Information & Management 54 (2017) 304316

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Information & Management

journal homepage: www.elsevier.com/locate/im

Boundary permeability and onlineofine hybrid organization: A case

study of Suning, China
Jin-Song Huanga , Shan L. Panb , Jie Liuc,*
a
Department of Marketing, School of Economics and Management, Beihang University, Beijing 100191, PR China
b
Business School, University of New South Wales, Sydney, Australia
c
School of Management, Fudan University, Shanghai, PR China

A R T I C L E I N F O A B S T R A C T

Article history:
Received 9 January 2016 This paper discusses the process of combining online and ofine business units into a hybrid
Received in revised form 23 June 2016 organization. While most previous studies focus on publicprivate hybridization, this study focuses on
Accepted 24 August 2016 the onlineofine type and discusses the combining process from the perspective of boundary
Available online 28 August 2016 permeability. By using Suning as a case study, we explore how a large retailer combines its online and
ofine units. The process model demonstrates that an onlineofine hybrid organization is hybridized
Keywords: through three multiple and conicting boundary permeability paths, namely complete, partial, and
Hybrid organization preventive permeability paths. Each path includes a capacity-seeking process in which the organization
Boundary permeability
improves its capabilities after developing strategies. Corresponding to the three paths, the organization
Online and ofine business units
develops absorptive, symbiotic, and preservative strategies. It then enhances its capabilities accordingly,
Capacity-Seeking
Case study including its assimilative, ambidextrous, and autonomous capabilities, to implement the necessary
boundary permeability behaviors and form a hybrid organization.
2016 Elsevier B.V. All rights reserved.

1. Introduction operate online and ofine business units simultaneously [17].

As an increasing number of online business units are operated
by traditional companies [17], many companies are running online
and ofine business units simultaneously. Consequently, many of
them face the problem of combining these two conicting business
units into one to operate them synergistically. Combining two
units with different institutional logics leads to the formation of a
hybrid organization [1,5]. Online and ofine business units have
different institutional logics because the organizational behavior
and consumer purchase behavior in these two units are different
[9,31,32]; hence, a hybrid organization will be generated by
combining online and ofine business units. Although this
combination leads to a new type of hybrid organization, only a
few studies have discussed its formation process; thus, how such
onlineofine hybrid organizations originate remains unknown.
Studying onlineofine hybrid organizations is of paramount
importance for two reasons. First, onlineofine hybrid organiza-
tions are becoming increasingly prevalent. As the Internet becomes
the main channel for selling products, many companies must
* Corresponding author.
E-mail addresses: huangjs@buaa.edu.cn (J.-S. Huang), shan.pan@unsw.edu.au
(S.L. Pan), liujie@fudan.edu.cn (J. Liu).
However, online and ofine business units have different
institutional logics, and because they sometimes share the same
resources such as customers, conicts between the two units
become inevitable [10]. To resolve these conicts, many companies
have adopted the strategy of combining the two units. For example,
92% of retailers are combining their online and ofine business
units to enhance operational efciency [3], and a brick-and-mortar
(B&M) model is now a key prot growth point for retailers [10].
This increased combination of business units in companies has led
to a greater prevalence of onlineofine hybrid organizations.
Second, the mechanisms driving onlineofine hybrid organiza-
tions need to be thoroughly explored. Previous studies on hybrid
organizations have primarily discussed the combination of public
and private units such as social enterprises incorporating social
welfare and commercial logics [4,5], state-owned enterprises
incorporating markets and hierarchy [7], and medical schools
incorporating health care and academic logics [13]. Enterprises
after acquisition incorporate short- and long-term orientations
[47]. However, the institutional logics of onlineofine hybrid
organizations are different from those of the publicprivate type.
When combining online and ofine business units, organizations
need to incorporate decentralization and centralization logics [43].
However, few studies have discussed this type of hybrid
organization, despite its prevalence and differentiation.

