New Organisational Forms and Networks.

A Literature Review
Eduardo Castellano

Complexity Research Programme

London School of Economics
March 27, 2003
Email: E.Castellano@lse.ac.uk

Abstract This new forms have also been suggested as the

New organizational forms have appeared due to
the transition from an economy based on
materials to an hyper-competitive economy
based on intense flows of information. Several
non-hierarchical, permeable and interconnected,
models are replacing classical integrated
hierarchical organizations. The networked
organization can be regarded as the underlying
structural arrangement behind most of the new
organizational alternatives. This papers presents
a literature review about such new
organisational models, as well as, briefly, some
insights about its properties, advantages and
disadvantages, enabling environments for its
development, and finally, some analytical tools
for its performance evaluation.
1. The Context
New organizational forms have appeared due to
the transition from an economy based on
materials to an economy based on intense flows
of information, this new organizational forms as
Child and McGrath (2001) stated have to deal
with four core themes: interdependence;
disembodiment; velocity; and power, and more
specifically with the following main issues
(Hales, 2001): (1) how global competition and
lower communication transaction costs compel
firms to dissolve internal and external boundaries
and concentrate on core processes competencies
(Hagel III and Singer, 1999), (2) organize around
social relations in order to create, access and
integrate knowledge and leverage intellectual
capital, and (3) inter-firm collaboration networks
and alliances to access new sources of
intellectual and social capital.
only way to manage in hyper-competitive
environments (Ilinitch, D'Aveni and Lewin,
1996). In this context, Volberda (1996), places
the flexible org form as a paradigm that surpass
the bureaucratic vertical forms that severely
hamper the ability to respond to accelerating
competition, in favour of a rich typology of
organizational forms for coping with hyper-
competition, each of which reflects a particular
way of addressing change and preservation.
Furthermore, he explores different trajectories of
organizational development over time, especially
those relating to revitalization.
2. New Organisational Forms
The organizational form of many firms therefore
is changing (Daft and Lewin, 1993), integrated
hierarchical organizations are being replaced by
non-hierarchical entities that are permeable and
interconnected (Schilling and Steensma, 2001).
As Child and McGrath (2001) paper points out,
different formulations have appeared as a result
of case studies of firms that have pioneered
various organizational innovations: the post-
entrepreneurial organization (Kanter, 1989) and
the flexible firm (Volberda, 1998) are two broad
concepts that express the paradigm of new
organizational form, as opposed to others that
focus on more specific aspects of the paradigm
as the network organization (Nohria and Eccles,
1992; Snow, Miles and Coleman, 1992; Castells,
1996), the virtual corporation (Davidow and
Malone, 1992), the knowledge-creating company
(Nonaka and Takeuchi, 1995), the ambidexterous
organization (Tushman and O’Reilly 1996), the
sense and respond model of adaptive enterprise
(Haeckel, 1995; Cap Gemini E&Y-CBI, 1999),
the project-based organisation (Hobday, 2000),
the high performance or high-commitment work

