Success factors in hospital network performance: evidence from Korea Kwang-Jum Kim and Lawton R Burns y Graduate School of Health Care Management and Policy, The Catholic University of Korea, Korea; y Department of Health Care Systems, The Wharton School, University of Pennsylvania, Philadelphia, PA, USA Collaborative networks have become a common organizational strategy to deal with uncertain and dynamic environments. Like their counterparts in the USA, Korean hospitals are establishing cooperative relationships with one another, with varying performance results. This paper analyses some of the sources of variation in hospital network performance and identifies some of the possible success factors. The study finds that the quality of cooperation and information sharing between network partners are critical. The paper concludes with a discussion of the implications for researchers and practitioners. Introduction Network models of organization (joint ven- tures, strategic alliances) have become a com- mon strategy to promote original collaboration in uncertain, dynamic environments. 1–4 In the USA hospital sector, urban hospitals formed networks 5,6 and rural hospitals formed consor- tia 7 in order to deal with the rise of managed care, threatened federal legislation, constrained fiscal resources, growing hospital competition and the shift away from inpatient care. Similar environmental pressures have con- fronted hospitals in Korea. In the 1990s, the Korean Government initiated policies such as payments for hospitals based on diagnosis- related groups and payments for physicians based on resource-based relative value sche- dules, integration of previously separate insur- ance plans into one national health insurance programme, segregation of drug prescription from drug dispensing and introduction of a hospital evaluation system. Within the hospital sector itself, the number of hospitals and physician clinics has doubled during the 1990s. Newly established hospitals have fo- cused on profitable niche markets, while physician clinics have started to form chain organizations. In the face of this new competi- tion, hospital incumbents have responded by forming alliances and networks. Since the late 1990s, two large tertiary Korean hospitals have built cooperative networks with smaller com- munity hospitals and physician clinics. How well do hospital networks perform? Scattered evidence from the USA hospital market suggests that networks under-perform compared with ownership-based hospital sys- tems and fail to out-perform hospitals that do not belong to any system or network. 8–11 The evidence also presents mixed findings on whether network structure exerts any impact on network performance. McCue and colleagues find no variation in hospital performance across different structural types Health Services Management Research 20: 141–152 r 2007 Royal Society of Medicine Press Correspondence to: Lawton R Burns E-mail: burnsL@wharton.upenn.edu Kwang-Jum Kim PhD, Graduate School of Health Care Management and Policy, The Catholic University of Korea, Korea; Lawton R Burns PhD MBA, The James Joo-Jin Kim Professor, Department of Health Care Systems, The Wharton School, University of Pennsylvania, 3641 Locust Walk, Philadelphia, PA 19104, USA 141