http://dx.doi.org/10.1016/j.im.2016.08.002
0378-7206/ 2016 Elsevier B.V. All rights reserved.
 J.-S. Huang et al. / Information & Management 54 (2017) 304316
Combining two different business units is related to boundary
managerial behaviors because the combination process involves
breaking up the original units boundaries so that resources can
enter or exit the units [2]. Thus, Borys and Jemison [6] suggest that
boundary permeability could play an important role in the
formation of a hybrid organization. However, previous studies
on hybrid organizations have largely focused on multiplicity,
disparity, and conict among the combined units [5], and few
studies have discussed the role of boundary managerial behaviors
in the formation of a hybrid organization. Thus, our knowledge of
boundary managerial behaviors during the combination process
remains limited.
In summary, there are two important gaps in the existing
literature. First, most studies on hybrid organizations have focused
on publicprivate hybridization [46], while few studies have
focused on onlineofine hybrid organizations despite their
prevalence. Second, although scholars have suggested that there
is a close relationship between boundary management and the
formation of hybrid organizations [5], few of them have conducted
empirical studies on the formation of hybrid organizations from
the perspective of boundary theory.
This paper aims to explore the actual formation process of an
onlineofine hybrid organization from the perspective of
boundary permeability. We conducted an in-depth case study
using the Sunings case. Suning engaged in the largest combination
of online and ofine business units in China, involving 1696 ofine
large-scale retail stores and >2 million SKU online retail stores. The
remainder of this paper is organized as follows. In Section 2, we
discuss the relevant theoretical studies. In Section 3, on the basis of
interview data, we describe the specics involved in the
combination of online and ofine business units. In Section 4,
we discuss how online and ofine business units develop into
hybrid organizations through boundary permeability. In Section 5,
we discuss the ndings and propose a theoretical model of hybrid
organization formation. In Section 6, we analyze the theoretical
contributions, practical contributions, and limitations.
2. Literature review
2.1. Hybrid organization
Hybrid organizations are dened as organizations that
incorporate elements (such as activities, structures, processes,
and identities) from different institutional logics [4,40]. Thus, the
main issue in forming a hybrid organization is how to integrate the
problems and potential conicts between different institutional
logics [5]. Previous studies on the contradictions and conicts
involved in the formation of a hybrid organization have largely
focused on the perspectives of public versus private institutional
logics. Public logic concerns the social welfare, whereas private
logic focuses on the market and prot [40]. Previous studies that
consider social enterprises [5,40], public tasks, and market
hybridization [27] among nonprot and business organizations
[26] involve publicprivate hybrid organizations. In this paper, we
discuss a new process of hybridization: the combination of online
and ofine logics.
A hybrid organization is a paradox that has multiple conicting
and competitive institutional logics [5,23]. The organization not
only maintains the features of the original business units but also
acquires new organizational features through hybridization [40].
Therefore, a hybrid organization must develop conicting strate-
gies for hybridizing and implement two or more such strategies
simultaneously [40,47]. In addition, previous studies have found
that the formation of hybrid organizations mainly involves two
mechanisms, namely, strategic responses and managerial
responses [26]. An organization adopts strategic responses when
305
it faces conicting external demands, while it adopts managerial
responses when it faces conicting internal demands and identity
claims.
2.2. Online and ofine business units
Although the institutional logics of online and ofine business
units differ greatly from one another in organizational operations,
these differences are reected internally through organizational
behavior and externally through consumer behavior [9,31,32].
Thus, the combination of online and ofine business units leads to
a hybrid organization.
With regard to internal organizational behavior, the organiza-
tional structures of online and ofine business units differ. Online
business units are decentralized [9]. Their organizational func-
tions, power, and staff transform from a centralized to a dispersed
organizational structure, and the central decision-making author-
ity does not make all of the decisions. Thus, online business units
are open and transparent, have minimum control, and experience a
high level of staff participation [32]. This decentralization feature
is more favorable for organizations to adopt new technologies and
thus enhance their novelty [9,36]. As compared with online
business units, ofine business units tend to have a centralized
organizational structure that emphasizes the effects of the
authority. The functions, power, and staff are centralized, and
the central decision-making authority makes the decisions.
