Research article Is the V-form the next generation organisation? An analysis of challenges, pitfalls and remedies of ICT-enabled virtual organisations based on social capital theory Kai Riemer, 1 Stefan Klein 1,2 1 European Research Centre for Information Systems (ERCIS), University of Mu ¨nster, Mu ¨nster, Germany 2 Centre for Innovation, Technology and Organisation (CITO), University College Dublin, Dublin, Ireland Correspondence: K Riemer, University of Mu ¨nster, Leonardo-Campus 3, D-48149 Mu ¨nster, Germany. Tel: þ 49 251 8338123; Fax: þ 49 251 8338119; E-mail: kai.riemer@ercis.de Abstract ICT-enabled virtual organisations (VOs) are regarded as the appropriate organisational response to turbulent markets. Although much has been written about the structural characteristics and propositions of VOs, their inherent limitations and structural shortcomings remain largely unaddressed. Based on the structural properties of VOs, most frequently discussed in the literature, we introduce the V-form organisation as an ideal type of VOs. A conceptual analysis, however, reveals a mismatch between espoused benefits of the ideal type and preconditions in terms of collaborative practices needed to succeed in a turbulent environment. Dealing with complex tasks in a collaborative environment requires shared understanding, shared values and a level of social cohesion, which do not simply emerge in a virtual setting. Social capital theory addresses the social and cultural preconditions of collaboration. Our analysis shows preconditions for successful value creation in VOs and suggests management measures to foster and facilitate environments for the development of social capital. Journal of Information Technology advance online publication, 4 December 2007; doi:10.1057/palgrave.jit.2000120 Keywords: virtual organisation; social capital; V-form organisation; virtual teams; collaboration; knowledge sharing Introduction G lobalisation, driven by the emergence of new infor- mation and communication technology (ICT), causes established market structures to erode while the costs of market entrance are decreasing (Bleecker, 1994) and new competition is arising (Franke, 2001). An increasing demand for customised products and the fragmentation of markets call for new and efficient ways to organise value creation. Significantly lower costs of processing and transmitting information within and between firms spur radical changes in their operations. Furthermore, compa- nies face an increasing importance of knowledge for value creation and an increasing dependency on innovation and new services. Today, even the largest companies are no longer able to access and control all necessary information and knowledge (Ciborra, 1992; Ireland et al., 2002). Scholars have coined terms such as ‘the permanently new economy’ (Ritzer, 1989), ‘postindustrial capitalism’ (Heydebrand, 1989), ‘the new rules of competition’ (Hage, 1988), ‘agile competition’ (Goldman et al., 1995) and ‘the age of the temporary company’ (Rahman and Bhattachryya, 2002) to describe market changes, which influence how companies organise their value creation. For example, companies increasingly cooperate in network arrangements (Ebers, 1999) and share risks in joint initiatives, such as Journal of Information Technology (2007), 1–16 & 2007 JIT Palgrave Macmillan Ltd. All rights reserved 0268-3962/07 $30.00 palgrave-journals.com/jit