Running head: Global Networks and Technology

Global network organizations are an increasingly prevalent organizational form whose diffusion promises to dramatically impact the way business is conducted within and between organizations. Economists posit that globally networked organizations will alter economic and political relationships across nation-states (Golden, 1993). Networked organizations are not new to the organizational scene, but their increasing complexity, vastly expanded global scope and rapid institutionalization as a structural form have brought new forms of organizing to a larger segment of world commerce. This phenomenon and its potential far-reaching impacts on world markets suggests an important need to understand this newly embraced form.

Global network organizations can be conceptualized as having four major components. First, their internal structures are comprised of flexible internal communication networks that typically are emergent rather than imposed. These networks emerge from relationships among individuals rather than formal attributes of organizational position. Thus, communication relationships are not bounded by vertical or horizontal structures. Relationships are also flexible in that the existence of relationships and the volume of communication across them waxes and wanes according to organizational needs.

Second, internal networks are connected to dynamic networks of external organizations through a parallel set of flexible linkages. External ties transcend national boundaries, extending their reach to encompass organizations in various countries around the world. External ties are flexible and may develop and disappear in accordance with the duration of joint projects.

Third, both internal and external network linkages are governed by partnerships based on mutual trust and respect and by shared collective outcomes, as contrasted to the traditional dominance of ownership or hierarchy. Internal linkages often encompass self-managing teams. The structure of external linkages can be seen to comprise a value constellation involving a complex network of contributing firms, rather than the traditional vertical value chain (Norman & Ramirez, 1993). Linkages may include complementary partnerships where each provides a unique contribution of value, but also pre-competitive relationships within a value segment in a form of "cooperative competition" (Golden, 1993) or "co-opetition" (Brandenburger & Nalebuff, 1996).

Fourth, global network organizations are based on a sophisticated information technology infrastructure that supports rapid, cost-efficient communication across network linkages. The technology permits the addition and deletion of linkages as relationships emerge and fade, and offers common platforms for information sharing across systems, organizations, and nations. The technology assists communication across the vast distances, time zones, and cultures that characterize global network organizations and assists in meeting the coordination challenges that accompany such differentiation.

This chapter describes global network organizations based on these four components and contrasts them with traditional forms. The chapter reviews changes in the political and economic landscape that undergird the diffusion of the global network form, and shows how a network perspective offers special insights on new structures and relationships in the global economy.

Organizations are comprised of structures, the configurations of their parts (McKelvey, 1982). Organizational forms are structures that share common features across a large number of organizations. The dominant form during the past century has been the bureaucracy. The bureaucratic form includes, among other features, a hierarchical structure of authority relations.

Burns and Stalker (1962) were among the first to identify an alternative internal structural form. Based on data collected from British and Scottish firms facing rapidly changing post-war markets, Burns and Stalker argued that the traditional bureaucratic hierarchy, which they labeled a "mechanistic organization," was an effective way to organize only in stable environments. In turbulent environments a more flexible, adaptive organizational form, which they called the "organic organization," was more effective. Organic organizations were comprised of communication networks that transcended the traditional hierarchy. They were seen as temporary, flexible, and adaptive to the problem at hand and focused on lateral rather than vertical communication

Over the years it has become well-known that all organizations contain sets of emergent internal communication networks, the patterns of person-to-person linkages through which information flows within organizations (Monge and Eisenberg, 1987). As Kenneth Arrow (1973) persuasively argued, an organization can be viewed as an "incompletely connected network of information flows." (pp. 19-23). Hence, although it is safe to say that almost all organizations contain both hierarchies and emergent networks, the significant increase in the rate of environmental change in recent years has made emergent networks more important. The well-known management technique of matrix organization is based on this insight (Galbraith, 1973).

Traditionally, multinational corporations (MNCs), which may have many subsidiaries worldwide, have been viewed from the perspective of a mixed network and hierarchy model. The linkages between the components of MNCs are often represented as a starburst connecting the center, the focal organization, to all the satellite organizations. A similar metaphor is the wheel, where the hub is the focal organization, the rim contains the external organizations, and the spokes represent the network of connections from the hub organization to the external organizations. This view is well illustrated in Ghoshal and Bartlett’s (1990) representation of the Phillips Corporation. (See Figure 1.) Here they conceptualize multinational corporations (MNCs) as a "network of exchange relations among different organizational units, including the headquarters and the different national subsidiaries..." (p. 604). This definition treats MNCs as a fixed network which connects all of its far-flung parts to its central core. This form relies on a single communication center for coordination of a large number of operations. Knowledge lies at either the local node or the centralized communications center; direct lateral interactions among the far-flung nodes themselves are much less important.

Many commentators have noted that advanced economies no longer rely on production of standard commodities in high volumes, the former modus operandi for which the bureaucratic organizational form was well suited (e.g., Reich, 1991). Instead, firms strive to provide high value for customers through differentiated products, customized services, discovering and meeting individual client needs and rapid response time. Flexible structures offer the opportunity to create customized solutions; close communication among the different parts of the organization permits rapid and effective linkage of solutions with individual customer needs. Networks of relationships unconstrained by rigid functional boundaries or hierarchical layers facilitate the rapid flow of information among the various parts of the organization whose activities must be coordinated in the delivery of service and value for the customer. Slow and cumbersome vertical communication up and down a chain of authority is not conducive to the responsiveness required to succeed in an increasingly challenging competitive environment. Filtration of communication through layers of middle management can impede not only speed but also accuracy of information that is passed around the organization. Hence, firms have embarked on the well-publicized shrinkage of middle management, in favor of direct coordination among relevant internal parties.

