Mixed Mode Network Structures: The Strategic Use of Electronic Communication by Organizations

Abstract

The impact of interorganizational systems (IOSs) on the structure of market networks is analyzed from a management perspective. A research framework is applied to various organizational settings, yielding a range of mixed mode forms in which elements of both market and hierarchy are evident. These forms are more complex than the simple network or hybrid structures postulated in the management and information systems literature. The framework represents a departure from electronic markets theory, questioning its basic predictions that as companies trade electronically there will be proportionately more markets than hierarchies. Instead, IOSs make possible relationships that combine market and hierarchy elements simultaneously. Although economic forces are driving the changes in network structure, economic variables are tempered by individual firm strategies reflecting investment, network structure and IOS choices. The implications for theory are that traditional analyses of network structures and competition in business markets do not describe or explain adequately the structure and dynamics of competition in an electronic trading environment. The implications for managers are that they should consider the effects of mixed mode network structures on their processes for forming and managing business relationships supported by IOSs. The contribution of the paper is to provide a more accurate model of competition in business markets by demonstrating that multiple forms of mixed mode network structures exist. The mixed mode proposition is illustrated with case data from a range of mixed mode network structures.