Beginning in the 1960s, many organizations in unwieldy environments developed matrix structures. By the mid-1990s, Asea Brown Boveri (ABB), the electrical engineering giant, had grown to encompass some thirteen hundred separate companies and more than two hundred thousand employees worldwide. To hold this complex collection together, ABB developed a matrix structure crisscrossing approximately a hundred countries with about sixty-five business sectors (Rappaport, 1992). Each subsidiary reported to both a country manager (Sweden, Germany, and so on) and a sector manager (power transformers, transportation, and the like). The design carried the inevitable risk of confusion, tension, and conflict between sector and country managers. ABB tried to create structural cohesion at the top with a small executive coordinating committee (thirteen individuals from eight countries), an elite cadre of some five hundred global managers, and a policy of communicating in English, even though it was a second language for most employees.
The structure worked through the 1990s, and ABB became one of Europe’s most admired companies. But the inherent tensions eventually took a toll, and after a business downturn in 2000, ABB began to generate more bad news than good (Reed and Sains, 2002). Nonetheless, variations on ABB’s structure—a matrix with business or product lines on one axis and countries or regions on the other—are common in global corporations.
Networks have always been around, more so in some places than others. Cochran (2000) describes how both Western and Japanese firms doing business in China in the nineteenth and twentieth centuries had to adapt their hierarchical structures to accommodate powerful social networks of merchants and workers deeply embedded in Chinese culture. One British firm tried for years, with little success, to limit the control of “Number Ones” (who headed local networks based on kinship and birthplace) over the hiring and wages of its workforce. The proliferation of information technology beginning in the 1980s led to an explosive growth of computer networks—everything from small local grids to the global Internet. These powerful new lateral communication devices often supplanted vertical strategies and spurred the development of network structures within and between organizations (Steward, 1994). Powell, Koput, and Smith-Doerr (1996) describe the mushrooming of “interorganizational networks” in fast-moving fields like biotechnology, where knowledge is so complex and widely dispersed that no organization can go it alone. They give an example of research on Alzheimer’s disease that was carried out by thirty-four scientists from three corporations, a university, a government laboratory, and a private research institute.
Many large global corporations have evolved into interorganizational networks (Ghoshal and Bartlett, 1990). Horizontal linkages supplement and sometimes supplant vertical coordination. Such a firm is multicentric: initiatives and strategy emerge from many places, taking shape through a variety of partnerships and joint ventures.