In large firms semi-autonomous divisions may be created that have flexible networked internal structures. These divisions can be loosely coupled through headquarters which retains information related to scale or scope, creating a network of networks that provides maximum flexibility and responsiveness. Several commentators have referred to such forms as "spider’s web" organizations due to their dense interconnections among dispersed nodes and minimal reliance on central hierarchy (Quinn, 1992; Reich, 1991). A key difference from the MNC model described earlier is the shift from reliance on the central core to creation of multiplex relationships among the individual nodes. Figure 2 illustrates such a model.

Miles and Snow (1992) offer a model that adds an additional element of dynamism to the internal network model. Their "spherical network form" envisions an organization where much of the firm’s resources are available on the surface of the sphere. When faced with a problem or opportunity the sphere rotates to provide access to a wide variety of resources. The rotation brings to the situation the complex of resources (persons, technologies, etc.) that are appropriate to the problem at hand. Spherical networks require autonomous operating units, self-managing teams, and empowerment of participants to assume leadership roles.

Spherical and spider’s web organizations may also be embedded in a complex web of external networks. These external networks that cross organizational boundaries reflect an increasing reliance on relationships that are neither subsumed under an organization’s own internal boundary nor totally governed by arm’s length market-based transactions. These so-called "mixed mode" (Powell, 1990) forms are increasingly made possible by information and communication technology that permits control, collaboration and coordination of interdependent activities without resort to the hierarchical mechanisms of the bureaucracy.

Neoclassical economic theory acknowledges only two forms of economic organization. The first is the free market where organizations are seen as independently buying and selling on the basis of self-interest and best price obtainable. The second is the firm, sometimes called the hierarchy, which seeks to improve efficiency by incorporating parts of market transactions into the firm (Coase, 1937; Williamson, 1975, 1985). In this case, hierarchical authority and the vested interests of employers are seen to provide a competitive edge over the open marketplace.

Recently, a number of economists and organizational scholars have argued that a third organizational form has emerged, the network organization (Eccles & Crane, 1987; Miles & Snow, 1987). Unlike the Burns and Stalker model that centered on internal networks, this new form focuses on the external networks of relations that tie organizations together. These linkages are seen as flexible and adaptive, cutting across traditional organizational boundaries. Powell (1990) provides an interesting comparison of markets, hierarchies, and network forms across eight key features. (See Table 1.) The first key feature is the basis for the organization. In the case of hierarchies, organizing is predicated on the employment relationship. In the case of network organizations, the basis is the complementary strengths between the two organizations, what each brings to the other. This shift is important because it changes the focus from one of dominance to one of equality. The second key feature is the means of communication. Hierarchies rely on vertical downward communication, primarily through routines, orders, and directives. Networks depend upon establishing and maintaining communication relationships without regard to direction or dominance. To resolve conflict, the third key issue, hierarchies typically resort to administrative fiat and supervision. Networks use norms of reciprocity, that is, expectation regarding fair exchange. With regard to the fourth category, flexibility, hierarchies are inflexible and slow to change. Since network forms of organizing attempt to establish stable though not permanent linkages, they tend to be more flexible than hierarchies though not as flexible as the free market.

Feature five, the amount of commitment among the parties, tends to be medium to high for both hierarchies and markets, but the tone or climate, feature number six, is very different. Hierarchies are formal and bureaucratic whereas networks are open-ended and focused on mutual benefits. The seventh feature is the preferences or choices that govern organizational relations. In pure markets people are assumed to be independent. In hierarchies, people are clearly dependent on those with authority. In networks, people are interdependent with each other. The final feature merely notes that hybrid forms exist for all three types of organizations.

The previous analysis of MNCs focused on the relations between a focal organization and its satellite organizations. This notion of a network organization is inadequate because it fails to recognize the network linkages among the external organizations (See Eisenberg, et al, 1985). Organizations are embedded in entire external networks (Goshal & Bartlett, 1990; Aldrich & Whetten, 1981); many of the organizations to which any organization is connected are also connected to each other (Emery & Trist, 1965). These external networks include suppliers, customers, governmental regulatory agencies, etc. The density of connections among the organizations in these external networks, i.e., the degree to which they are connected to each other, has a major impact on the focal organizations to which they are connected (Emery & Trist, 1965; Goshal & Bartlett, 1990; See Figure 3). The interrelations among other organizations impact the flow of information to and from competitors and also provide the basis on which other organizations can create exclusive coalitions. One important net effect is barriers to entry into the competitive field.

Of course, this description takes an idiosyncratic view of a single, focal organization. When the view is changed to that of another organization, the picture of the network can change considerably. Further, when we shift the view again to that of the entire set of organizations, to the network as a whole, the picture changes again. From this vantage point, each organization is connected to sets of organizations that are in turn connected to others.

