The Design of the Virtual Organization: A Research Model


Bob Travica

In Gupta, Jatinder N.D., Association for Information Systems Preoceedings of the Americas Conference on Information Systems, August 15-17, 1997, Indianapolis, IN, 1997, pp. 417-19.  


Conceptualizations of VO and uses of this term by both business press and firms increase, while theoretical controversies persist and evidence of VO remains meager and inconclusive. The research model proposed in this paper intends to help resolve theoretical controversies and enrich evidence of VO. The model takes a particular information-communication perspective, which appears to be suitable for study of this information and communication intensive form.

Research Problem

The purpose of this paper is to propose a research model of the virtual organization (VO). Although conceptualizations of the virtual organization (VO) proliferate, they exhibit disagreements regarding necessary conditions for VO, the newness of this form and other important issues. These disagreements reflect on empirical research they inspire. In addition, empirical research in itself is still meager. On the other hand, business press appears to be using "virtual organization" as a buzz word, while a growing number of organizations declare themselves as "virtual". All this creates an ambiguous situation in which VO appears to be everywhere, whereas we indeed cannot tell with more certainty where it really is. Put another way, defining the domain of VO and key characteristics of this form becomes a problem for research. The following discussion will elaborate on this problem, and sets the stage for proposing a working definition of VO and a research model for investigating it empirically.

Previous Research

First mentions of VO, sometimes refereed to as "virtual corporation", date only few years back.. A consensus exist with regard to centrality of the IT role in VO; a temporary character of VO is also posited by many writers. However, disagreements are numerous. One refers to the concept scope. For example, Davidov and Malone (1992), who are credited for initiating the discussion on VO, use "virtual corporation" to refer to a very broad concept encompassing any new organizational form, inter-organizational forms, etc. In contrast, Byrne (1993) ascribes the same term to a transient collection of electronic communication linkages between ephemeral entities that donate their core competencies to a temporary collaboration.

Another point of discord concerns necessary conditions for VO. A group of researchers believe that electronic linking is necessary for VO to exist. This assumption underlines, for example, Nohria and Berkeley’s (1994) specification of VO conditions -- increased computer-mediated communication in primary activities, the rooting of organizational structure in the organization of information and IT, and networking beyond the firm boundaries. Similarly, Martin (1996) proposes a "cybernetic corporation" which sports a vast web of electronic links implemented in the Internet and intranets. In contrast, other writers either do not discuss explicitly electronic linking (e.g., Goldman et al., 1995) or overtly deny its necessity (e.g., Coyle and Schnarr, 1995).

The literature also disagrees regarding the newness of VO. A number of scholars treat VO as a new organizational form (e.g., Byrne, 1993; Martin, 1996) -- common denominators including a more flexible structure and a peer-democracy inclined culture. In contrast, Venkatraman and Henderson (1997) contend that the virtual organization is not a distinct type, but that virtualness is a characteristic of every organization, meaning "the ability to consistently obtain and coordinate critical competencies".

Empirical studies of VO are still rare, and evidence they bring is partially under insignia of the controversies discussed above. For example, if a conceptualization of VO encompasses classical inter-organizational forms (e.g., joint venture and strategic alliances), then evidence of VO exhibits equivocality (cf. Goldman et al., 1995). The differentiation problem also marks the evidence springing from conceptualizations that are not explicit regarding the necessary conditions and/or do not account for new organizational forms (cf. Coyle and Schnarr, 1995). Equivocality of the evidence is increased by the business press which appears to be using the term "virtual organization " as a trendy phrase applicable to any organization that either calls itself "virtual" or is somehow conspicuous in appearance. This behavior is mirrored by business firms in self-declaring virtualness. For example, a Yahoo search on "VO" returns thousands of hits.

Toward a Working Definition of VO

In order to cope with conceptual and empirical equivocality discussed above, a working definition of VO needs to be formulated and then tested empirically. A standard dictionary defines "virtual" as "being in essence or effect, not in fact; not actual but equivalent" (Webster, 1984). In the organizational domain, this effect-not-fact can instantiate in an impression that there is what customarily is presumed to be an organization (e.g., a company), while in fact there is no such a thing. What does exist are the people and material resources outside the same or immediate organizational boundaries that are somehow brought together so that they produce an impressionistic effect of a single organization. For instance, there could arise an impression that spatially scattered people are working at the same locale, or that resources from different firms function like they are owned by one.

