Powell on network theory
Powell (1990) Introduction
Powell argues that previous research on economic organizations have focused on two kinds of structures, markets and hierarchies, but that these structures are inadequate to explain some complex interactions that occur in today's business world. He suggests a new structure, called a network, that he believes is a better description of business interactions in some situations.
Market, Hierarchy and Network In a market, there are buyers and sellers and the relationship between buyers and sellers is limited to single interactions. The emphasis is on a single transaction and not on maintaining continued trust between the buyer and seller. Markets are good for describing transactions that involve quantifiable products where the seller who can produce the product for the cheapest price is typically the winner. One of Powell's best descriptions of a market is as follows:
"The stereotypical competitive market is the paradigm of individually self-‐interested, non-‐ cooperative, unconstrained social interaction. As such, markets have powerful incentive effects for they are the arena which each party can fulfill its own internally defined needs and goals." The hierarchy arises out of a
Powell argues that previous research on economic organizations have focused on two kinds of structures, markets and hierarchies, but that these structures are inadequate to explain some complex interactions that occur in today's business world. He suggests a new structure, called a network, that he believes is a better description of business interactions in some situations.
Market, Hierarchy and Network In a market, there are buyers and sellers and the relationship between buyers and sellers is limited to single interactions. The emphasis is on a single transaction and not on maintaining continued trust between the buyer and seller. Markets are good for describing transactions that involve quantifiable products where the seller who can produce the product for the cheapest price is typically the winner. One of Powell's best descriptions of a market is as follows:
"The stereotypical competitive market is the paradigm of individually self-‐interested, non-‐ cooperative, unconstrained social interaction. As such, markets have powerful incentive effects for they are the arena which each party can fulfill its own internally defined needs and goals." The hierarchy arises out of a