The Value Creation Process in Networked Organizations

The Value Creation Process in Networked Organizations

Jengchung V. Chen (National Cheng Kung University, Taiwan) and Yu-Hsiang Wang (National Cheng Kung University, Taiwan)
Copyright: © 2008 |Pages: 7
DOI: 10.4018/978-1-59904-885-7.ch230
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Abstract

The concept of the organizations as value creators is not new. The capacity to create value in a sustainable way is just recognized to the organizations that are able to innovate and to find other forms of continuously combining their resources, capabilities, and processes. Value creation corresponds to a complex exercise that appeals to a global and transversal analysis of the organization and its environment as well as to the knowledge and control of the variables that leads or affects its creation (value drivers) or destruction. For a question of efficiency and/or flexibility, organizations cannot perform all value chain activities and do it in a better way. Concentration in activities or knowledge areas in which they are competent enough and rely on the other members of the network’s other responsibilities is a way to strengthen their own resources and capabilities; at the same time they preserve the flexibility to face change. On the other hand, firms do not control all the fundamental resources needed for the value creation process. In this way networks are not only important, but also critical to the success, or even the survival of the organization.

Key Terms in this Chapter

Value Creation Process: A number of activities performed by firm (alone or along with other parties, being a firm and/or an individual) that lead to the creation (or destruction) of value.

Relational Rent: A supernormal profit jointly generated in an exchange relationship that cannot be generated by either firm in isolation and can only be created through the joint idiosyncratic contributions of the specific alliance partners.

Relational Capital: Represents the value of the fomented and consolidated relationships within the organization as well as between the organization and external entities (individual or collective).

Value Driver: A fundamental and persistent characteristic of a business enterprise that influences the total value created.

Virtual Organization: Flexible and dynamic coalition of geographically dispersed organizations, or organizational units, that pool resources and capabilities quickly to achieve common objectives. A fundamental characteristic of virtual organizations is the flexibility of the interdependent relationships across space, time, and formal boundaries.

Stakeholder: Any part, being an individual, a group or an organization that has an interest in a firm and/or, in some way, either directly or indirectly, either voluntarily or involuntarily, influence its activity.

Networked Organizations: A network of autonomous organizations that cooperate based on complementary competences and connect their resources and capabilities to those of their partners via networks aiming at mutual benefits.

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