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- Types of Networks
- Network Approaches: Member and Purpose
- Knowledge and Innovation Networks
- Cultural Differences
- Legal Networks
- Benefits and Drawbacks of Corporate Networks
- Corporate Networking Theories
The various relations and networks of modern life are complex. Both private and business spheres are determined by different networks, such as energy, transportation, economics, and socializing. Corporate life is also a complex system in the junction of different grids and lattices and, consequently, can be studied through the network perspective. However, the organization is not the only element that can be examined within the framework of networking. The fluidity and changeability of the modern world are reflected in the network structure not only in corporations but also in their environment. Even organizations specializing in very specific domains deal with a different range of people and organizations in the process of producing, marketing, and selling products and services. The aspect of specialization is also crucial for networking, as it leads to a strong dependency not only on other companies but also on human and nonhuman entities. The corporate environment, comprised of different stakeholders, various constituting relations, and other entities, together with the corporation itself, can be studied by taking into account different networks.
Corporate networking can be perceived in many ways. In the most general approach in organization studies, it can be understood as all the networks shaping and influencing the corporation and its setting, since modern companies constitute networks and at the same time are embedded in networks. Thus, corporate networking is the sum of networks determining company performance. Elements such as people and organizations, individual and shared resources, and the relations within and between them all influence corporate networking. Since the relations and ties between individuals and organizations are more of a focus than individual people and companies, corporate networking deals with the ways in which human and nonhuman entities are connected in business settings.
There are no strict boundaries in corporate networks, and nodes and ties are the most important elements. They consist of people, organizations, and things having a shared corporate interest. For example, business relationships with customers and suppliers are even more important than the actual products or services offered on the market. Since the hierarchical aspect is less relevant in networking, the networks are horizontal rather than hierarchical. There are different reasons for forming networks. Some focus on products or product lines, others deal with social relations, and still others are more regional or centered. The most important reasons for forming corporate networks constitute the corporate networking typology.
Types of Networks
In everyday life, there are different networks influencing corporations. Companies can be considered from the sustainability perspective, which requires three network pillars to be effective: social, environmental, and economic. Social networks determine various relations between people by taking into consideration such issues as gender, occupation, country of origin, and other collective determinants. Thus, in the case of business settings, corporate social networks will involve the inner corporate relations between workers and the outer corporate relations between employees and stakeholders within the broader corporate environment. Within proximity and comparability issues, corporate social networks can be divided into homophilous and heterophilous networks. The first type is connected with the groups of people who are similar in background, education, age, and other social determinants. Heterophilous networks encompass human beings who are different when various factors are taken into account. A more relational view on social networks divides networks horizontally and vertically. Vertical networks mirror the links between workers and customers, whereas horizontal networks show the relations between competing companies. Vertical networks can be partitioned into downward and upward networks. Downward networks reflect the communication modes between supervisors and subordinates, such as giving orders or instructions. Upward networks show the communication patterns of workers when they speak to their superiors, for example, when they respond to complaints and ask for additional clarification. Horizontal networks, on the other hand, reflect the communicative patterns between people who are equal in the corporate hierarchy.
In the corporate network structure, some networks are loose while others are very close. Sometimes loose networks become structured organizations with the flow of time and changing conditions. Loose networks are likely to suffer from limited feedback or inadequate information flows; however, due to the great number of constituting members, the informative content can be spread quickly within the target audience. Loose networks can consist of different employee groups who have common interests or goals, which make them outstanding from other workers. What is characteristic about this type of network is the fact that its members may not know each other very well and meet only occasionally. Close or tight networks (sometimes also called strong networks) are characteristic for formalized relations. The network consists of a relatively smaller number of associates, and the entrance procedure is more restricted. In the informative aspect, data provided are more reliable but distributed within a more restricted circle. Weak networks can be generated very easily and almost immediately, whereas strong networks need more formalized methods to be created, and their rules are generated with the flow of time.
Network Approaches: Member and Purpose
Corporate networking can also be studied from the network member approach. Thus, networking can be researched from the client perspective, taking into account customer networks, highlighting the relations between customers and sellers, marketing or advertising specialists, service staff, and others. The priority of supplier can be taken into account as well and, consequently, supplier networks receive primary attention. Examining the production process in greater detail, producer networks or manufacturer networks come into question, which includes the networks determining the production process. When the cooperation is to be stressed, partner networks, which include the relation between cooperating companies, receive greater notice.