Considerable evidence exists for this embedded form of network organization. In fact, Biggart and Hamilton (1992) argue that networks are the primary organizational forms in most Asian countries. They cite the Japanese keiretsu and its predecessor, the zaibatsu, the Korean chaebol, and the Taiwanese jituangiye, as network forms of organization. These businesses are organized into groups, often on the basis of family ties, and often with people with whom they have had long standing personal and social relations. As Biggart and Hamilton note, "the crucial economic actor in Asian societies is typically not the individual, but rather the network in which the individual is imbedded." (p. 474). In fact, Gerlach (1992) has called this form of Asian network organization "alliance capitalism," to distinguish it from the traditional western form that typically ignores financial, social, familial, and political ties. Quinn (1992) has observed that in practicing this network form of alliance capitalism "the Japanese generally have been wise enough to practice ‘quasi-integration,’ not complete vertical integration. Most keiretsu operate largely through multiple, carefully interlocked coordination and decision structures based on common interest, rather than on orders from some formal central authority." (p. 233; see also Ju, 1994)

Powell (1990) identifies a number of nonAsian countries in which network forms of organization have also developed. These include craft industries such as construction and publishing in which people establish long term contracting relations, and regional industrial districts, such as German textiles and the Emilian model centered around Modena in north-central Italy. In the Emilian model, Powell says, firms are "grouped in specific zones according to their product, and give rise to industrial districts in which all firms have a very low degree of vertical integration (Brusco, 1982), Production is concentrated through extensive, collaborative subcontracting agreements. Only a portion of the firms market final products, the others execute operations commissioned by the group of firms that initiate production. The owners of small firms typically prefer subcontracting to expansion or integration (Lazerson, 1988). The use of satellite firms allows them to remain small and preserve their legal and organizational structure as a small company. Often satellite firms outgrow the spawning firms. Though closely related and highly cooperative, the firms remain strictly independent entities." (p. 310). As one would expect, a variety of historical, social, legal, ideological, and other institutional factors support this network form of organizing.

It is interesting to note that each of these examples of network organizations is specific to a different country. In fact, the nature of the networks varies considerably from country to country. For example, Biggart and Hamilton (1992) point out that "The South Korean economy is dominated by networks that on the surface resemble Japan’s, but in fact have substantial differences." (p. 475) For example, Korean and Chinese firms are heavily built around family ties while Japanese firms are built around financial ties (though prior to World War II, they too were built around family ties). Ju (1994) points out that there are two forms of Japanese keiretsu. In the horizontal keiretsu, the networks connecting a diverse set of member companies are organized around a core commercial bank such as the Sumitomo group. The vertically organized keiretsu are connected "along a supplier chain dominated by a major manufacturer" such as Toyota. (p. 76)

It is ironic that these various forms of networked organizations and economies are themselves somewhat isolated from each other, isolated in the sense that they do not develop and maintain the same types of external networks beyond their own countries. It is useful to identify these network organizational types that are specific to each country as national network organizations.

Global network organizations transcend this national form. Further, to be competitive, global network organizations connect to a variety of different national network organizations. Accordingly, they develop a flexible, adaptive network form capable of integrating with organizations embedded in numerous other national networks. As Quinn (1992) states, most Japanese and other companies around the world would "gain greater competitive advantage by jumping beyond the mutual, partial-ownership ties of the keiretsu and directly into more flexible contract partnership-oriented structures." (p. 235)

Global network organizations face three difficult challenges not often encountered by more traditional, local organizations. These obstacles are the physical distances that global organizations span, the time asynchronicity encountered, and the diverse cultural differences that comprise the world system (O’Hara-Devereaux & Johansen, 1994). Physical dispersion and time displacement makes direct contact and coordination exceedingly difficult, thus necessitating coordination by electronic and other computer-based technologies. As O’Hare-Devereaux and Johansen (1994) point out, global organizations require "Anytime/Anyplace" communication, the ability to communicate across vast distances and diverse time zones, thus maximizing flexibility in global space-time. Finally, global network organizations must address the difficult issues attendant on operating in the different cultures in which their various operating units, alliances, subsidiaries, partners, customers, suppliers, stakeholders, competitors and governmental agencies reside. Differences in language, values, cultural stereotypes, customs, and management styles must be addressed. Strategies are needed that permit differentiated local responsiveness in the context of overall synergy (Kanter, 1995).

Development of global network organizations. This analysis provides the foundation of what constitutes the network form of global organization. But it is does not answer the question of why they form as they do. Several factors have converged to contribute to the development of global network organizations. First, the increasing rate of globalization of the world economies has opened both new markets and new labor forces. This development has increased the level of competition among firms eager to take advantage of these emerging opportunities. This level of competition requires firms that are responsive and adaptive to new opportunities, a feature that is not characteristic of traditional hierarchies. As Powell (1990) says, "A hierarchical structure--clear departmental boundaries, clean lines of authority, detailed reporting mechanisms, and formal decision making procedures--is particularly well-suited for mass production and distribution. ...But when hierarchical forms are confronted by sharp fluctuations in demand and unanticipated changes, their liabilities are exposed." (p. 303).

Second, accelerating rates of change, which appear to have become a permanent feature of the contemporary landscape, have dramatically increased the level of uncertainty and risk. Technological advances routinely bring new products to market faster than previously thought possible. Ironically, this same increase in technological productivity has also dramatically shortened the life span of most products, thus increasing competitive pressures. As Quinn (1992) notes, the necessity to generate an ever increasing number of new products and services requires an organizational form that is knowledge intensive.

Third, computer technology has enabled companies to develop products for "mass customization." This apparent contradiction in terms, which refers to mass produced products that give the appearance of being customized for each individual, requires highly flexible manufacturing techniques (Miles & Snow, 1986). Traditional organizational hierarchies are designed to handle routinization, not customization.

Fourth, a hierarchical organization is one that attempts to deal with its external networks by hierarchical authority. The firm attempts to own and control all aspects of its production process. Historically, as Chandler’s (1977) work amply demonstrates, this strategy has led to attempts at vertical integration, whereby a company owns all up and downstream enterprises needed for the production and distribution of its products. The intent is to provide hierarchical control for all aspects of the process. By contrast, a network organization is one that attempts to deal with its external networks by relational interdependence rather than hierarchical control, i.e., by outsourcing. The firm attempts to produce its products by establishing and maintaining a set of alliances that preserves the autonomy of the organizations in its networks.

