Virtual corporation tradeoffs

Abstract

Interest in the virtual corporation has grown because most firms cannot afford to develop high-level competencies in all of the areas required to be truly competitive. Specializing in a narrow area, and outsourcing the rest appears to offer significant leverage. There are tradeoffs, however. Profits earned by external suppliers are lost to the core organization. Value-added experience is lost when the relationship ends, and shared experience becomes available to competitors. It is difficult to accumulate the human capital of the knowledge era. There may not be sufficient momentum to support continuous improvement over the long run. For each gain, there is a loss. Each enterprise will have to decide for itself.