Moreover, ofine business units often communicate face to face
with less openness and transparency than online business units
[32]. Thus, ofine units are less efcient and innovative [36].
With regard to external consumer behavior, online and ofine
business units also have different institutional logics that lie in the
following two aspects. First, online and ofine business units have
different market advantages. The advantages of online business
units include more product information, a larger quantity of
products, easier price comparisons, and fewer limitations regard-
ing location and shopping time. For ofine business units, the
advantages are that consumers can feel, touch, and test products
before purchase, and they can obtain in-store experiences and
human interaction. In addition, consumers can pick up the goods at
the same time they purchase them [31,43]. Second, the perceptions
of online and ofine shopping are different. Price sensitivity [8],
price elasticity, [20] and risk perception (such as privacy and
security) [49] in online shopping are higher than in ofine
shopping. Thus, online and ofine business units tend to use
different external marketing activities.
2.3. Boundary permeability and boundary permeability strategies
2.3.1. Boundary permeability
Permeability is the degree to which the focal organizational
unit is open to inuence from its environment [34]. The main role
of boundary permeability is to build good cooperative relation-
ships between organizations [48]. Boundary permeability has a
close relationship with the formation of a hybrid organization.
Borys and Jemison [6] suggest that boundary permeability is an
essential factor in the formation of a hybrid organization. Which
resources permeate business units directly dictates the formation
of a hybrid organization. Minkoff [37] argues that to form a hybrid
organization, the business units must coordinate and communi-
cate across the boundaries, and coordination across organizational
boundaries is a major factor in the choice of the specic mode of
governance and in the design of the mechanism to create the
hybrid arrangement. Thus, permeability of resources between
business units is fundamental to the formation of a hybrid
organization.
306 J.-S. Huang et al. / Information & Management 54 (2017) 304316
2.3.2. Boundary-permeability strategies
Organizations should implement different boundary perme-
ability strategies simultaneously when combining business units
[40,47]. Boundary permeability strategies can be divided into
different categories based on the extent of permeability. Duxbury
et al. [14] propose that there are two types of boundary
permeability strategies: one is a segmented strategy, which
strengthens boundaries to clearly distinguish the boundaries
and identities among different business units, while the other is an
integrated strategy, which blurs boundaries to make business units
exibly permeate one another. Haspeslagh and Jemison [24] divide
postacquisition integration approaches into three types, namely
absorptive strategies, symbiotic strategies, and preservative
strategies. In an absorptive strategy, one element adsorbs another
element directly and assimilates it into its culture. A symbiotic
strategy reects a strategy with high interdependence while also
requiring a high degree of organizational autonomy. A preservative
strategy reects a strategy requiring low interdependence and
high autonomy; such that the hybridizing business units are
integrated only to a modest degree and the units continue to
conduct business in the same manner as before the integration.
These three strategies are related to boundary permeability
because more interdependent business units in a combination
increase the need for boundary permeability [6].
In addition, different permeability strategies lead to different
results. For example, Leifer and Delbecq [34] suggest that a
manufacturing unit has rigid boundaries, whereas the boundaries
of a sales unit blur. Schweizer [47] believes that in a hybrid
organization, the boundaries are rigid for units with long-term
motives, such as a research and development (R&D) unit, whereas
the boundaries blur for those with short-term motives, such as
marketing units.
2.4. Boundary permeability capabilities
When a company prepares to implement a certain strategy, it
needs corresponding capabilities before it can succeed [11,53]. For
different degrees of boundary permeability, a company must have
assimilative, ambidextrous, and autonomous capabilities.