The world industrial environment created by these factors has begun to make organizations based on traditional hierarchies obsolete. Although many traditionally structured organizations still exist, typically they are not at the competitive forefront. Network organizations have developed because they are better suited to operating in this type of challenging and demanding environment. As Nohria and Eccles (1992) point out, they are "fast, flexible, responsive, and knowledge intensive." (p. 290)

There can be little doubt that knowledge and service constitute the bulk of economic output in the developed countries. In fact, Quinn (1992) estimates that service industries, including knowledge and information generating companies, "... have become the preeminent producers of GNP and new job opportunities in all advanced industrial societies. They now account for 77 percent of all employment and 74 percent of all value-added in the US economy and a majority of all GNP in other countries." (p. 30) The new network organizations are particularly well suited to these intelligent enterprises.

Quinn argues that successful corporate strategy contains two major components. First, a company must identify its "core competencies," those activities and processes that it does best. The company must strive to become "Best in World" in these core competencies. Second, the company should outsource all other activities required to produce its products or deliver its services, meaning that it should hire, buy, contract, and otherwise obtain all other productive elements other than those that comprise its core competencies. In essence, Quinn is arguing for what we are calling a network form of organization.

Crucial to the creation and maintenance of a network organization are the linkages between the organizations (See Eisenberg, et al, 1985, for a discussion of information linkages). Quinn (1992) and others have argued that the core competency of organizations is knowledge, what an organization knows how to do better than anyone else in the world. Badaracco (1991) distinguishes two types of knowledge, which he calls migratory and embedded. Migratory knowledge is that information which exists in forms that are easily moved from one location to another. Migratory knowledge tends to be contained in books, designs, machines, and individual minds. Blueprints, specifications, formulae, computer programs, engineering plans as well as products and machines all encapsulate the knowledge that went into their creation.

Embedded knowledge is more difficult to transfer. As Badarraco (1991) states "...embedded knowledge resides primarily in specialized relationships among individuals and groups and in the particular norms, attitudes, information flows, and ways of making decisions that shape their dealings with each other." (p. 79) Craftsmanship, unique talents and skills, accumulated know-how, and group expertise and synergy are all difficult to transfer from one place to another and particularly difficult to transfer across firm boundaries.

Badaracco (1991) identifies two forms of linkage, one for each type of knowledge. The first is a product link, which is associated with migratory knowledge. The second is a knowledge link, which is associated with embedded knowledge. A product link is an arrangement whereby a company relies on "an outside ally to manufacture part of its product line or to build complex components that the company had previously made for itself." (p. 11)

Knowledge links are alliances whereby companies seek "...to learn or jointly create new knowledge and capabilities." (p. 12) These "...alliances are organizational arrangements and operating policies through which separate organizations share administrative authority, form social links, and accept joint ownership, and in which looser, more open-ended contractual arrangements replace highly specific, arm’s length contracts." (Badaracco, 1991, p. 4)

Powell (1990) notes that the network form of organization includes arrangements based on "...joint ventures, strategic alliances, equity partnerships, collaborative research pacts of large scale research consortia, reciprocity deals, and satellite organizations. There is no clear cut relationship between the legal form of cooperative relationships and the purposes they are intended to achieve. The form of the agreement appears to be individually tailored to the needs of the respective parties, and to tax and regulatory considerations. The basic thrust, however, is quite obvious: to pursue new strategies of innovation through collaboration without abrogating the separate identity and personality of the cooperating partners." (p. 315)

In one sense, network organizations create what have come to be called "boundaryless organizations." Where one organization begins and the other ends is no longer clear. Organizations come to share knowledge, goals, resources, personnel, and finances. To accomplish this they must establish collaborative work arrangements since that is the only way to transfer embedded knowledge.

The kind of global network organizational form described in this chapter is almost impossible to create without a highly sophisticated communication and information infrastructure (Child, 1987). Indeed, new technologies often energize the development of new organizational forms. For example, developments in communication and transportation systems in the late 19th century led to the emergence of the current hierarchical organization form. Prior to that time smaller, regionally-based local organizations were the norm (Yates, 1989; Beniger, 1986). The integration of computing with communication now provides the possibility for major changes to these hierarchical organizations.

New communication and computing technologies offer at least three main benefits that impact organizational forms. First, they have greatly reduced transmission time, enhancing the ability of dispersed participants to share information and coordinate their efforts. The decentralization of organizations through the use of local branches was initially made possible by the telephone in the early part of this century (Pool, 1983); the decentralization effect has been significantly enhanced by the speed and capabilities of more advanced systems. Not only branch offices but also central core activities may be dispersed widely throughout the globe. Ford’s redesigned global research and development organization is an illustration (Business Week, April 3, 1994, pp. 94-104).

Second, with new technologies comes a reduction in the costs of communication. As Thompson (1967) noted three decades ago, the costs of communication for coordinating activities are among the highest that organizations face. Thus, organizational structure previously was designed to reduce coordination and communication costs by collocating mutually interdependent activities. With the reduction in coordination costs that accompanies technological developments, organizational structures need not be so closely linked to communication cost reduction criteria. This decoupling opens up opportunities for a greater variety of structures.

