From Hierarchies to Network Firms

growing reliance upon networking technologies has brought about a deep transformation of economic activities. Information networks, once considered merely a utility like water or natural gas systems, moved centre stage during that period to become strategic infrastructures. From a technological standpoint, digital convergence was the fundamental enabler of this transition. Telecommunications and computing became more alike: networks were built upon digital technologies and increasingly served to interconnect computers, while computers relied ever more upon networks to support their basic operations. Software, at the heart of the resulting digital networks, made it possible to create new communication applications for individuals or organizations to collaborate and compete. Software also came to define network configuration – the set of rules determining who can communicate with whom, to do what and under which conditions – so that ownership of the underlying hardware alone no longer guaranteed control of the network’s uses. The result was a fast-evolving, software-defined, indispensable, and increasingly capable information infrastructure: the ‘new media’ of much economic activity, our focus in this chapter. While the information networks born of digital convergence spread through all economic sectors in developed countries, their deployment and implementation have taken many forms. A range of factors, such as the nature of preexisting economic arrangements, the state of the national communication infrastructure, or national telecom policy, have influenced and shaped the deployment of intraand interorganizational networks. As a result, while the new media share a common technological lineage, they have been put to a variety of uses in organizations, with diverse consequences. For example, digital networks have been used at times to reinforce central coordination and at others to enable decentralized power; to buttress existing organizations or to invent new ones; to strengthen long-term, stable economic partnerships or to support fluid, fast-changing virtual teams. At the individual level, new media networks permit new work arrangements overcoming time and space constraints (Morton, 1991; Sproull and Kiesler, 1991; Wigand, 1997), allowing firms to cut costs associated with coordinating dispersed geographical facilities. These network-enabled work arrangements are said to result in increased job satisfaction and empowerment (Sproull and Kiesler, 1991; Malone, 2004), and provide access to a wider pool of potential employees, unlimited by geographical constraints (Cash et al., 1994). At the firm level, new media networks make multiple kinds of reorganization possible. 17