2.4.1. Assimilative capability
Assimilative capability refers to an organizations capacity to
reconstruct managerial and technological capabilities by absorbing
knowledge, resources, or cultures obtained from external sources
through open boundaries [56]. When an organization completes
such an assimilation, the absorbed external resources are
integrated into the organization as a whole, thus reaching a state
of deployment or utilization. However, when the organization
wants certain parts of the business units to be completely
integrated, the boundaries between these business units must
increasingly blur to allow each business unit to assimilate the other
units resources [5]. Once the resources of online and ofine
business units assimilate, the boundaries blur and open accord-
ingly; thus, the business units operate as one unit [47].
2.4.2. Ambidextrous capability
Ambidextrous capability refers to the behavioral capacity to
simultaneously pursue conicting demands such as the ability to
demonstrate alignment and adaptability across a business unit
[21,25,45]. Ambidextrous capability is the capacity to balance
different business units; it thus allows for the development of the
units in a balanced manner [46]. When combining two business
units, an organization needs cross-boundary ambidextrous capa-
bilities to use the resources from both units effectively, and the
units must partly open their boundaries, thus facilitating resource
permeability and balancing the units operations [39,46]. To use
ambidextrous capabilities, business units must maintain their
independence and open parts of their boundaries to increase cross-
boundary activity [6,48].
2.4.3. Autonomous capability
Autonomous capability refers to a capability in which an
organization preserves the business units operations for contin-
ued exploration through structural separation [44,47]. Generally,
when the structures of business units are integrated, the units
exploit capabilities through enhanced coordination, but coordina-
tion and autonomy do not always conict they can coexist in one
organization [44]. When an organization combines business units,
autonomous capabilities help each unit concentrate on its own
specialty, thus enhancing operational efciency. Schweizer [47]
nds that when a company establishes a hybrid organization
through a merger or acquisition, the companies adopt an
autonomous approach to manage departments that require
innovation or independence, such as R&D departments.
Overall, a hybrid organization is an organization with multiple,
conicting, and competitive institutional logics. These disparate
logics refer to not only the operations but also the processes of a
hybrid organization. Because boundary permeability involves a
degree of boundary openness, different degrees of boundary
permeability may lead to different paths of hybridization. In this
paper, we explore the actual formation process of an onlineofine
hybrid organization from the perspective of boundary permeabili-
ty by using a case study.
3. Methodology
This paper uses the case study method for the following
reasons. First, this method is applicable to research about process
[18] and how questions [41,55]. This paper discusses a how
question that analyzes the process of how online and ofine
business units combine into a hybrid organization. Second, a case
study is suitable for revealing complex multidimensional relation-
ships and phenomena [55]. The question discussed in this paper
concerning the combination process of online and ofine business
units involves many dimensions, including commerce, products,
and knowledge; as a result, the question is complex. Therefore,
using the case study method is appropriate.
We chose this case for two reasons. First, we want to investigate
an onlineofine hybrid organization, and a combination of online
and ofine business units is such a case. Second, we want to
analyze the formation of a hybrid organization from the
perspective of boundary permeability, and a study on the
hybridization of business units provides a suitable setting. Suning
is the largest and most successful case of combining online and
ofine business units in China; therefore, a study on this company
achieves these purposes.
3.1. Data collection
We collected data in two stages. The rst stage (preparation)
lasted from March to April 2014. We contacted the senior
management of Suning through phone calls and e-mails and
established interview times. Before the interviews, we learned
about Suning by collecting data from newspapers, magazines,
journals, and the Internet, based on which we selected a theoretical
lens [41]. In the second stage, in April 2014, a research group
consisting of seven people went to Sunings headquarters for
interviews with the senior management team and visited company
stores. Nine senior management staff from ofine stores, online
departments, the logistics department, human resources (HR), and
management (see Appendix A) were interviewed, including ve
members of the board of directors (e.g., the CEO) and four middle
 J.-S. Huang et al. / Information & Management 54 (2017) 304316
managers. We also interviewed three clerks at a retail store. The
research group interviewed and communicated many times with
these key management staff to ensure the reliability and validity of
the data. We also communicated with the staff in the stores and
headquarters. During the interviews, we veried the data about the
companys integration of online and ofine business units from
various perspectives and nally obtained all the data required for
this paper [29]. From May 2014 to May 2015, we continued our
communications with Suning through phone calls, e-mails, and
WeChat to ensure that our theory conformed to the progress of
events [41].
