Market Hierarchy Networking: Cooperation in Times of Globalization, Fragmentation, and Uncertainty

Due to globalization and increased competition, many international firms have been adopting outsourcing strategies in order to cut costs by decreasing their degree of vertical integration. However, this strategy causes new problems. For instance, fragmentation of the companys value chain causes uncertainty with respect to the quality and availability of resources and the reliability of transaction partners. Further, the number of potential transaction partners has increased with the abolishment of trade barriers, which not only increases uncertainty, but also the complexity of the processes. International firms are managing these problems with different organizational structures and contractual arrangements with their transaction partners, while others have been evolutionary emerging.