The Formation of Inter-Organizational Networks. - Review - book review

Administrative Science Quarterly,  March, 2000  by Julie T. Elworth

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Mark Ebers, ed. Oxford: Oxford University Press, 1997. 295 pp. $78.00.

This anthology is the result of a workshop organized by the editor, Mark Ebers, and funded by the European Science Foundation. Ebers and some of the other authors state that the book's focus is on the recent trend among organizations to form networks with competing organizations, but most of the theory presented applies as easily to networks among noncompeting organizations.

The chapters written by De Laat, by L[ddit{u}]tz, and by Lipparini and Sobrero have the rigor needed to make lasting contributions to the literature. They are worth reading and should be required reading in relevant courses on organizations. Ebers' introductory chapter and the concluding chapter, with Grandori, "The Forms, Costs and Development Dynamics of Inter-Organizational Networking," provide good reviews of the literature and could be easily used as a framework for syllabi. A different kind of introduction is provided in the work by Dubois and H[dot{a}]kansson, titled "Relationships as Activity Links." The chapter is useful for those who are new students of organizations and want a very general feel for individuals' behaviors in organizational settings.

As with many of the chapters, Easton and Araujo's "Inter-Firm Responses to Heterogeneity of Demand over Time" is written with a distinctively business focus (i.e., buyer concentration, product diversity, and life cycles). The authors focus on heterogeneity of demand for a product and the consequences for network formation. Their contribution is a list of options for organizations facing change in demand (e.g., absorbing all changes or refusing to accept changes) as an alternative to Gerwin's (1993) work on organizational responses to uncertainty. The authors assert that their topology is better for predicting network formation when there are changes in product demand because their topology addresses a "plethora of changes" rather than a single change, but they do not support this assertion. It's also unclear why a more general construct like uncertainty should be replaced by the more specific "heterogeneity in product demand." The real challenge is not in the construction of typologies but in the topics for s ubsequent research the authors propose.

Those topics include the probability that these options are used in some combination (whichever typology is used) and that the option or combination of options varies as a function of long-term versus short-term heterogeneity of product demand.

Lomi and Grandi, in a preliminary report titled "The Network Structure of Interfirm Relationships in the Southern Italian Mechanical Industry," propose to overcome some theoretical problems in the organizations literature and to explain the less-than-successful efforts by the state to correct the "relative backwardness" of economic development in Southern Italy. The authors recognize the complexity of networks by measuring four network types--supply relationships, quality control agreements, technological transfer, and equity relations--although more detail is needed in defining these network types, particularly equity relations. The main conclusion is that better integration of the larger organizations into the local community would further the economic development of Southern Italy. Focusing on theory development, the authors may want to look at the ways these four network types operate together. For example, supply relationships probably give rise to quality control agreements; technological transfer may s upport the creation of equity relations. The applied problem of economic backwardness may be illuminated by comparing the networks of Southern Italy with those in Northern Italy.

De Laat's chapter, "Research and Development Alliances: Ensuring Trust by Mutual Commitments," is based on an obviously painstaking search of the literature on research and design alliances. Based on the results of this search, De Laat constructed a list of the different commitment patterns used by R&D alliances and the conditions and consequences of those commitments. The list itself is clearly organized, and examples are provided that illustrate each point. His effective use of social psychology leads him to one of his most interesting findings from both a practical and research perspective: that classical contracting, used in the extreme, actually promotes opportunism, whereas commitments serve to stabilize the relationship. De Laat also describes how reputation is used as a control mechanism to manage a commitment. He finds, similar to L[ddot{u}]tz in the following chapter, that trust evolves from the process of implementing the commitment rather than being a precursor to any commitment or contract. De Laat's cha pter provides useful background for those courses that include discussions of the Microsoft antitrust case.

In her chapter, "Learning Through Intermediaries: The Case of Inter-Firm Research Collaborations," L[ddot{u}]tz finds that trust between competitors is a consequence of necessity: all of the individual competitors know that they cannot succeed on their own. She also finds that a mediator between the competing organizations is also a necessary precursor to trust. Once there is trust, competing organizations may then work together, share information, and then, in L[ddot{u}]tz's case study, produce radical innovation. This chapter is well written and makes contributions to empirical and theoretical research.