16 3 Theoretical Framework: Network Performance and Network Leadership

3 Theoretical Framework: Network Performance and Network Leadership

Development of a comprehensive model of leadership requires depiction of three dis-

tinct levels of analysis: the leader, the followers, and the performance outcomes of this rela-
tionship. Prior studies have shown that most leadership theories can be incorporated in this
model (Yukl, 1989, 2010; Hernandez, et al., 2011). Leadership is constructed through interac-
tion, as “followers exist because of leaders and leaders exist because of followers” (Hogg,
2001, p. 185). In interaction, leaders elicit follower behaviors and depend on the cooperation
of the followers, just as followers depend on the leader. Leaders and followers are closely
intertwined and embedded in a common social system.

However, evaluation of the importance of leadership and analysis of the effectiveness of

the interactive system between leaders and followers requires the investigation of perfor-
mance outcomes. Performance is contingent on both interdependent levels of analysis, namely
on the ability of the leader to stimulate the followers as well as on the behaviors of the fol-
lowers. This study analyzes the leadership processes created in interaction between the net-
work managers and the network members and discusses the performance implications of this
relationship in the context of the whole network. Although the different levels are examined
successively, the goal of this theoretical analysis is to combine the three levels into an integra-
tive framework of network leadership and network performance.

Therefore, chapter 3.1 analyzes network performance. Then, chapter 3.2 analyzes net-
work leadership. First, chapter 3.2.1 gives an overview of leadership research. Chapter 3.2.2
then analyzes network leadership from the perspective of the network manager, followed by
an analysis of leadership from the perspective of and in interaction with the network members
in chapter 3.2.3. Hereby, this study draws on the literature concerning both (collaborative)
leadership and networks, providing the current state of the art and developing the central hy-
potheses. Moderating effects on the relationship between network leadership and performance
are analyzed in chapter 3.3, and chapter 3.4 summarizes the hypotheses derived and develops
a theoretical model of network leadership and network performance.

3.1 Network Performance

Initially, the concept of organizational performance will be analyzed and then, in a se-
cond step, the concept will be applied to the inter-organizational context.

S. Ruckdäschel, Leadership of Networks and Performance,

Markt- und Unternehmensentwicklung Markets and Organisations,
DOI 10.1007/978-3-658-07033-5_3, © Springer Fachmedien Wiesbaden 2015
3 Theoretical Framework: Network Performance and Network Leadership 17

Organizational performance can be characterized in terms of efficiency and effective-

ness (Ostroff and Schmitt, 1993; Fugate, Mentzer and Stank, 2010). However, efficiency and
effectiveness are two distinct concepts (Brettel, et al., 2011):

Efficiency is defined as an input to output ratio and concentrates on getting a given out-
put with a minimum of resources and costs (Mouzas, 2006; Fugate, Mentzer and Stank, 2010;
see Andrews and Entwistle, 2013 for four dimensions of efficiency). Efficiency is used to
refer to “whether a given effect [is] produced with least cost or, alternately, whether a given
amount of resources [is] used in a way to achieve the greatest result” (Thompson, 1967, p. 86;
Rushing, 1974). Therefore, efficiency assessment requires measurement of both resources and
outcomes or results (Rushing, 1974). Efficiency focuses primarily on the means or on the in-
ternal functioning and processes and therefore is predominantly evaluated internally (Fugate,
Mentzer and Stank, 2010).

Efficiency is clearly distinct from effectiveness (Thompson, 1967; Mouzas, 2006; An-
drews and Entwistle, 2010). In contrast to efficiency, effectiveness refers to an absolute level
of output, goal attainment, or attainment of formal objectives (Ostroff and Schmitt, 1993; An-
drews and Entwistle, 2010). Effectiveness commonly takes one of three forms: (1) task effec-
tiveness or goal attainment, such as output, results, etc.; (2) appropriate organizational struc-
ture and feedback effects, such as member satisfaction, etc.; and (3) environmental adaptation,
such as flexibility, long-term adaptation, and survival (Quinn and Rohrbaugh, 1983; Dess and
Robinson, 1984; see Kanter and Brinkerhoff, 1981 for a review of literature on organizational
effectiveness). Measures of effectiveness shed light on customers’ perceptions and how cus-
tomers evaluate the company’s activities, on possibilities for increased value creation and
innovation, and on financial aspects (Behn, 2003). Effectiveness, therefore, focuses on the
end and on the final output (Venkatraman and Ramanujam, 1986). Effectiveness is primarily
evaluated externally, implying that the customer and business value perspectives suggest ef-
fectiveness as a measure of success in the market (Mouzas, 2006).

Generally, organizations have to be both effective and efficient to be successful (An-

drews and Entwistle, 2010). However, Mouzas (2006) sees “efficiency as a necessary, but not
sufficient, condition”, whereas effectiveness is a necessary and sufficient condition for organ-
izational success. In various studies, therefore, performance and effectiveness are used inter-
changeably (Kanter and Brinkerhoff, 1981; March and Sutton, 1997).

For adequate performance measurement, the levels of analysis – overall organizational

performance, performance of subunits, or individual performance – have to be defined, goals