Virtual or vague? a literature review exposing conceptual differences in defining virtual organizations in IS research

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Authors: Kai Riemer

Publication Year: 2012


Journal: Electronic Markets

Volume: 22

Issue: 4

Categories: Adaptive Organization, Digital Transformation, Virtual Organizations


The authors of this article state that the term Virtual Organization has been interpreted in varied form with an unsatisfying mix of VO notions existing in literature. In their research, they uncover three distinct types of VO referred to in literature: the internal VO, the network VO and the outsourcing VO. The authors describe each type by outlining their characteristics, they also briefly explain the emergence of each type, and discuss the related managerial challenges. What follows below is a summary of the key takeaways of their classification. This article is relevant in the context of the (V)ODC course in that it identifies, describes and clarifies the different perspectives and views on virtual organizations.

Critical Reflection

1. Internal VO: internal virtualization within one organization through virtual teams and mobile work practices. Characteristics defining the internal VO: A collaborative network of people residing inside one organization (virtual team structure) Geographical distribution of value creation (de-centralization) ICT is the main means for communication and information sharing Mobile work practices are common Emergence: stimulated by ICT advances and possibilities Management challenges and implications. Caused by graphical distribution and communication overhead: Communication overhead, lack of awareness of other’s availability, activities, work progress Maintaining mutual knowledge Controlling of work becomes harder (HR perspective)

2. Network VO: a network of (often small and medium-sized) companies, which, by bringing in their core competencies, join forces in order to swiftly exploit emerging market opportunities in short-term projects. Together, they become a virtual player in the market. Characteristics defining the network VO: A flexible and collaborative inter-organizational network of independent firms Core competences of partners are synergistically combined Geographical distribution of work Linking of partners via ICT Trust is the key enabler of collaboration Emergence: from strategic management and –alliances Management challenges and implications: Initiation and configuration of the network and management thereof: finding the right partners and assigning the right managers Distribution of incentives, rewords, costs and risks Virtual team challenges, plus cultural issues due to the inter-firm environment

3. Outsourcing VO: refers to a focal firm, which outsources a major part of its value creation activities to a network of suppliers. The focal firm appears as something it is not because the actual value creation is virtualized. Characteristics defining the outsourcing VO: A network of suppliers to the outsourcing company Specialized partners that bring in their expertise and value to the outsourcing company Significant parts of the final offering are delivered by suppliers, making the value creation process virtual Emergence: from operations management, supply chain management and outsourcing Management challenges and implications: Make or buy decisions Supplier selection Relationship management and contracts