The Development of Virtual Organizations in Romania

Recent Researches in Neural Networks, Fuzzy Systems, Evolutionary Computing and Automation The Development of Virtual Organizations in Romania LARION...
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Recent Researches in Neural Networks, Fuzzy Systems, Evolutionary Computing and Automation

The Development of Virtual Organizations in Romania LARION VALENTIN, TOFAN DAN CONSTANTIN, DINCĂ LAVINIA MIHAELA Bucharest Academy of Economic Studies 6, Romana Square, district 1, Bucharest postal code: 010374, postal office 22 ROMANIA [email protected], [email protected], [email protected] Abstract: - The practical studies that have been conducted so far focused on the analysis of virtual organizations (VO) which had already been constituted and were operational, without considering the particularities of the economic environment in which the participating VOs run their activity as well as the impact on the VO’s profile. The current study aims to identify the particularities of the national economic environment for the development of VOs by surveying the economic agents which act in Romania and to identify the level of competence necessary to such a collaboration and the importance allowed to the factors that could act as barriers in the way of this collaboration. The analysis takes into account structural, social, technical and legal factors. Key-Words: Virtual organization, Breeding environment, Collaboration effectiveness, Collaboration efficiency, Collaboration barriers, Trust level. exists a main set of features which are valid regardless of the approach one chooses when one studies them. Hans Jägers, Wendy Jansen and Wilchard Steenbakkers (1998) were the first to present, in a global approach, the primary features that define the VO as well as the main requirements which have to be met in order to operate in such an organization [3]. Marita Haas, Sabine Koeszegi & Matthias Noester (2007) have identified and considered as being the most important features of VO the following: - the participants focus on their own main competences, - the participants are legally and economically independent, - in order to provide a high dynamics to the entire organization, the participants are not positioned according to a hyerarchical structure, - the cooperation between the partners is supported by mutual trust, - participant coordination is usually insured by a complex infrastructure of communications and data, - VOs generally have a temporary character and are constituted to satisfy a demand that is limited in time [8]. Later on, after conducting an extended study on the definitions and the theoretical and practical concepts regarding the VO’s properties, Markus Spillner (2009) has come to the conclusion that there are both important similarities and differences between the various existing approaches. Thus, the following generally valid features of VO’s have been enumerated: • the network structure: although they may be geographically dispersed, the participants constitute a network structure oriented towards reaching a common goal;

1 Introduction It is an unanimously accepted fact that one of the main advantages of virtual organizations (VO) resides in the opportunity of participating firms to join greater and more complex projects, in a faster and more flexible way than if they were to act on their own. The features of virtual organizations are already known, and recent studies have brought to attention several factors which influence the effectiveness and the efficiency of the collaboration, producing various types of barriers between the members of a virtual organization and eventually affecting their collaboration. The current study aims to identify the particularities of the national economic environment for the development of VOs by surveying the economic agents which act in Romania and to identify the level of competence necessary to such a collaboration and the importance alloted to the factors that could act as barriers in the way of this collaboration. The paper is organised as follows: • Section 2: Theoretical aspects • Section 3: Research method • Section 4: Formulating hypotheses • Section 5: Study results and conclusions • Section 6: Future Work

2 Theoretical aspects The definitions ennunciated in the professional works in order to describe the VO vary, and each concept brings to attention one or more of the VO’s properties. To resume, specialists reached the conclusion that there