All interviews and discussions occurred at Sunings headquar-
ters and its stores. We adopted the method of a semistructured
interview, and each interview lasted between 120 and 180 min. We
encouraged the interviewees to speak freely about the processes
that occurred throughout the combination process and how the
rm hybridized the online and ofine units. Overall, the theoretical
lens guided our data collection process to ensure that the data were
related to the formation of a hybrid organization. Therefore, all
interviewees talked in detail about the companys combination of
online and ofine business units from their perspective.
Because the interviews focused on the same questions, the
collected data analyze the same activities from various perspec-
tives, which effectively ensure the reliability and validity of the
data [29]. To further enhance the reliability and validity of the data,
we continued collecting data during the on-site interview sessions
and obtained a large volume of second-hand data, including
relevant papers and information from Sunings ofcial website,
WeChat, journals, and news websites. Overall, we identied and
studied 44 articles related to the combination (for details, see
Appendix B). We digitally recorded the interviews and transcribed
them for subsequent data analysis. We reorganized our record of
interviews and e-mails into textual data in the original language
and translated them into English. One group member translated
the data, and another member proofread and checked the
translations [29].
3.2. Data analysis
We analyzed the data soon after we nished the data collection
process [15]. First, we analyzed Sunings current development and
background and the driving forces behind combining its online and
ofine business units. This analysis is helpful for explaining the
unique characteristics of onlineofine hybridization. Then, we
analyzed information related to the formation of a hybrid
organization. In a hybrid organization, there are different
institutional logics and different strategies for implementing
combinations [47]; thus, at this stage, we focused on the
institutional logics and corresponding strategies used during the
process of combining the online and ofine business units. For
example, during the analysis, we found that an organization adopts
absorptive, symbiotic, and preservative strategies simultaneously
to build a hybrid organization.
Because the formation of hybrid organizations is highly related
to boundary management [6], in the third stage, we focused on the
methods of boundary permeability under different institutional
logics and strategies. For instance, we ascertained that organiza-
tions adopt different modes of boundary management according to
different logics, such as blurring, crossing, and rigidifying
boundaries. In the fourth stage, we extracted information about
activities under different modes of boundary management and the
necessary organizational capabilities. Throughout the analysis, we
observed conceptual and structural differences among various
strategies, boundary management modes, and boundary activities
under different institutional logics. We engaged in two activities
throughout the data analysis process abstraction of process and
307
renement of tentative explanations until we accounted for all
tentative explanations and agreed among each other [35].
Throughout the analysis, we used multiple coding techniques to
code, organize the interview data, and extend the theoretical lens
[40,51]. The coding techniques [50] that we adopted include open,
axial, and selective coding. Open coding was used to identify the
theoretical dimensions. For instance, it was used to analyze
different types of boundary permeability. Axial coding was used to
identify second-order themes. For example, it was used to identify
and analyze permeability capabilities. Selective coding was used to
link the existing theoretical systems with our new ndings. For
example, it was used to analyze hybridization strategies. While
analyzing the data, we repeated the process described previously
to uncover and further extract the core elements of the
mechanisms to ensure alignment among the data, theory, and
ndings [29] until we nalized the results. We also adopted the
rule of triangulation to ensure that the interviewees interpreta-
tions converged [12]; that is, we used multiple data sources
(interviews, news reports, and archival data) and data from various
interviewees to ensure that the data were consistent.