Third, the integration of computing with communication has enhanced the complexity of information that can be communicated in a cost-effective and rapid manner. Indeed, it is the enhanced capability for communicating complex information that distinguishes current communication technology developments from those that spawned the hierarchical organization. Older communication technologies such as the telephone served primarily as connective systems, with little capability to modify, enhance, or manipulate the information that was being transmitted. Fulk, Flanagin, Kalman, Ryan and Monge (1996) note that current integrated communication technologies also have communal properties that permit individuals and/or organizations to share databases and manipulate information.

The ability of these technological developments to foster global network organizations has depended on efforts to develop compatible technical interfaces and standards for information transmission. Compatibility has been substantially enhanced by international standards-setting organizations, governmental policy choices, regulations regarding transborder data flow, and voluntary agreements among vendors over the past decade. In combination, these organizational and political advances have contributed substantially to the ability to network widely across units and organizations.

Communication and information technology are implicated in new network forms through the improvements in connectivity and communality that they provide. Connectivity as defined by Fulk et al. (1996) is the ability of each member of a defined public to directly communicate with each other. Early examples of connectivity are the universal linkages provides by the postal service and the telephone. Communality is the ability of each member of the defined public to contribute to, access, and use a jointly held database. Early examples of communality include public records, libraries, or a company bulletin board. Recent advancements in information and communication technology have provided vastly expanded potential for connectivity and communality within internal networks, within external networks, and across linkages for global network organizations.

Communication and Information Technology for Internal Networks

Internal networks in the new organizational form are flexible and emergent. A key facilitator for emergent networks is an extensive connective and communal infrastructure for sharing information with all potential partners. When the telephone was introduced into the Unites States early in this century, a conscious policy choice was made to provide universal service, so that any citizen could reach any other citizen if they chose to do so (Pool, 1983). Although no person ever telephoned everyone else, the infrastructure made it possible for individuals to phone persons that they might not otherwise have contacted. Telephone usage illustrates emergent communication whereby a "large number of relatively small, overlapping, and shifting coalitions of users" contact each other directly (Fulk et al., 1996, p. 67). Thus, the telephone and related infrastructures such as the federal postal service facilitated emergent networks and linkages for communication early in the century.

In a parallel fashion, the advanced infrastructure for connection and communal sharing of information offers possibilities for endless emergent networks within organizations. The mass communication capabilities of these systems permit information to be distributed widely through distribution lists and electronic bulletin boards, extending the reach of internal networks. Because the backbone provides universal access to organization members, communicators need not be able to identify each other prior to interaction. Finholt and Sproull (1990) provided case histories of emergent groups that arose through the use of electronic bulletin boards in one organization. Eveland & Bikson (1987) described the emergence of interests groups through the use of electronic mail in an R&D organization. These groups transcended the existing organization structure, forming a new, overarching layer. Steinfield and Fulk (1988) demonstrated the mass communication effects associated with using distribution lists in an office products firm. Participants were interlinked densely within the organization and each made new contacts that ultimately paid off for them in the performance of their tasks. Steinfield (1986) demonstrated how the socialization process of new recruits was distributed more broadly throughout the organization through use of electronic mail. Steinfield (1983) and Kiesler (1986) described how people used electronic mail to send broad requests for information that ultimately reached many individuals previously unknown to the sender, and sometimes led to establishing more permanent and intensive dyadic communication linkages.

Even among previously acquainted organizational members, technological support can facilitate more extensive communication and broader network participation. Videoconferences have been shown to facilitate inclusion of more participants in meetings (Dutton, Fulk & Steinfield, 1982), especially when travel budgets are restricted. Huber (1990) proposed that computer-based technology use leads to a larger number and variety of persons involved in making decisions. Asynchronous computer conferences can facilitate participation in meetings by individuals in different time zones. Overall, the availability of advanced communication technologies has facilitated more overall communication, and not just substituted for other forms (Rice & Bair, 1984; Rice & Case, 1983).

Because the increased connectivity permits more broadly dispersed communication and more linkages to partners previously unknown to communicators, these systems have been described as promoting more "weak ties" (Granovetter, 1973) and more radial communication networks (Fulk, Power & Schmitz, 1986). Weak ties and radial networks have been shown to promote more broad dispersion of information and more organizational innovation (Monge & Contractor, in press). The ability of technology-induced radial networks to facilitate innovation is a valuable contribution to the responsiveness that is characteristic of new network forms of organization.

Research by Danowski and Edison-Swift (1985) showed how networks of electronic communication shifted over time in response to an organizational crisis. Volume and dispersion of contacts rose dramatically during the crisis phase, then waned as the crisis began to dissipate. The emergence of extensive networking in response to organizational events may pose challenges to traditional hierarchical control mechanisms in organizations. In traditional hierarchical organizations key competitive information typically resides in the top management team and does not flow broadly to the organizational community without the acquiescence of top management. The mass communication capabilities of new communication technologies make possible the rapid and blanket dispersion of such information once top management control has been breached. For example, one major aerospace firm literally shut down its electronic mail system in response to concerns about the spread of rumors regarding a potential sale of the firm.²

Communication and information technologies are implicated in shifting control away from hierarchical mechanisms. Fulk & DeSanctis (1995) describe this change as a movement from social rationalization (hierarchy) to technological rationalization. Hierarchical arrangements typically arise to deal with information overload and vertical coordination. Hierarchical organizational forms are social structures based on domination and control, through rules, programs, procedures and goals. Communication and information technology now can assume these functions by programmed routines that are built into the technology, such that coordination is preprogrammed through technological rationalization. One well-documented effect over the last decade is the significant decline in the number of middle managers--whose traditional jobs are primarily coordinative. Technological rationalization reduces bureaucracy and frees the social form to provide significantly greater flexibility, adaptability and learning capability--the organicness that characterizes the global network organization. Thus, communication technology can make hierarchy obsolete by subsuming its control and coordination functions. Of course, such an effect depends on political decisions as to how the technology is deployed and employed. Koppel, Applebaum and Albin (1988) distinguish between "algorithmic" applications that automate, rigidify, and reinforce existing bureaucracy and "robust" systems that reduce bureaucracy and enhance flexibility. Zuboff (1988) makes a similar distinction between technological systems that "automate" and thus reinforce existing hierarchy versus those that "infomate" by enriching the options for innovation. The choice to automate versus infomate is managerial and political.