1
system (Pfeffer, 1998), the boundaryless
company (Devanna and Tichy, 1990), the hybrid
organization (Borys and Jemison, 1989), the
modular organization (Schilling and Steensma,
2001; Sanchez and Mahoney, 1996). Another
important concept is the improvising
organization (Crossan, White, Lane, and Klus,
1996) where time to plan converges with time to
act, and shows how improvisation helps to
synthesize even time and event time in
scheduling processes, internal pacing and
external pacing in synchronization processes,
and linear and cyclical time in allocation
processes for conditions of time pressure and
uncertainty. Weick (1998) also refers to
improvisation as “just-in-time strategy” and
explains how these strategies are distinguished
by less investment in front-end loading (try to
anticipate everything that will happen or that you
will need) and more investment in general
knowledge, a large skill repertoire, the ability to
do a quick study, trust in intuitions, and
sophistication in cutting losses.
3. Network Organisation
According to Schilling and Steensma (2001),
despite the terms are sometimes invoked in
slightly different ways, most of them describe
the phenomenon whereby the role of the tightly-
integrated hierarchical organization is, in many
cases, being supplanted by “loosely coupled”
networks of organizational actors that allow
components to be flexibly recombined into a
variety of configurations to develop internal and
external networks of cooperation and
collaboration. Therefore the network
organization can be regarded as the underlying
structural arrangement behind most of the new
organizational alternatives that have emerged in
the last times (Alvarez and Ferreira, 1995).
Continuing with Schilling and Steensma (2001)
research, to better understand this phenomenon,
authors have developed descriptive typologies of
different types of network organizations (Achrol,
1997), have studied the nature of dyadic business
relationships (Anderson, Hakansson, and
Johanson, 1994), and the governance of inter-
organizational linkages (Candance, Hesterly and
Borgatti, 1997). Some researchers have also
examined the impact of such arrangements on
the transfer of learning within and between
organizations (Powell, 1998) and the
implications of trust and social embeddedness in
relational exchange (Uzzi, 1997; Jones and
Bowie, 1998; Lane and Bachmann, 1998; Newell
and Swan, 2000). In the same way, in Powell
(1990), the attempt is to speak about networks as
a distinct form of organization for explaining
many forms of collaboration, new organizational
design and complex realities of economic
exchange, and provides a rationale for network
forms and discuss three factors that are critical
components of networks: the exchange of know-
how, advantages in dealing with market's
demand for speed, and the importance of an
interfirm trust environment.
4. Network Organisational Practices,
Benefits and Disadvantages
In Candace, Hesterly and Borgatti (1997) a
general theory of network governance is
explained in terms of transaction cost economics
and social network theories, it describes under
what conditions network governance has
comparative advantage seeing the network form
of governance as a response to exchange
conditions of asset specificity, demand
uncertainty, task complexity, and frequency.
Network governance is referred as interfirm
coordination (Uzzi, 1997), that is characterized
by organic or informal social systems in contrast
to bureaucratic structures within firms and
formal contractual relationships between them,
and constitutes a distinct form of coordinating
economic activity which contrasts and competes
with markets and hierarchies (Powell, 1990;
Nohria, 1992). In Grandori and Soda (1995), ten
organizational co-ordination mechanisms that are
employed in inter-organizational networks are
identified: communication, decision and
negotiation mechanisms, social coordination
mechanisms, integration and linking-pin role and
unit mechanisms, common staff mechanisms,
hierarchy and authority relation mechanisms,
planning and control system mechanisms,
incentive system mechanisms, selection system
mechanisms, information system mechanisms,
and public support and infrastructure
mechanisms… trust will emerge to the extent
that the integration mechanisms actually do
encourage co-ordination between the different
parties involved. In Akkermans (2001), a
systems approach, with system-dynamics based
group model building at its core, is presented in
terms of practices that facilitate the development
of inter-organisational collaboration and
cooperation networks, the creation of favourable
conditions for spontaneous bottom-up emergence
2
of successful network formation and developing
– top-down – workable business processes to
embed those network relations in, and the
creation of an inter-organisational trusting
environment in integrated project teams based in
a case study of four organizations striving for
collaborative supply-chain management in the
high-tech electronics industry. In Newell and
Swan (2000), a case study is developed in terms
of the evolution of trust and different types of
trust (companion, competence and commitment
trust) as the essential mechanism and
environment for interorganizational networks
(inter-university research team working) to be
effective in co-ordinating the work of a diverse
range of partners. Also, Dirks and Ferrin (2001)
research provides insight, this time within the
organization, into the processes through which
trust affects organizational outcomes, and
suggests ways that organizational settings can be
modified to capitalize on high levels of trust or
mitigate the effects of low levels of trust. In
Handy (1995), seven rules of trust are proposed
in the context of virtual networked teams: Trust
is not blind, it needs fairly small groupings in
which people can know each other well; Trust
needs boundaries, define a goal and then leave
the worker to get on with it; Trust demands
learning and openness to change; Trust is tough,
when it turns out to be misplaced, people have to
go; Trust needs bonding, the goals of small units
must gel with the larger group's; Trust needs
touch, workers must sometimes meet in person;
Trust requires leaders.
According to Hacki and Lighton (2001),
networked firms and network orchestrators like
Cisco, CNET, Schwab, and eBay by owning
fewer assets and leveraging the resources of
partner companies, require less capital, return
higher revenues per employee, and spread the
risks (and benefits) of a volatile market across
the network. This paper also describes the
characteristics of these networks, how they are
built by orchestrators, and that this business
networks deliver superior value to customers,
partners, and investors, outperforming other top
companies inside and outside their industries.