Overall, we adopted the case study method to perform an
empirical analysis that addressed the research issues. We selected
a theoretical lens and collected data through face-to-face inter-
views and analyses of various second-hand materials. Reliability
and validity were emphasized during the data collection process.
In the data analysis process, we used multiple coding techniques to
code the data and organize the information related to the
formation of hybrid organizations, and we adopted appropriate
approaches to ensure consistency of the data. Throughout the data
collection and analysis process, we applied Klein and Myers [29]
principles to conduct the interpretive work.
4. Case description
4.1. Organizational background and environment
Suning is one of the largest retailers in China, with annual sales
revenue of more than RMB 108.925 billion (approximately USD
17.57 billion) and 180,000 employees. The company ranked rst in
the top chain retailers list in China several times between 2000 and
2014. Since its establishment in 1990, Suning has expanded its
ofine electronics stores, and by 2010, it had become the largest
chain retailer for domestic appliances. By 2014, Suning had 1696
stores in 23 cities in China.
After 2010, Suning began to build an online retailing business
platform with separate operations and accounting. The company
has expanded its sales scale and market share through its online
operations and mergers and acquisitions. At the same time, Suning
built an IT-related team of 5000 people and established two IT R&D
centers one in Beijing and one overseas. By the end of 2013,
Suning had sold >2 million SKUs on its online sales platform. In
2004, Sunings transaction volume of online sales was RMB 22.599
billion (USD 3.65 billion), which ranked third in Chinas e-
commerce retailing industry, behind only Alibaba and Jingdong.
Before 2013, Sunings online and ofine business units operated
separately; each unit had its own management system, staff,
logistics, delivery system, and product categories. In 2013, the
company combined its online and ofine business units so that
they became one overall operating system. This combination
represents the largest in terms of such combination of online and
ofine business units in China.
Combining online and ofine business units had great
signicance for Suning, as reected in three aspects. First, the
companys internal needs encouraged the combination. Suning
intended to create synergistic effects by integrating its online and
ofine business units, and then improving the operating efciency
308 J.-S. Huang et al. / Information & Management 54 (2017) 304316
of the entire organization. Second, consumers needed the
combination. Customers switched frequently from one purchase
channel to another, and they needed unied products, services,
and prices. Third, competitive pressure promoted the combination.
Although Suning faced formidable challenges from other online
retailers, the company had an advantage because it had both online
and ofine business units; therefore, Suning expected to obtain
competitive advantages by combining the two units.
However, there were difculties for Suning in the combination
process. The online and ofine business units had different
institutional logics; hence, each unit needed to change its
organizational culture, decision mode, and operating skills during
the combination, and these changes were not easy. However, the
two business units were both complementary and separate; thus,
the question of how to obtain synergistic effects without affecting
their respective operations was a signicant problem that needed
to be solved.
4.2. Reasons why suning combined its online and ofine business units
There are three reasons why Suning combined its online and
ofine business units: internal needs, consumer demand, and
competitive pressures.
First, from the viewpoint of the companys internal needs,
Sunings ofine chain store is the largest retail store in China, and
its sales volume of online products ranks third nationwide. Suning
had a sound sales system in which the online and ofine business
units operated separately. However, the units would create more
opportunities for development through cooperation. From an
internal perspective, making the best use of online and ofine
resources means fully realizing their advantages while avoiding
their disadvantages to achieve cooperative development between
the units. The CEO explained,
Suning had established a leading sales system both online and
ofine. We had to revitalize these two advantageous resources to build
an advantage for cooperative development, so I proposed the
development strategy of integrating O2O (online to ofine or ofine
to online) to realize a unied operation of online and ofine business
units.
From the perspective of consumer demand, shopping channels
in China have changed tremendously. Online shopping, which is
becoming accepted by an increasing number of consumers, is a
clear shopping trend. Consumers can compare and select products
online and obtain the shopping experience and service ofine.