The breadth and reach of electronic communication also can help to foster the sense of community and shared goals that are a feature of new organizational forms. Miles and Snow (1992), for example, describe the new organization as one in which individuals are committed to the enterprise as a whole rather than their individual functions. Ready electronic access to other organizational members can facilitate a sense of organizational community, as Kling and Gerson’s (1977) research demonstrated.

A key feature of global network organizations is the dispersion of functional expertise to cross-functional teams. In traditional hierarchies, functional structures provide experts the ability to share key knowledge within the function and thus keep up-to-date with knowledge in their fields. Advances in computing and database systems offer the opportunity to share information within a function without the requisite of collocating organizationally. Allen & Hauptman (1990) describe three technologies that facilitate knowledge transfer across geographically dispersed functional experts: document search and retrieval systems, expert-system-based selective dissemination of information, and bulletin boards for forums for information search. To this list may be added secured videoconferencing links between sites that permit sharing more complex information among R&D personnel (Ruchinskas, Svenning & Steinfield, 1990) and facsimile support for communicating extremely complex diagrams between dispersed functional experts (e.g., Fulk, Schmitz, & Ryu, 1988).

Information and communication technologies can also support coordination within cross-functional teams. Project management software is a typical illustration. Allen and Hauptman (1990) also describe how hierarchically organized bulletin boards are used for reporting project status and controlling configuration. Lu (1996) provides an advanced communication and software solution through his "Engineering as Collaborative Negotiation" (ECN) paradigm. His research is developing communication and software solutions that support (1) application of optimizing criteria at the team level in the context of satisficing at the individual level, (2) design specifications that are comprised of acceptable ranges for each variable rather than single values, in an attempt to facilitate alignment of solutions across functions; (3) functionally decomposed design stages to support negotiation of output across functions; (4) mutual rather than serial interdependence, and (5) involvement of the customer in the design phase.

The penetration of sophisticated electronic mail systems and local area networks in organizations has made it possible to rapidly transmit complex information. One consequence has been that once-isolated databases can now be made available more broadly, contributing to the increased general availability of information reported by Applegate in the volume. Networks of individuals and units linked through these shared, distributed databases are characteristic of new network forms of organization. Finholt (1993) studied a variant of these shared databases that transcended time and current organizational membership. His research on expert databases showed that individuals unknown to each other were linked when experts contributed to a database that was accessible and querriable by other members of the organization. The database accumulated over time such that valuable expertise was captured and retained for use beyond the organizational tenure of the expert. In some cases, queries of the expert database led to personal contacts with individuals that would not have occurred except through the information provided in the database.

Technical compatibility is critical to these processes. Without interoperability, connectivity and communality cannot be achieved. For example, Fulk, Schmitz & Ryu (1995) describe an R &D site that was somewhat isolated from the rest of the organization because its electronic mail system (DEC architecture) could not link with that of the rest of the organization (IBM architecture). Eventually, the scientists wrote their own code to link the two systems. The historical difficulty of Apple and IBM-based operating systems to share files is another case in point. Many compatibility issues are being resolved as technologies converge and market mechanisms act to favor one platform over another. One development that speaks directly to this issue is the growth in use of the common platform of the Internet for seamless internal organizational communication, the so-called Intranet applications.

Summary. The connectivity and communality offered through advanced communication and information technologies facilitate network structures in a variety of ways. The infrastructure for connectivity offers the technical means for a virtually infinite set of possible emergent networks for direct communication within an organization. The specific sets of networks that emerge will depend on user choices to employ the technology and to select specific sets of communication partners, what Fulk et al. (1996) call social connectivity. The research described above has shown that within the connective infrastructure:

• mass communication features help to link people with similar interests, leading to emergent, interest-based networks
• previously acquainted persons communicate more extensively and may participate in a wider array of interactions
• previously unacquainted persons can become acquainted and develop more intensive links
• more "weak ties" can be initiated, and more radial and embedded networks developed that support the more complex situations faced by organizations today,
• technological coordination and rationalization can subsume some of the main functions of hierarchy, and
• more community-building can occur throughout the organization.

• complex information sharing among unacquainted parties, across organizational subunits and across time
• initiation of new communication relationships
• wide dispersion of information that is characteristic of new forms
• mechanisms for sharing expertise among functional specialists dispersed to different teams, and
• coordination mechanisms for optimizing team efforts under uncertainty.

Communication and Information Technology for External Networks

Connectivity and communality pose greater challenges across organizations that lack a common infrastructure for communication and data exchange. Communication and information technologies impact the rise of the external global network in two major ways. First, some technological improvements facilitate rapid and cost effective interorganizational exchanges. These includes gateways across different electronic mail systems, electronic data interchange (EDI) standards, proprietary interorganizational systems, and Internet-based tools. Second, the need for more advanced interorganizational connectivity and communality motivates alliances designed to help develop a common infrastructure for information exchange in the marketplace. These precompetitive alliances typically involve networked R & D efforts (Golden, 1993).