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• cooperation and coordination: cooperation between participants is always oriented towards the process optimization in operating the VO; • the combining of the main competences: the participants contribute with their own main competences, insuring complementariness within the network in order to achieve a common goal. In the same time, the following factors that generate differences between the current concepts relative to the VO have been signaled: • virtuality: the intensity of the virtual character of a VO differs according to the way in which the participants contribute to its formation, by extending the network so that new participants are co-opted in order to insure a new competence or by the development within the existing network in order to achieve that competence; • centralized control: in case there is a dominant participant in the VO’s structure, that shall lead to a tendency to control the other participants, otherwise participants shall attempt to control only their own field of competence; • longevity: the formation of a VO may aim to serve a purpose with no limited duration or only to finalize a project and then to disolve; • risk and uncertainty: depending on the complexity of the task or of the context in which the VO operates there may be different levels of risk or or uncertainty among the participants; • vertical/horizontal cooperation: this factor depends on the more or less dominant position that some partners occupy relative to the others; • collaboration: the collaboration within the VO is mainly constituted by knowledge exchange, and a network of equal partners provides an enhanced opening to collaboration comparative to the case in which some participants have dominant positions [9]. By analyzing 30 projects in the field of VO development in order to capture the evolution of modelling approaches, Katzy Bernhard R. and Sung Gordon (2003) have come to the conclusion that an increase in the effort that goes in the VO modelling triggers a decrease in the flexibility of the model’s change [4]. Later on, in other articles on the subject, Amit Goel, Heinz Schmidt and David Gilbert (2010) have cited several attempts to capture the VO’s architecture and behaviour starting with the modelling based on the graph theory and up to the modelling based on agents [1]. There have been numerous studies that aimed to identify a general profile of virtual organizations, but every time people have noticed the necessity to previously identify/define the breeding environment which should represent the VO’s foundation (Virtual Breeding Enviroment). This environment is constituted by partners who can contribute to the VO’s organizing and operating and aims to insure the identification and the training of

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adequate partners in order to activate the VO whenever the opportunity comes up. Marita Gruber and Matthias Nöster (2005) have identified and evaluated, at the same time, the importance of each factor that defines the VO. The conclusions have pointed out the fact that, although there exists a solid analysis and development of concepts in theory, these have a limited degree of application. The formation process of a VO, capable of promptly acting when an opportunity comes up, presupposes the immediate coordination of partners, which in its turn requires the existence of a certain level of flexibility within the network and of a set of predefined rules and roles [7]. In other words, the partners are required to have a prior training in order to run their activity in such a modus operandi. Luis M. Camarinha-Matos and Hamideh Afsarmanesh (2006) have defined the VO’s breeding environment as an association of organizations and back-up structures which have adhered to a longterm cooperation contract, adopting operating principles and a common infrastructure, and aiming to enhance their own chances to collaborate within the future VOs [5]. Starting from the main role of the breeding environment, namely that of allocating support for the VO’s formation, Zbigniew Paszkiewicz and Willy Picard (2009) have proposed a methodology addressed to the participants in the VO’s configuration process [12]. Hamideh Afsarmanesh and Luis Camarinha-Matos (2005) have brought to attention the necessity to define a life-cycle of the breeding environment which could also funcion as the grounds for the identification of the specific management processes, starting from the environment’s inception and continuing with its evolution, transformation and dissolution [2]. Marc Pallot, Ulf Bergmann, Hermann Kühnle, Kulwant S. Pawar and Johann CKH Riedel (2010) have focused on the factors that can influence the collaboration between partners and they have identified a greater number of barriers. The analysis looked to the effect on the collaboration’s efficiency, as well as on its effectiveness, and the 25 factors that have been evaluated have been grouped in 4 categories: structural, social, technical and legal [6]. Msanjila S. and Afsarmanesh H. (2008) have introduced a marker that should evaluate the trust level within the VO’s breeding environment and they have estimated the trust that exists between participants, as well as relative to the management team, as a main factor in the successful formation and operating of VOs [11]. Roland Bauer & Sabine T. Köszegi (2003) have developped a device that would mesure the virtualizing degree of these organizations, which integrates both the partners’ features, as well as the relations between them. Thus the following factors have been considered: the