Social networks can also be divided by taking into consideration the notion of purpose. Thus, profit networks, relation networks, or socializing networks can be distinguished within corporate networking. Environmental networks encompass the relations between human beings and the natural environment and whether or not people and their corporate activities aim at sustainable growth in accordance with the surrounding ecosystem. Economic networks stress the commercial aspect of relations. These networks can be further subdivided into financial networks, banking networks, and insurance networks, for example. Within financial networks, elements such as insurance companies, financial and investment institutions, and brokerage houses can be traced. The issue of financial networks is especially important in times of crisis, when liquidity and regular financial flows are hindered. Banking networks entail both human and nonhuman entities related to banking operations. The same applies to insurance networks, which involve people as well as products and services related to security and assurance.
Knowledge and Innovation Networks
Other types of networks can be distinguished by taking into account the aim of corporate activities. An organization is considered a place of creating and disseminating knowledge; thus, modern companies are often viewed in the literature as learning and knowledge-generating systems. This is also in line with the concept of the knowledge-based economy, which stresses knowledge as the tool of market competitiveness. Since companies are distributed geographically, both knowledge production and distribution involve different experts and diversified skills. The specialists representing different disciplines speed up the process of knowledge exchange and enrich the quality of corporate expertise. However, knowledge networks differ, depending on the relations between participants. Direct ties lead to quick knowledge flows, whereas indirect ties may limit the tempo of knowledge dissemination. Knowledge networks can be further divided into knowledge creation networks, knowledge diffusion networks, and knowledge use networks, depending on what happens to the particular piece of knowledge. Knowledge gain encompasses knowledge exchange networks and knowledge trade networks. Knowledge exchange networks comprise the relations connected with expertise swapping, whereas knowledge trade networks deal with buying and selling information. Knowledge diffusion includes knowledge spillover, knowledge transfer, and knowledge integration. Knowledge spillover networks aim to benefit the company from the knowledge created by other companies. Knowledge transfer networks reflect exchanging knowledge, whereas knowledge integration networks are responsible for adapting new expertise. Information technology (IT) networks within knowledge management systems involve the application of IT in the process of knowledge production, diffusion, and usage. Many different types of knowledge networks can be identified by their particular characteristics: tacit networks, explicit networks, personal networks, and social networks. Scientific knowledge networks, engineering knowledge networks, and entrepreneurial knowledge networks can be found within corporations.
Companies also seek to produce and sell knowledge that is unique and new and makes them outstanding and competitive. Thus, innovative networks are important in creating innovative products and services, which determine the position of a company in the market. Innovation is connected with stakeholders investing in new technologies, managers producing innovative products, and workers in novel fields. As companies cannot produce innovations in a vacuum, they rely on networks of internal and external sources. Even companies that manufacture and offer similar products or services differ in the intensity and type of innovation implemented in their innovative processes. Since networks are not geographically limited and can encompass transdisciplinary experts, new knowledge is produced quickly and effectively.
Although boundaries are of secondary importance in modern corporate networking, the issue of culture and distance is taken into account in knowledge and innovative networks; that is, in the cooperation between knowledge seekers, knowledge providers, and corporate innovators. Cultural differences determine the types of knowledge and innovation creation as well as their distribution. The division of corporate networks takes into account the cultural attitude toward goals. For example, collaborative networks value relationships and fixate on expertise and innovation. Coordinated networks appraise transactions and aim at efficiency and adaptability, with social relations of secondary importance. In this case, the difference in corporate cultures will determine the appearance of human- or transaction-oriented networks. As corporate networks depend on culture on the global, national, and corporate level, national and corporate characteristics will determine the type and role of networks in a company. For example, some organizational cultures favor informal communication, and thus this mode of interaction will determine communicative networks. On the other hand, those companies opting for strict and extensive power relations will have strong hierarchical networks. Hence, communication networks can be viewed in different ways, such as by the degree of formality.
In this way, communication networks can be divided into formal and informal networks. Within formal communication, the following types can be observed: chain communication, wheel communication, circular communication, free-flow communication, and inverted “V” communication. Chain communication exemplifies the communication flow between supervisors and subordinates, with the next in hierarchy informing the direct subordinate. In wheel communication, the supervisor is the transmitter of information to all those second in command. In circular communication, workers communicate with the two nearest colleagues.
Communication networks can be used for different functions. In free-flow communication, each member has the opportunity to talk with his or her colleagues. In inverted “V” communication, every worker is entitled to communicate with workers. These networks can be classified as decentralized and centralized networks by taking into account the presence or absence of a central information point. Communication networks mirror the organizational culture of the company by showing the relations between subordinates. Informal communication and, consequently, informal networks are more relaxed within corporate communication and rely more on personal networks than on hierarchical and power interrelations. They are especially important in unplanned situations, which require an immediate response. They also tend to be cheaper, more effective, and quicker than formal ways of communication. As informal networks also include gossip, rumor, and grapevines, some argue that they are unreliable and should instead be used for entertainment and socializing. However, networking also takes place in communication; thus, both formal and informal networks overlap and influence each other.
