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

The concept of ‘virtual organization’ was coined about 15 years ago to describe changes in organizational structures and value creation, enabled by the affordances of ICT. Not surprisingly, the Information Systems community has been influential in researching virtual organization phenomena. However, it appears that, since the notion of ‘virtual’ in its most basic connotation only denotes some form of difference to a ‘traditional’ form of organization, the term VO has been interpreted in varied form with an unsatisfying mix of VO notions existing in the literature. What is more, papers frequently exhibit mismatches between what they characterize as VO and the real-life phenomena they discuss. Motivated by these observations we carry out a literature analysis to explore differing notions of virtual organization. Based on a systematic classification of VO definitions, we uncover three distinct types of VO that are used in the literature, each of which interprets the notion of ‘virtual’ differently, but is useful in its own right and exhibits unique management challenges. The first type, named Internal VO, revolves around internal virtualization based on distributed collaboration in virtual teams. It emerged on the back of emerging new groupware and communication technologies. Its main challenges stem from distributed project and work organization. The second type, named Network VO, describes a network of smaller companies that form a virtual entity, bringing in core competencies in short term collaborative projects. It emerged on the back of a emerging inter-organizational information systems and a trend of forming network arrangement. Its main challenges are with the governance of the multi-entity network. The third type, termed Outsourcing VO, refers to a hierarchical network of suppliers to which the focal firm outsources a significant part of its value creation, thus appearing as a virtual firm. It emerged on the back of the outsourcing trend of the last decades. Its main challenge is determining the optimal degree of integration and virtualization. With the identification and detailed exploration of the three VO types, our study contributes to a better understanding of the conceptual foundation of VO research and points to the necessity for conceptual clarity in future research.

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