From Networks to Hierarchies: The Construction of a Subcontracting Regime in the Irish Telecommunications Industry

Abstract

The perceived displacement of bureaucracy by external market relationships through the use of subcontracting has brought about an increase in interest in inter-organizational relations. The development of such relationships can be a protracted process, characterized by tensions and contradictions. The article traces the development of subcontracting within Eircom, the Irish telecommunications provider, from its relatively ad hoc origins in the mid-1990s to the development of a far more sophisticated contracting regime by 2003. The article explores the relationship between internal and external organizational changes associated with the construction of the subcontracting regime and the development of inter-organizational relationships. The subcontracting regime was transformed from a reliance on a series of decentralized local networks of suppliers to a highly centralized arrangement that bore increasing semblance to a unitary hierarchy. The transactions costs implications of such developments are considered throughout. The dynamics of change in this case reflect an incremental learning process as the organization adapted to changes in its environment and the emergent limitations of existing practices. Trust played an important role in the mediation of the subcontract relationships; however, the development of trust-based relationships was not a linear process.