Virtual Organizations: The Business Design for the Twenty-First Century

The growing prominence of virtual organizations, such as Dell and Amazon.Com, has demonstrated the potential for virtual governance structures to achieve greater competitiveness than their more traditional counterparts. The designs of such organizations typically support three important characteristics: virtual customer interaction, virtual sourcing of complementary resources and assets from a network of alliance partners and suppliers, and the leveraging of virtual expertise for greater organizational effectiveness. The organizational adoption of a virtual organizational design has important economical and organizational implications for the firm. This study aims to investigate how economic (using transaction cost theory) and organizational factors (using institutional theory) could affect top management’s attitudes towards adopting virtual organizational designs. A mailed questionnaire survey of potential adopters of virtual organizations will be conducted. Additional insights on economical and organizational factors of interest will be sought through semi-structured interviews with a representative sample of the respondents. Results from the study would provide researchers with a better understanding of how economical and organizational factors could affect management’s decision to adopt new governance structures in general, and virtual organizations in particular. The findings could also point practitioners to the concerns of firms that intend to adopt virtual organizational designs, and suggest ways of addressing these concerns during implementation.