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operating, and we highlighted the fact that the most significant factors that affect the collaboration’s performance mainly manifest on the collaboration’s effectiveness and less when it comes to its efficiency. The factors that affect effectiveness influence in particular the participants’ preparation for collaboration and are generated by the lack of trust, of leadership, of a common understanding of matter at hand, of a common set of principles etc. The factors that influence the efficiency are more likely to be connected to the technical or organizational support, where the adequate methodes or techniques contribute to the blurring of distances generated by time, space, technology heterogeneity, communication channels’ incompatibility etc. Identifying adequate partners and establishing necessary conditions proves to be time and effort consumming, affecting especially the VO’s dynamics on the whole. Taking into consideration the theoretical ascertainments presented in this article, we have formulated several hypotheses relative to the VO’s particularities when it comes to the formation and operating in the national economic environment’s context: − the lack of trust represents a crucial factor in the VO’s formation; − the partners will exhibit reserves when it comes to knowledge exchange and they will attempt to limit/control it; − the VO’s IT component will be of great significance; − the geographical scattering will not represent a major impediment; − the face-to-face communication will not be essential; − the VO’s dynamic character will be limited, and the access of new partners will be encumbered.

creation of a virtual value, the focus on the main competences, the general characteristics of the network formed by the participants, the participants’ independence, the character of the commitments that exist between participants, the trust level and the level of IT technology implementation [10].

3 Research method In order to accomplish our research, we have taken the following steps: 1. Starting from an extended study of professional works, we have identified the elements of the VO’s general profile, the breeding environment’s characteristics and the factors that can act as barriers to the VO’s formation. 2. In order to study the implications of the national economic environment we have premised that in Romania, although there are economic domains wherein the participants run their activity in a similar manner to the VO’s (i.e the constructions domain), this fact has not yet been acknowledged, and we considered that, at this moment, there exists no sufficient grounds on which an analysis of the Romanian VOs can be conducted. Thus, we have regarded as greatly significant the evaluation of the national economic environment’s potential for the formation and operativeness of VO’s breeding environments. We have kept in mind the evaluation of the adaptability level of the economic agents and of the factors that can act as barriers in the collaboration of potential participants, and we have formulated several hypotheses on the grounds of these two objectives. 3. In order to study the truth value of these hypotheses we have resorted to the method of investigation by direct interview and enquiry. The test-sample of interviewed entities was constituted by randomly selected firms which run their activity in Romania and we aimed at covering all domains of activity (according to the CAEN codification), all the country’s regions, as well as consulting both the SMEs (small and middle enterprises) and the great enterprises. The enquiry has been achieved on a web platform, and the link has been transmitted via e-mail to the people in the firm’s management in order to make sure of the answers’ relevance. 4. Using these answers, we have conducted an analysis of the opinion and the preparation level of economic agents when it comes to this collaboration method and to the importance they assign to the factors which may represent barriers in collaboration.

A. Relative to the preparation level of firms when it comes to participating to the formation of a VO’s breeding environment, we have evaluated: A.1. The readiness to equally distribute power; A.2. The capacity to collaborate in different domains of activity; A.3. The adaptability per the VO’s temporary requirements; A.4. The readiness to grant trust to the other participants; A.5. The readiness to take risks together; A.6. The readiness to operate private knowledge exchanges; A.7. The importance of the IT component in run their own activities.

4 Formulating hypotheses In a previous study we have brought to attention the evolution of barriers in the VO’s formation and

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adapt to the VO’s temporary requirements a medium level of adaptability may be observed. The trust level between participants constitutes an essential factor for the VO’s success, and the respondents to the survey have expressed their high readiness in about 40% of the cases to grant trust to the other participants. The tackling of greater or more complex projects, which could not be achieved by a single firm, constitutes one of the main advantages of the collaboration within the VO. The benefits thus obtained are distributed among the participants, but there are always risks which simmilarly presuppose a common assumption, yet less than 20% of the respondents have manifested a high readiness for such a common assumption. When it comes to the readiness to operate private knowledge exchanges necessary to achieve a project or to meet a temporary requirement existent on the market, over 95% of the participants to the survey have manifested a low readiness. Over 90% of the respondents have mentioned the IT component as being greatly important in running their activity.

