Propositions, challenges and dilemmas of the Virtual Organisation - a social capital-based analysis

Virtual Organisations (VO) are regarded as the appropriate organisational form to facilitate innovation. Much has been written about the structural characteristics and propositions of virtual organisations, but their inherent limitations remain largely unaddressed. Hence, there is a significant gap between the propositions in the literature and the number of successful VO examples in practice. We argue for a more realistic view of the VO, its goals, structural propositions, limitations and challenges. VO are flexible and volatile organisational arrangements with only little formal structures and management mechanisms. While this is a promising proposition on an organisational level, it challenges cooperation on the project and team level. Especially complex and innovative tasks need effective social structures to enable interpersonal cooperation in knowledge-intensive tasks. Based on a conceptual analysis of its structure and by applying social capital theory we are able to identify inherent contradictions and challenges of the VO, which result from a mismatch between task requirements on the project level and its characteristics on the organisational level. Organisational virtualisation in terms of inter-firm cooperation and technological virtualisation in terms of intensive usage of ICT challenge the emergence of social capital as a prerequisite for effective team-level collaboration. At the same time social capital can be seen as a solution to the problems of the VO, given that management finds ways to promote its emergence in the VO. We present some ideas of how to facilitate the emergence of social capital in the VO.