Technological support for interorganizational exchange. Global network organizations manage external networks through relational interdependence rather than hierarchical control. All but core operations are outsourced, embedding the organization in a complex web of interdependencies. Communication and information technology are critical to the ability to monitor and control these interdependencies. For example, General Motor’s (GM) requirement that it suppliers use its own EDI standard bound the supplier’s own internal operations more tightly to GM’s. American Hospital Supply’s ASAP system is often described as a classic example (Vitale, 1990). AHS developed inventory management and information systems for its customers (hospitals) that permitted monitoring of supply levels at customer premises and direct order entry into AHS’s own internal order-processing system. The system created not only efficiencies, but a high level of dependence of hospitals on AHS--and tremendous switching costs for hospitals to change suppliers.

Computerized reservation systems permit travel agencies to directly book seats in the airlines’ computers. This type of system demonstrates how new communication and computing systems can manage complexity. Prior to deregulation of the airline industry, only a small percentage of bookings were made through travel agents. Rates and routes were fixed and manageable, since there were few choices. With deregulation, the fares differed not only by airline, but also by time of purchase, with as many as a dozen different fares for any one single flight. Passengers needed assistance with this new maze. Travel agency business grew dramatically, and the computerized communication and reservation systems between travel agents and airlines permitted the agencies to manage this information complexity for the traveler. The agency became a critical link in the value chain. Travel agencies also became sellers of information, since their reservation systems captured travel patterns, preferences, and other marketable forms of information. Agencies then became parts of more complex networks of relationships, serving simultaneously as customer, competitor and supplier to airlines, car rentals agencies, and other participants in the travel business. The rise of the Internet as an alternative source of up-to-date and comprehensive travel information now offers an alternative to travel agency services. This technological development now threatens an industry whose prior success was facilitated by earlier technological developments.

Information systems also facilitate networked organizations in unrelated industries. Consider the alliances between airlines and long distance companies whereby customers earn frequent flier miles based on volume of long distance telephone usage. The ability to rapidly transfer information between the disparate organizations is critical to the success of such alliances. In contrast to the outsourcing effects, such arrangements illustrate that technologies may supplement rather than replace or alter existing organizational forms, leaving the core organization intact but expanding their networks to encompass new types of partners.

Organizations also link themselves into new networks through shared proprietary information and communication systems. Examples of this are the regional databases that link law enforcement organizations through sharing communal data. In one such system officers at state, federal and local levels can access shared information about criminal activity and can contribute information to the communal database. A computerized monitoring system tracks planned enforcement actions across dozens of agencies and identifies potential conflicts before they occur. The system is designed to assist the organizations to integrate previously separate networked resources rather than to act in isolation. The system also tightly couples the organizations through a communal information repository that replaces the separate databases in the individual agencies.

With the rapid development of the Internet and the World Wide Web, organizations need not rely on proprietary systems to achieve connectivity and communality through a shared infrastructure. Secured web sites offer options for private exchanges of information between networked firms. Search engines can assist firms in seeking information from previously unknown sources, facilitating new linkages. Newsgroups link individuals and organizations into complex nets. Indeed, the vast information dissemination potential threatens the role of traditional information intermediaries such as travel agencies (Benjamin & Wigand, 1995), while offering new linking roles to others such as producers of information search tools (Sarkar, Butler & Steinfield, 1995) or information packagers (The Economist, March 2, 1996, p. 72.) The Internet also provides the basic infrastructure upon which other networking tools can be built. An example is the recent release of Habenero, a Java-based collaborative tool that permits synchronous conferencing and sharing of complex data through ordinary Internet connections (Wall Street Journal, May 30, 1996. p. B4).

Alliances in pursuit of technological infrastructures for collaboration. The second form of technology-induced alliances arises from firms linking together to create or enhance the information and communication infrastructure required for interorganizational linkages. A recent example is the alliances among credit card companies and firms that produce web browsers to craft mechanisms for secured communication of confidential information such as credit card numbers through the Internet. In this case, the alliance hopes to create proprietary software that secures competitive advantage for the alliance firms. Yet, the broader goal is to create an infrastructure for secured commercial transactions on the Internet.

Gulati (1995) claims that "the last 15 years have witnessed an unprecedented growth worldwide in the number of interfirm strategic alliances--voluntary arrangements involving durable exchange, sharing, or codevelopment of new products and technologies" (p. 619). A primary thrust is "cooperative competition", in which firms cooperate in research and development to create the communal good of the communication infrastructure needed for global interaction, even though these same firms simultaneously compete with each other in product markets (Golden, 1993). The infrastructure is critical because, as Fulk et al. (1996) assert, a fully connected system provides maximum flexibility for linkages to wax and wane over time, and a firm need not know a priori which specific linkages will be required. Hagedoorn and Schakenraad (1992) draw on a large database of alliances to identify recent international networks of alliances for cooperative R & D in information technology development. Their data show how strategic subnetworks of companies change over time, as do the positions of leading companies within these networks.

Summary. External network forms are facilitated by technologies that specifically support interorganizational exchange.

• Exchanges across stages of the value chain are supported by such developments as EDI standards, or by proprietary systems designed to link a constellation of customers to a supplier’s own data standards.
• Alliances among unrelated industries may arise through routinely collected information in one industry that can benefit firms in other industries.
• Organizations with common goals can develop coordinated action through information-sharing systems that create jointly held databases that are accessible to all, provided that each participating organization shares relevant information through the database.
• The Internet and World Wide Web provide publicly available infrastructure for exchanges of information between firms.

