Pitfalls and Paradoxes: Coping With The Capabilities-Rigidities Dilemma In Whole Networks

Abstract

Emergent interorganizational forms intent on long-term competitive performanceat the network level are affecting markets and gaining scholarly attention.Whole networks are an example of such organizations. Managerial paradoxes resultfrom these informal, non-hierarchical structures when they seek long-term competitiveadvantage. Applying paradox theory and research on ambidexterity, we concludethat, counter intuitively, formalized governance is necessary to sustain informalcompetitive entity success. Contrary to traditional network theory, social capitalmechanisms and trust are not solely adequate. We examine challenges facing wholenetworks and propose three governance strategies to address them: (1) formalizedgovernance with adequate authority; (2) centralized leadership with decentralizeddecision-making; and (3) provisions for managing membership composition. Wediscuss implications for practitioners and scholars and suggest research paths forvalidating and extending this theory.