Network companies and competitiveness: A framework for analysis

Business networking for the purpose of becoming globally more competitive seems to form the very basis of strategic decisions in many companies today. The concept of ``network company'' has recently been the subject of many studies in the literature, perhaps mostly due to its world wide practice among more successful companies. Yet, there is no model-based formal treatment of the concept per se leading to the development of frameworks that are instrumental in formulating networking strategies. This paper addresses itself to formalizing the concept of ``network company'' within the context of global competition. For this purpose, ``network company'' is positioned in the value chain of pertinent product±market chain systems and then its functioning is decomposed into a set of minimal and basic components, which are termed ``elementary resources, methods, products, and activities''. The set thus de®ned at that detail level is used to analyze and evaluate ``network companies'' at any desired condensed level re ̄ecting the needs of a project or a function for the purpose of competitive strategy formulation. The formal analytical framework developed is then discussed in association with three basic approaches to competitive strategy formulation: resource-based strategy, activity-based strategy, and strategy based on the economic theory of the ®rm. The usefulness of the proposed framework in connection with these approaches is expressed in terms of formal propositions. Ó 1999 Published by Elsevier Science B.V. All rights reserved.