• Alliances may be created among previously unrelated firms each of which is seeking a different part of the new markets that such infrastructure can create, as in alliances to develop mechanisms for secured commercial transactions on the Internet.
• Alliances may also be among competing firms in the precompetitive R & D phase, what have been variously called "cooperative competition" (Golden, 1993) or "co-opetition" (Brandenburger & Nalebuff, 1996).

With information as the major "product" moving through channels in postindustrial economies, organizations and their component parts need not be linked so much by transportation systems as by communication systems. Historically, size and location of organizations and their component units have been heavily based in needs to reduce transportation costs. Major industrial areas were located along major transportation routes--rivers, railroads, oceans--where large consolidated facilities were sited. Advanced information systems are significantly different than transportation systems in that cost of movement through the system are much more weakly tied to distance between points and physical access. As post-industrial organizations focus more on moving information than physical products, dispersion of units is no longer a handicap. As electronic information highways replace asphalt ones, global network organizations that permit local responsiveness through dispersed nodes become the preferred form. And, as Golden (1993) notes, as exchange of value occurs increasingly through electronic transmission rather than transfer of products, considerable national and international issues arise surrounding the location of the network nodes relative to national boundaries.

Badaracco’s (1991) earlier-described distinction between migratory and embedded knowledge is critical for understanding successful information transfer for global network organizations. Migratory knowledge is easily codified and transmitted electronically. The flow of tacit, embedded knowledge, relies heavily on close contact and the development of close working relationships. Although communication and information systems are essential, alliances that network through sharing of personnel and other forms of nontechnological networking are still critical to the success of global network organizations.

Eastman Kodak’s (EK) web of relationships for managing their outsourced information services function is an example of the complex interaction of technological and nontechnological linkages through relationship management. EK outsourced its massive information systems function to a web of three different suppliers. Information technology permitted some monitoring of the services. EK also used a second source of control that is commonly described as critical to global network organizations: relationship management and development of trust (Creed & Miles, 1996; Handy, 1995; Miles & Snow, 1992; Yoshiro & Rangan, 1995). EK’s contracts with its suppliers were explicitly based on trust and shared expectations of each other; EK resisted creating the detailed contract language typical of an arms-length relationship. Instead, the contracts described broad agreements and shared goals.

Sharing of knowledge, goals, resources, personnel and finances in "boundaryless" global networks is nowhere more evident that in the communications industries. "Convergence" is the key buzzword in the business press, indicating the blurring of industry boundaries such that one can no longer tell where one industry begins and another ends. The multitude of alliances across cable, telephone, satellite, cellular, computing and entertainment providers is the dominant industry form. The race for sole-source provider of bundled services that include terrestrial telephone or satellite, Internet connection, cellular, and entertainment programming has created a heavily interconnected network of organizations from previously discrete industries. Indeed, a new industry has even been spawned from this globally networked "industry"--sales of products designed to help make sense of the linkages. For example, Deloitte & Touche, the consulting company, offers a CD-ROM with information on "convergent industries" of cable, broadcasting, telecommunications, software and hardware. There is also a rising number of books on this issue, including such titles as The Red Herring Guide to the Digital Universe (Red Herring, 1996; also a searchable website: http://www.herring.com/) and Convergence (Baldwin, McVoy & Steinfield, 1996).

Summary. Changes in network linkages have implications for the form and shape of the global network organization.

• The increasing reliance on information "products" in international commerce support more dispersed nodes that are regionally responsive yet can be coordinated and monitored via information technology.
• For transferring embedded knowledge, alliances that involve more personal contact and sharing of personnel are required, and these linkages are less susceptible to monitoring via information technology.
• Technological advances in the core knowledge base have brought together previously disparate industries and organizations, as in communications. Complex interconnections among multiple industry partners have become the norm as convergence offers new opportunities for offering complex arrays of bundled services.

This paper has developed a set of ideas that describe a new organizational form: the global network organization. It began by acknowledging that all organizations contain both hierarchies and networks, although in the network form of organization the networks are far more important than the hierarchy. A network organization is also embedded in an external network of organizations that are, in turn, connected to each other. To be a global network organization, an organization must transcend its local national network form and interface with various national network forms around the world. To do so, it must focus on knowledge linkages, those alliances which enable it to create and share knowledge across a wide variety of organizational partners. This can only be accomplished in the contemporary world with the assistance of a wide array of information and communication technology. It is this support that creates the capability for rapid, flexible and reliable communication, without which global network organizations could not exist.

Global network organizations have emerged in the late twentieth century as the dominant world force, rivaling and sometimes surpassing sovereign nation states in importance. By dominating the world economy, global enterprises significantly influence the course of political, social, and military events. Further, as more than one observer has commented, global enterprises often capture the minds and loyalties of their executives far more than do their own home countries (Golden, 1993). Surely, an organizational form and communication technologies that exert this much power and influence warrants careful study. And, for those companies who wish to be competitive in the global marketplace, understanding and utilizing this new organizational form has significant long term potential.

¹This section and the subsequent section on linkages draw on an early version of these ideas presented in Monge (1995).

²This information was provided to the authors by a consultant to the firm. The "public" explanation for the shutdown was "technical problems".

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         Figure 2: Spider’s Web Organization (Source: Quinn, 1992, p. 121)                 Figure 3: Interorganizational Networks               Table 1: Stylized Comparison of Forms of Economic Organization (Source: Powell, 1990, p. 300)