Academic journal article Journal of Business Strategies

Pitfalls and Paradoxes: Coping with the Capabilities-Rigidities Dilemma in Whole Networks

Academic journal article Journal of Business Strategies

Pitfalls and Paradoxes: Coping with the Capabilities-Rigidities Dilemma in Whole Networks

Article excerpt


Emergent interorganizational forms intent on long-term competitive performance at the network level are affecting markets and gaining scholarly attention. Whole networks are an example of such organizations. Managerial paradoxes result from these informal, non-hierarchical structures when they seek long-term competitive advantage. Applying paradox theory and research on ambidexterity, we conclude that, counter intuitively, formalized governance is necessary to sustain informal competitive entity success. Contrary to traditional network theory, social capital mechanisms and trust are not solely adequate. We examine challenges facing whole networks and propose three governance strategies to address them: (1) formalized governance with adequate authority; (2) centralized leadership with decentralized decision-making; and (3) provisions for managing membership composition. We discuss implications for practitioners and scholars and suggest research paths for validating and extending this theory.


Interfirm networks are altering the competitive landscape (Parkhe, Wasserman, & Ralston, 2006). The benefits of networks for rapid technical innovation, for example, have led to widespread government involvement in creating science parks and incubators to foster economic development and growth of small, entrepreneurial firms (Phan, Siegel, & Wright, 2005). Networks can offer access to resources, capabilities, and markets not easily available to individual firms. Networks can thus achieve valuable competitive advantage for themselves and their members (Meiseberg & Ehrmann, 2012). Though interfirm organizations have been a topic of study for several decades, there is a "growing set of pioneering organizational experiments" intent on leveraging the advantages of networked business models (Miles, Miles, Snow, Blomqvist, & Rocha, 2009; p 61). Advances in information and communication technology have allowed unique organizational forms such as virtual organizations to emerge for both short-term and going-concern motivations (Pedersen & Nagengast, 2008; Riemer & Klein, 2008). Non-traditional network forms are becoming pervasive and increased competitive intensity is fueling further network form innovation (Parkhe et al., 2006). It is thus not surprising that scholars are increasingly studying emergent organizational forms such as virtual organizations the V-form--(Riemer & Klein, 2008), innovation networks - the I-form (Miles et al., 2009), and whole networks (Provan, Fish, & Sydow, 2007).

The modern economy and much of the competition within it is knowledge-based. Customization, flexibility, and the rapid creation, sharing, and value conversion of knowledge are often key success factors for firm success (Contractor & Lorange, 2002; Miles et al., 2009. These competitive demands are resulting in the continued rise of networked organizations. As a secondary result, the increase in interfirm networks is leading to competition between networks and between networks and individual firms (Gimeno, 2004; Guidice, Vasudevan, & Duysters, 2003). As these emergent network forms flex their competitive muscle, many individual firms, especially small and medium sized firms (Meiseberg & Ehrmann, 2012), are likely to feel pressure to create or join rival networks in order to survive and compete with these new organizations. Thus, the emergence of such competitive networks is likely to influence the creation of more and more such organizations. Firms in affected markets that are not members of a network may find themselves with strategic disadvantages that are individually insurmountable. Thus, an increasing number of managers may find themselves forming, joining, or considering joining such networks in order to access the unique advantages (or necessary survival benefits) they may afford.

Various descriptors distinguish types of networks that involve specific strategic intent. …

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