Communication also improves network performance, which is often discussed in the literature through the prism of technology. The type of communication channel determines the relation between participants and, consequently, the overall performance of a company. The Internet and Intranet networks, telephone networks (regular and mobile), and video networks (teleconferences) are the most popular communication channels. Technology networks allow for quick, cheap, and effective communication, making geographical distance of secondary importance. Internal networks cover all the communication networks within the corporation, whereas external networks deal with the communication networks outside the company. Industrial districts are the type of interorganizational network that reflects the geographical distribution of companies from the same or similar industry sector.
Virtual networks can be understood in two ways. The first approach is related to subcontracting, such as outsourcing services from cleaning to accounting for cost reduction and new knowledge acquisition. Virtual networks can also be viewed by their mode of communication, such as online, where participants rely on technology for everyday interactions. Trust and organizational climate matter in the contacts between people who are separated by great distance. The structural network is not fixed, and evolves according to current conditions.
Networks can also be classified according to their legal aspect. Legal networks are related to the regulations and rules applicable in business environments and are formal, with strict laws and application. They involve the bodies engaged in producing and executing legislation as well as advising on legal matters, such as courts, governments, lawyers, and counseling. Policy networks, consisting of politicians and public administrators, also constitute legal networks. Other classifications include networking between companies with a common owner and networking between unrelated companies. Within legal typologies, there are different networks dealing with organizational memberships. Interlocking directorate networks involve a situation where the person is a member of the board in another company as well as their own. Strategic alliances encompass two or more companies cooperating to produce products or offer services that reflect their joint efforts or mutual knowledge. Corporate networks also arise as the result of mergers and acquisitions as well as other changes necessary to adapt to a new corporate environment. For example, franchising networks is a traceable activity. Corporate networks also depend on the type of legal cooperation. For example, multinational corporations and transnational corporations establish and maintain networks with local companies, apart from the most visible global networks. Corporate networks can also be divided by the time factor, especially in how long the networks are supposed to last. For example, employee networks are supposed to last longer than corporate representative– customer networks.
Benefits and Drawbacks of Corporate Networks
Corporate networking has both positive and negative aspects. Networking determines knowledge leverage, since network members are likely to absorb a new strategy or unique method if they were successfully applied by other members. Since corporate networking is not limited by boundaries, geographical limitations are of secondary importance in forming corporate networks. Because of its structure, corporate networking allows for establishing new contacts and strengthening old relations, trust, and support. For example, according to the leader–member exchange, both leaders and followers benefit more from the relations with influential people than from their direct workgroup.
However, being in a corporate network requires behaving similarly to other network members; thus, both the choice and independency of actions are limited. A new worker, product, or service should not only meet the individual expectations of one person or company, but should also comply with the network’s needs. Networks also limit an individual’s freedom of choice. Workers in a corporation must follow the schema used in their network, as every element in a network has its ascribed role.
Corporate networks are complicated structures involving different elements. Thus, it may take time for the corporate network to adapt to new environmental or market conditions, and sometimes it fails to follow these changes completely. The size of the network also matters. Large, complex corporate networks can be difficult to control and manage. Even just one element may start disorganizing the network and spoil the work of others, leading to cascading failure.
Corporate Networking Theories
The origins of corporate networking can be found in the studies on holonic enterprises and lattice organizations. Different approaches can be applied to the modern methodology of corporate networking. For example, functionalist theories take into account the economic and social aims of networking, stressing the profit and communal aspect of interrelations. Power and control theories underline the role of networks in creating monopolies or eliminating competitors. Since power networks are often asymmetrical, with one being stronger or having more influence, this approach is used to discuss inequalities or hierarchies in corporate networks. As corporations consist of human beings, the prism of social network analysis can be used to examine the ties between individuals, organizations, and countries that allow the transfer of information, behavior, services, and goods. In the corporate context, organizational network analysis is used to describe human, knowledge, and product flows as well as group interactions. Corporate networking can also be viewed through the principle of communication network analysis, which shows the communication system between interpersonal ties within companies. There are also approaches underlining the role of nonhuman relations in corporate settings. For example, actor network theory stresses the role of human and nonhuman elements in corporations, examining the manager’s role as well as the influence of telephones or faxes on a company’s performance.
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