B. Relative to the impact that barriers have on the collaboration within the VO we have evaluated the potential considered by the firms relative to: B.1. The geographical scattering of the partners; B.2. The lack of designating an organizational leader; B.3. The differentiated level of expertise of the participants; B.4. The lack of a common code of practices or conduct; B.5. The lack of face-to-face collaborations, unmediated by means of IT&C solutions; B.6. The lack of a framework of initiative stimulation among the participants; B.7. The differentiated use of IT&C technologies; B.8. The lack of common rules of information security; B.9. The lack of contracts between the participants in order to initiate a collaboration.

5 Study results and conclusions The enquiry has been made available on the site www.ovromania.ro, and the access has been limited by an access code sent only to the contacted economic agents. Each question had four pre-established possible answers which aimed at specifying a level of readiness / importance. The survey has been conducted between november 2010 – january 2011 and 9260 economic agents have been contacted, out of which 316 agreed to respond to the enquiry, and on the grounds of their answers the following centralisations have been drawn up. Dimension

Preparation level 1 2 3

36 96 A.1. 36 49 53 A.2. 13 A.3. 36 122 86 Social A.4. 66 115 82 A.5. 115 142 43 A.6. 211 89 13 4 92 Technical A.7. 16 Table 1 – Preparation level

Structural

Dimension

4 95 107 99 B.1. 15 B.2. 46 137 91 42 7 B.3. 183 107 19 27 7 Social B.4. 198 84 B.5. 30 107 145 34 B.6. 171 103 23 19 Technical B.7. 160 103 42 11 19 7 Legal B.8. 213 77 53 126 91 46 B.9. Table 2 – The potential impact of barriers Structural

4 148 201 72 53 16 3 204

In order to evaluate the factors that may represent barriers to the VO’s operativeness, the survey participants were asked to appreciate these levels by considering the hypothetical situation in which a VO functions in their domain of activity. In table nr.2 level 1 stands for a very high importance, while level 4 stands for a low importance. At first sight, it can be observed that the social dimension of collaboration may meet the barriers which are highest in importance. Approximately 90% of the respondents have signaled „The lack of a common code of practices and conduct between the participants” and „The lack of a framework of initiative stimulation” as having at least a high importance. In his analysis, Marc Pallot has identified the necessity of functioning on the grounds of a common code of practices and conduct as being a factor of medium importance. Relative to „The

In the previous table level 1 represents a low readiness / capacity, while level 4 represents a high readiness / capacity. From a structural point of view, it can be seen that there is a high readiness from approximately 80% of the respondents to participate in such a collaboration on equal positions and approximately 20% request a dominant position. Over 60% of the firms have a very high capacity to participate in collaboration projects in various domains which differ from their own domain of activity. Relative to the economic agents’ capacity to

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Barrier impact 1 2 3

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lack of face-to-face collaborations”, this was appreciated by approx. 80% of the participants as having a medium importance, the solutions offered by means of IT&C being considered as viable alternatives. A second dimension of collaboration that may bring about important barriers is the structural one. The barrier that is generated by the collaboration between the participants with “Differentiated levels of expertise” has been signaled as having at least a high importance by over 90% of the respondents, followed by “The lack of designating an organizational leader” which has been considered by approx. 70% as being of medium importance. If we are to compare these results with those that Marc Pallot obtained, these two factors have switched places in terms of relevance. „The geographical scattering” doesn’t represent a very important barrier in this economic environment, 95% of the respondents considering it as having at most a high level. „The differentiated use of IT&C technologies” is evaluated by over 80% of the economic agents as being of great significance. Relative to the legal aspects of collaboration, the survey participants have assessed in a proportion of over 90% „The instituting of common rules of information security” as having at least a high importance. Comparativ in contrast with this, Marc Pallot’s study has identified a medium level of relevance for this factor. Relative to the necessity of collaborating on the grounds of solid contracts between the participants, this has been noticed to have a medium importance by 70% of the participants. Coming back to the formulated hypotheses we can say for sure that the trust level between the partners that activate in the national economic environment is considerably low, and that this factor will greatly influence the success of VO formation and operativeness. At the same time we have observed a very low readiness to operate private knowledge exchanges and to take risks together. Therefore, we deduce the fact that the access to such an organization is limited, and if a new competence is required, it is preferable to constitute it in its own breeding environment than to co-opt new partners. The utilisation degree of IT&C technologies is very high and it provides efficient solutions to the diminishing of the impact of barriers generated by distances between partners or by communication efficiency. In contrast with other studies conducted in this domain, it can be noticed that in this case the elements which are related to the social dimension of collaboration have a much more pronounced importance. In the next table are presented the categories of the respondents based on the number of employees:

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Categories

Respondents % Number

0-9 employees 232 10-49 employees 42 50-249 employees 29 over 250 employees 13 TOTAL 316 Table 3 – Respondents categories

73.42 13.29 9.18 4.11 100

6 Future Work All these ascertainments will contribute to the identification of the VO’s profile that might best answer to the conditions generated by the national economic environment. It is obvious that the essential elements in defining and modelling this profile will have to do with the social aspect of the colaboration. If we take into account the very low readiness to exchange private knowledge and the great interest to insure at the level of all partners some common security rules, we realize that the development of a collaboration method which is also based on the principles of information security management is absolutely necessary. At the same time, we believe that continuing research by means of factorial analysis would be very useful, in order to identify corelations and the intensity of ceraint factors in influencing the success of VO operativeness. At the same time we shall try to identify the particularities on the VO’s profile generated by the domain of activity in which the partners activate and the dimension of these firms, and for each of these cases we shall calculate the degree of virtuality according to the methodology proposed by Roland Bauer.

References: [1] Amit Goel, Heinz Schmidt and David Gilbert, Formal Models of Virtual Enterprise Architecture: Motivations and Approaches, Pacific Asia Conference on Information Systems (PACIS) Proceedings, 2010, pp. 1207-1217. [2] Hamideh Afsarmanesh, Luis M. Camarinha-Matos, Colaborative Networks and Their Breeding Enviroments, Springer Science & Business, 2005, pp. 35-48. [3] Hans Jägers, Wendy Jansen and Wilchard Steenbakkers, Characteristics of Virtual Organizations, Proceedings of the VoNet Workshop, 1998, pp. 65-76. [4] Katzy Bernhard R. and Sung Gordon, Building the Knowledge Economy: Issues, Applications, Case Studies, IOS Press Amsterdam, 2003.

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[5] Luis M. Camarinha-Matos and Hamideh Afsarmanesh, Creation of virtual organizations in a breeding environment, Proceedings of INCOM’06, 2006, pp. 583-593. [6] Marc Pallot, Ulf Bergmann, Hermann Kühnle, Kulwant S. Pawar, Johann CKH Riedel, Collaborative Working Environments: Distance Factors Affecting Collaboration, Proceedings of the 16th International Conference on Concurrent Enterprising, ICE'2010, 2010. [7] Marita Gruber and Matthias Nöster, Investigating Structural Settings of Virtual Organizations, Proceedings of the 11th International Conference on Concurrent Enterprising, 2005. [8] Marita Haas, Sabine Koeszegi & Matthias Noester, Current practice and structural patterns in virtual organizations – a qualitative analysis of 30 cases, The Electronic Journal for Virtual Organizations and Networks, Volume 8, 2007, pp. 83-101. [9] Markus Spillner, The Virtual Enterprise, ITEC810 Information Technology Project, 2009. [10] Roland Bauer, Sabine T. Köszegi and Michaela Wolkerstorfer, Measuring the degree of virtualization - An Empirical Analysis in two Austrian Industries, Proceedings of the 36th Annual Hawaii International Conference on System Sciences (HICSS'03), 2003, pp. 270-280. [11] Msanjila S.and H. Afsarmanesh, Trust analysis and assessment in virtual organization breeding environments, International Journal of Production Research, Volume 46, 2008, pp. 1253 – 1295. [12] Zbigniew Paszkiewicz and Willy Picard, Modeling Virtual Organization Architecture with the Virtual Organization Breeding Methodology, IFIP Advances in Information and Communication Technology, Volume 307/2009, 2009, pp. 187-196.

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