Organizational Performance of a Firm in a Modular Business Network

The organizational capabilities to interact with others have been greatly improved as a result of modern information and communications technologies: Nowadays a company can maintain more relationships with more companies at much lower costs than before. What impact does this increased interaction capability have on the company's choice to perform tasks itself or to 'outsource' such tasks to others (the trade-off between 'make' or 'buy')? Business network theory places the company in a 'business network', a web of business partners linked together in a flexible way to produce different outputs depending on the customer requirements. Previous research suggests that such business networks require modularization of the products, the processes and the firm in order to be effective. Firms would be able to share their core capabilities and therefore can respond faster, and more effective, to different requirements. Are business networks indeed more dynamic and more 'agile' than other forms of inter-organizational co-operation like alliances, joint-ventures or markets? More precisely, what is the impact of the structure of a business network on the performance of the participating actor organizations? The objective of this study is to define and understand this relationship: business network structure and organizational performance. In this Research in Progress Paper we present our preliminary set of hypotheses and our testing instrument, a management game called the Business Networking Game that simulates modular business networks.