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 defined at that detail level is used to analyze and evaluate "network companies" at any desired condensed level reflecting 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 firm. The usefulness of the proposed framework in connection with these approaches is expressed in terms of formal propositions. (C) 1999 Published by Elsevier Science B.V. All rights reserved.