Formulating a working definition of VO needs to proceed toward resolving the controversies discussed above. The following propositions are thus proposed:

(a) There are two necessary structural conditions to VO (1) geographical dispersion of organization units, and (2) electronic linking of production process. The former defines VO as a spatially dispersed organization with a dispersion of individuals, groups, departments, or whole companies (minimally two of any of these). The second condition implies that the production process in VO cannot be completed without support of IT in linking the parts of VO.

(b) VO is a distinct organizational form, not just a property of any organization. This proposition excludes from the VO universe organizations that can use communications extensively, but not in a way critical to completing the production process (e.g., multinational corporations with dispersed parts on the same satellite network whose use, however, is not critical for completing the production process).

(c) VO is a new organizational form. The implication here is that VO inherits certain organic characteristics of new forms (cf. Travica, 1995), while being differentiated from them on, minimally, its necessary conditions. For example, VO can share with adhocracy the property of design volatility, but differs from an adhocratic corporate instruction unit which has no spatial dispersion nor electronic linking (see Mintzberg and McHugh, 1985).

A working definition of VO can now be formulated: VO refers to a new organizational form which manifests itself as a temporary or permanent collection of geographically dispersed individuals, groups, organizational units – either belonging or not belonging to the same organization -- or entire organizations that depend on electronic links in order to complete the production process.

A Model for Investigating VO

A research model that can be used for investigating empirically VO appears on Figure 1. It contains eight aspects whose interrelationships are designated by the center of the figure. The purposes of this paper limit the discussion to a general description of dimensions for investigating each aspect.

The model in Figure 1 depicts organizational aspects that, taken together, can represent a distinct organizational form. IT is in the center of the model, which signifies its central role in VO. So for example, as the model in Figure 3 specifies, IT is hypothesized to be critical for carrying out production process at locales of VO as well as linking tasks that are spatially dispersed both through transfer of the work matter and accompanying communication of workers (the aspects of dispersed production and its management). In addition, IT supports VO structure (the aspect of electronic structure in the research model) whose distinctive elements are the linkages between VO parts dispersed in space (cf. Lucas, and Jack Baroudi, 1994). IT, furthermore, supports organizational information which can mirror social organization (cf. Nohria and Berkley, 1994). It is hypothesized that this aspect instantiates in, for example, information construction practices that depend on the problem at hand (such as exceptions/unknowns occurring during a task execution), IT available and data accessible (cf. Rosenbaum, 1996). Moreover, IT is also brought into relation with the aspects of virtualness culture. This implies that VO members need to adjust to the dispersed organizational context which precludes socialization processes pertinent to non-mediated contexts. That being the case, it is important to understand how IT influences creation of stories an beliefs that bind VO members and parts together? What sort organizing images does the IT-mediated context create in the cognition of VO members? How do VO members cope with the problem of developing trust (cf. Goldman et al., 1995; Handy, 1996)?


Figure 1 Research Model of VO


IT is also related to organizational learning which in itself could be crucial to sustaining VO (cf. Martin, 1996). Not only that VO members need to learn how to use IT which can depend on a number of organizational factors (cf. George et al., 1995) -- the dimension of production learning captures this -- but they also have to learn about abut each others’ skills, expertise, work habits and so on. How instrumental and/or constraining is IT in these processes of learning, is certainly important to ask. Another important relationship within VO is that between IT and the aspect of organizational memory management. It is sensible to assume that the dispersed character of VO increases the importance of maintaining organizational memory that could serve as an integrating force; on the other hand, there can be serious limitations to deal with, such as the problem of memory fragmentation (see Stein and Zwass, 1995). How, then, IT contributes to the memory management? -- naturally emerges as a question to ask. This is largely a domain of unknown and therefore the research model in Figure 3 is not very specific in terms of the dimension to be studied. Finally, business kind, organizational age, size and history of VO constitute an aspect here called ‘virtual context". Are IT-intensive businesses more prone to VO? Does a certain size applies typically to VO parts and the overall VO size, and what does IT have to do with it? (For example, there are some indications in literature that VO tend to be of a smaller size.) All these are interesting and important questions.

The model is intended to be used for guiding investigation that used both quantitative and qualitative lenses; the latter implies a learning process in the manner of grounded theory (Glasser & Strauss, 1967) which may result in new organizational dimensions to be studied.


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