Understanding hospital performance: the role of network ties and pattern of competition

The current environment in which healthcare providers operate and perform is characterized by the simultaneous influences of cooperation and competition amongst themselves (Brandenburger & Nalebuff, 1996). In the early 1990s, many national governments took initial steps towards introducing market forces into the provision of healthcare services, while simultaneously emphasizing the need for closer collaboration between different healthcare providers. In Beverige-like systems for example, competition has been strengthened by the introduction of new private-sector providers, the split between purchaser and provider for hospital services, and the ability for patients to choose their hospital. At the same time, government policies contrastingly argued the need for cooperation between hospitals rather than competition, and have introduced incentives for coordination (Mur-Veeman et al., 1999). The importance of inter-organizational competition and collaboration for hospital performance has been emphasized in the healthcare management literature (Robinson & Luft, 1985; 1988; Dranove, Shaley, & Simon, 1992; Manheim, Bazzoli, & Sohn, 1994; Robinson & Phibbs, 1989; Alexander & Morrisey, 1988; Bazzoli et al., 2000; 2002). Despite this extensive prior research, a number of limitations are observed. First, few empirical studies analyze how inter-hospital competition influences hospital performance in universal-health-care settings. Second, the simultaneous effects of competition and collaboration have not been investigated. Finally, the theoretical framework of previous literature mainly relies on neoclassical economic views. According to these views, the competitive behaviors and performance of organizations are products of the larger structure of the industry. In this paper, we adopt an “embeddedness perspective”, which suggests that organizations are not atomistic agents that are free to undertake any competitive action within the constraints of their own resources, but rather, are embedded in a network of relationships that influences their opportunities and constraints (Uzzi, 1997). The purpose of this study is to explore the impact on organizational performance stemming from the collaborative and competitive inter-dependence observed between hospitals.