Network forms of organization – Summary of Powell (1990)

September 9, 2007 at 4:17 pm 1 comment

I have read it several times – excited to discuss it tomorrow in the orgnizaitonal communication technology class taught by Janet.

Powell, W. W. (1990). Neither market nor hierarchy: Network forms of organization. Research in organizational behavior, 12, 295-336.


  1. What is alluded to but not formally discussed in this paper is the impact of communication technologies on the evolution of organizational forms. Since organizations use more and more communication technology, are they all moving towards network forms? Or are they just replicating their existing structure electronically?
  2. Network relations may be temporal (actually market could be conceived as a network with one-time relations) as well as long-term. How do we incorporate time into our understanding of network forms?
  3. In this paper and other recent literature of network form of organization, researchers seem to imply that networks represent a better form of organizing and are well-suited for today’s industries that are increasingly technology-intensive. But are there any cases where networks are inadequate or inferior to market or hierarchy? In other words, is network always good? Under what circumstance will network collapse?


  • Three modes of organization (table 1)
    • Market: One night stand
      • good for exchanges that are straightforward, non-repetitive and require no transaction-specific investments.
      • A form of non-coercive organization, coordinating without integrating.
      • Price is the invisible hand.
      • It offers choice, flexibility, and opportunity, but it is bad at capturing technological know-how.
    • Hierarchy: Marriage
      • good when asset specificity goes up (because of bounded human rationality and opportunism)
      • The boundary of a firm expands to internalize market transactions.
      • Management is the visible hand.
      • Reliable but inflexible and inertial.
    • Network: Marriage without licence?
      • Transactions are reciprocal and repeated
      • Can deliver efficient, reliable and tacit information.
      • Organizational boundary has a relational dimension.
      • Reputation/Trust is key
  • Examples of network organization
    • Craft industries (tacit knowledge)
    • Film and recording industries (creative and project-based)
    • Industrial districts
    • Strategic alliances and partnerships
    • Vertical disaggregation (internal)
  • Network forms are for:
    • Activities based on know-how: networks foster lateral communication and mutual obligation
    • Activities that demands speed: networks are good for disseminating and interpreting new information
    • Exchanges based on trust: in certain social contexts that emphasize generalized reciprocity, networks are sufficient for controlling opportunism.

Entry filed under: COMM641, organization, reading notes, social network, technology.

Digital Natives – OII SDP notes Networking for introverts

1 Comment Add your own

  • 1. Andre Bonnet  |  September 7, 2008 at 4:42 pm

    Dear Ms. Shuen,

    I have appreciatted a lot your comments about Powell´s paper. In this way, I´d like to know if yo have published any article about these critics?
    I´m a Ph.D student at Brazil, and so, I would like to know other forms of thinking about Network strucutures of governance.
    It would be great if you have any material about this theme.

    Best regards,

    Andre Bonnet


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