Organizational Forms
for
Competing
in Highly Dynamic Environments:
the Network Paradigm
David
W.
Cravens, Nigel
F.
Piercy* and Shannon
H.
Shipp
M.
J.
Neeley School of Business, Texas Christian University, Fort Worth, Texas 76129,
USA
and
*Cardiff Business School, University
of
Wales, Colum Drive, Cardiff, CF13EU,
UK
'hrbulence and rapid change in the business environment have been associated for
some time with the development of new network organizational forms which put
various types of strategic alliance and other inter-organizational collaborations into
effect. This paper traces the rationale for the formation of such networks and the
associated vertical disaggregation of functions and implications for internal organiza-
tional design. This leads to the proposal of a classification framework for network
forms. Using the dimensions of volatility of environmental change on the one hand,
and the type
of
inter-organizational relationship involved (collaborative
or
trans-
actional) on the other hand, network forms are classified
as:
hollow networks, flexible
networks, value-added networks and virtual networks.
In
each case it is possible to
identify the environmental and organizational contingencies most likely to be associ-
ated with the emergence and adoption of a particular type of network arrangement.
This argument leads to the identification of a new research agenda which has the goals
of developing more robust conceptualizations
of
network characteristics; better under-
standing the contingencies
surrounding
the emergence of network forms and their rela-
tive efficiencies and specifying some of the major implications of network formation
for internal organizational design.
In
parallel the paper identifies a number of man-
agerial implications
for
setting strategic priorities and developing appropriate manage-
ment systems in these new organizational contexts.
Introduction
This paper focuses on the network paradigm as a
strategic organizational response to those dy-
namic environmental pressures which provide an
incentive to devolve and disaggregate business
functions to specialist partners in collaborations
and alliances. The network paradigm has been a
focus for research attention in the European and
Scandinavian literature since the mid-1970s (e.g.
Gummesson, 1994), perhaps most prominently in
the work of the International Marketing and
Purchasing (IMP) research group studies of inter-
action in business relationships (e.g. Ford, 199Ob;
Hakansson and Johanson, 1992). More recently, a
similar focus has emerged in the American litera-
ture (e.g. Thorelli, 1986; Achrol, 1991; Webster
1992). Notwithstanding such important contribu-
tions, our general understanding
of
this phenom-
enon is not well developed.
For
example, one
Scandinavian commentator has noted
'network and virtual organizations have been here
for a long time, although our ability to define them
and communicate their true content is still
limited.' (Gummesson, 1994)
This paper does not attempt a comprehensive
review
of
the literature pertaining to alliances and
0
1996 British Academy of Management
204
D.
W
Cravens,
N.
E
Piercy and
S.
H.
Shipp
the conventional organizational forms (e.g. see
Ford, 1990b; Webster, 1992).
While similar to conventional channels of
distribution networks (i.e. inter-organizational
linkages between producers and suppliers, mar-
keting intermediaries and end-users (Robicheaux
and Coleman, 1994)) network organizations differ
from that more familiar form in a number of key
respects. They display both horizontal and verti-
cal structures (e.g. Achrol, 1991), and are likely to
involve manufacturing, technology and services-
based partnerships as well as distribution in the
conventional form. Moreover, evolving networks
are likely to be more complex and liable to more
frequent change than conventional channels of
distribution (Miller, 1994). This reflects such net-
work characteristics as flexibility and adaptability
in the face of change, and the responsiveness of
the customer-driven network, guided by the needs
and preferences
of
buyers (Powell, 1987,1990).
In examining emerging network organizational
forms, Quinn (1992) characterizes them as ‘intelli-
gent enterprises’, and proposes a variety of
descriptive structural concepts as infinitely flat,
the spider’s web, the starburst and inverted
organizations. Certainly, the notion of the ‘intelli-
gent enterprise’ is reinforced by Tapscott and
Caston (1993) who describe sophisticated infor-
mation and decision support systems as the
‘brain’
of
the network, which is frequently global
in scope, and which performs many of the
command and control functions of the traditional
organization.
The existence of vertical and horizontal rela-
tionships between network members, as noted
above, is also remarkable. The suggestion is that
the inter-organizational ties in a network may
involve
vertical
relationships, for example linking
suppliers to end-users, as well as
horizontal
relationships, for instance among actual or poten-
tial competitors, and service providers like con-
sultants, research agencies and the like. Examples
of
the relationships among firms in a network
include: joint ventures, strategic alliances,
supplier-producer collaborations, franchises, re-
search consortia and channel of distribution
linkages (e.g. see Achrol, 1991; Anderson and
Narus, 1990; Bucklin and Sengupta, 1993; Cravens
et
al.,
1993; Doz, 1988), and a given network may
include one or several of these kinds of relation-
ships (Cravens
et
al.,
1994). The conclusion
reached by such commentators as these is that the
networks (for this see, for example, Ford, 1990a;
Gummesson, 1994; Piercy and Cravens, 1995).
However, the need for this focus on network
formation can be traced to a number of critical
and topical developments.
It has been noted for example, that a global
environment of rapid, frequently unpredictable,
change is likely to be the norm as the developed
economies face the twenty-first century (e.g. see
Davis, 1987; Achrol, 1991). Related views suggest
that underpinning this turbulence is a stream of
exacting new technologies and customer markets
which are more demanding, increasingly diverse
in their needs and preferences and highly com-
petitive (e.g. see Tapscott and Caston, 1993). Simi-
larly others suggest that the characteristics of the
post-Industrial era which confront the developed
economies include more and increasing know-
ledge, growing complexity and competitive and
technological complexity reaching new levels
(Huber, 1984).
Although partly speculative, the observation of
such trends leads some scholars and other com-
mentators to identify a mandate for radical organ-
izational change (e.g. Achrol, 1991, 1993a, 1993b;
Quinn, 1992; Ring and Van de Ven, 1992; Tapscott
and Caston, 1993; Webster, 1992). Such analysts
suggest that organizations are drastically revising
traditional paradigms and developing new organ-
izational forms with the goals of adapting to new
environmental threats and opportunities, relocat-
ing in new environments, such as new product-
markets, intervening in the competitive structure
faced or developing buffers to reduce the organ-
izational impact of environmental forces (e.g. see
Huber, 1984; Quinn, 1992).
In this context, observations suggest that one
increasingly pervasive change in organizational
forms is an escalating trend in individual com-
panies
of
developing network forms (e.g. Hakans-
son and Johanson, 1992; Cravens
et al.,
1994).
These forms are unusual and noteworthy in
several respects, and certain of their key attrib-
utes are briefly reviewed below.
For example, one fundamental characteristic of
the network organization as it
is
currently under-
stood is the performance
of
various business
functions by a number of independent organiza-
tions and individuals. In these terms, the network
is typically a relatively ‘flat’ organization, relying
for its operations on interaction between network
partners, rather than the multilateral functions
of
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