However, there are also some dangers. For
example, in Marchington (2000), the
consequences of this new kind of network
organizations in the reshaping of work and
employment relationships has been studied from
a number of case studies in the UK. These
network org forms introduce complementarities
as well as conflicts and contradictions,
unclearness, and blurring in the employer-
employee relationship in the sense of legal,
performance responsibilities, transparency and
equity in employment conditions when the
employee is working in project teams, or on site
beside employees from other organizations, or
involve organizations other than the employer,
and therefore having incompatible missions and
goal sets, no strong driving force or, mutual
commitment (Skyrme, 1999).
Also, in Koza and Lewin (1999), based on a
single longitudinal case study of a professional
service network in the public accounting
industry, the authors found that although the
network was initially created with the strategic
intent of producing incremental income in
exchange for cross-border referrals, it generates
asymmetric positive returns, so individual
member firms bypass the original intent of
network by entering each other’s market and
therefore producing tensions that may be
endemic to alliance networks. In this paper a co-
evolutionary approach is taken in order to
explore the antecedents and stimuli for the
formation of the network, the network’s
morphology (Oliver and Ebers, 1998), the
motivation of the network members, and the
ways in which the network coevolves with its
environment and with the adaptation practices of
its members. This paper concludes with a model
of the co-evolutionary process (Lewin, Long and
Carroll, 1999).
5. Social Network Analysis and
Organisational Network Analysis Tools
This kind of intra and inter organizational
networks have been analysed by Social and
Organizational Network Analysis (SNA/ONA)
methods (Wasserman, Faust and Iacobucci,
1994; Scott, 2000) and software tools (Borgatti,
2003; Galloway, 2003; Krebs, 2003; Snijders,
2003; Stephenson, 2003).
For example, in Hansen (1999), the relationship
between the strength of ties (Granovetter, 1973;
Krackhardt, 1992) in a multiunit organization
network and complex knowledge inter-unit
project development performance is studied in
detail in a large electronics company reaching to
the conclusion that having weak interunit ties
speeds up projects when knowledge is not
complex, but slows them down, when the
knowledge to be transferred is highly complex.
Benassi, Greve and Harkola (1996) present ten
propositions to explore an ideal type of network
organizations with emphasis on internal structure
3
relating properties to organizational structure and
processes (flat and flexible structures, with high
reachability and high information access
enabling learning), and use ONA over an
empirical case study firm to identify that this
organization has the properties of a network
organization. Oswald, Conway and Steward
(1999) use the SNA approach to provide a
deeper understanding of the way in which
networking contributes to innovatory activity in
the management of the innovation process in
business organizations. Cross, Parker and
Borgatti (2000) make use of the potentials of
SNA: (1) Identifying a network’s ability to
leverage its collective knowledge in response to
new opportunities or problems; (2) Assessing
cross-boundary collaboration in networks that
cross functional, hierarchical or geographic
boundaries and (3) Ensuring integration
following restructuring or other change
initiatives, applying it to the area of promoting
and improving the effectiveness of strategic
collaboration in important groups such as top
leadership networks, strategic business units,
new product development teams, joint ventures
or mergers. A similar study was done by Hutt,
Stafford, Walker and Reingen (2000), analysing
the social network of a strategic alliance at an
operational and strategic level in a case study
which follows 2 Fortune 500 firms as they
developed a co-branded product. They explore
the communication patterns that united the
participants and the beliefs that divided them
showing the intricate web of relationships that
formed in the alliance and the flow of
communications within and across the partnering
organizations. And as another example, Michael
and Massey (1997) research, illustrates the way
social network analysis techniques can be used to
graphically model and quantify employees’
communication networks for the case of a mid-
sized softwood sawmill to identify the principal
nodes of input/output flow of information.
One of the most interesting areas to apply this
kind of tools is the relationship between the
formal and informal network (Kleiner, 2002). In
Conway (2000), the nature of informal
organisation and its relationship with the formal
organisation is explored and the authors
underline the importance of the informal or
social structures within organizations as an
important device for promoting communication,
integration, flexibility, and novelty, within and
between organizations and an intangible
organizational resource which is difficult for
competitors to replicate. In Doloff (1999), the
author states that organisational charts do not
reveal the more important links, the connective
tissue or personal influence, therefore, in order to
illuminate this shadow organization, social
network mapping over the informal organization
provides a clear snapshot of the organization's
human and intangible workings dynamics, what
facilitates to X-ray the organization and identify
quantifiable findings on who are the movers and
shakers as well as emergent communities of
practice (Wenger, 1998). In the same line,
Krackhardt and Stern (1988), and Krackhardt
and Hanson (1993), discuss how managers can
harness the power in their companies by
diagramming the advice network, which reveals
the people to whom others turn to get work done;
the trust network, which uncovers who shares
delicate information; and the communication
network, which shows who talks about work-
related matters and how to design a social
network structure more effective in responding
to conflicts and organizational crises.
Nardi, Whittaker and Schwarz (2000), take this
assumption a step further pointing that traditional
institutional resources are being replaced by
resources that workers mine from their own
networks. In this context, intensional networks or
"egocentric" networks that arise from individuals
and their communication and workplace activity
is fast becoming the only sensible alternative to
the traditional Org chart as a main resource of
information and labour for the firm in a quickly
transforming economy (less institutional stability
and fewer reliable corporate resources).
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