Sunings online and ofine business units used to operate
separately, which led to different prices and services for the same
product. Many consumers complained and even demanded
refunds. Therefore, Suning started to think about how to
coordinate the development of the units. The vice president
(VP) of operations explained the change in consumer demand as
follows:
We divide shopping channels into four kinds according to the
terminal, which include the store terminal, PC terminal, mobile
terminal, and family Internet terminal. However, to consumers, these
four terminals have no boundaries, so they could switch and compare
among the four.
In terms of pressure from competitors, the rapid rise of online
retailers has brought considerable pressure to bear on traditional
retail stores. In the age of personal computers and the Internet,
some online retailers have advantages in China. Therefore,
traditional retailers must consider how to exploit their advantages
to counteract the effect of online sales. The CEO and a senior
management member said,
The rapid development of Alibaba, Jingdong, and other ecommerce
companies brought us great pressure, so we had to bring the
advantages of our stores into play and build an O2O ecommerce
system. This is what urged us to venture again (CEO).
Online businesses have their own weakness they do not have
physical stores. Since physical stores are the main way for consumers
to buy, to experience and to receive service, Suning had to consider
how to revitalize the assets of its ofine stores. In the personal
computer age, Sunings development of online sales was weaker than
that of its competitors, but through a combination of online and ofine
business units, we thought we would be able to take advantage of
ofine retailing stores to develop our online business and take a leap
forward in the mobile Internet age of the future (Suning VP of Overall
Management).
4.3. Developing strategies and improving capabilities
Suning created a one body, two wings development strategy
before the company combined its online and ofine business units.
One body means that the company focused on the retail industry,
whereas two wings refers to building an open platform that
integrates the online and ofine business units into one unit. At the
same time, the company proposed centering its retail business on
three core resources, products, information, and funds, combin-
ing the online and ofine retail business units. With regard to how
to execute this strategy, the VP of overall management explained,
From strategy to organization, from brand to human resources, we
have nished the overall layout. What we take is the strategy-oriented
way of thinking. The strategy has been made beforehand, after which
we are only allowed to talk about how to implement it, such as how to
do O2O, how to expand product categories, how to build the platform,
and how to specify the operations to turn the strategy into reality.
The companys management knew that after developing the
relevant strategies, it still had to enhance its capabilities before it
could achieve its strategic goal. Therefore, Suning improved its
capabilities rst. Sunings combination of online and ofine
business units represents a process of creating a strategy initially
and then improving the companys capabilities accordingly. The VP
of Information Systems explained,
To carry out the transformation strategy, Suning had to gure out
what its core ability was in facing a new round of transformation and
how to develop this ability. Once the direction is decided, be rmly
devoted. As long as we possess these abilities, the accumulated
resources and capabilities will transform into performance, which will
bring Suning into a new growth period.
4.4. Strategies of combination
4.4.1. Strategy of integrating functions to meet customers demands
Suning thought about how to combine the two units from the
perspective of consumer demand. The company believed that the
core concept behind retail industry management is to please
consumers, who make purchases both in physical stores and on
their PC, cell phone, or the Internet, who use these different
channels simultaneously, and who compare one channel with the
others. Thus, Suning intended to create a strategy that would
provide consumers with unied and consistent services on the four
platforms. This strategy would require Suning to integrate the sales
services of the four platforms into a whole, which is the key to the
combination of the online and ofine business units. The VP of
Operations said,
We adjusted our operations according to the changes in consumers
shopping demands. Because consumers could make their purchases on
four different platforms, we have to ensure that wherever they access
us, the products and services are unied. The purpose is to satisfy
them.
Sunings strategy was based on the consumers perspective,
primarily the demands of the market and consumers. The company
 J.-S. Huang et al. / Information & Management 54 (2017) 304316
emphasized a consistent perception of service for consumers to
improve customer satisfaction and loyalty.
4.4.2. Strategy of promoting cooperation between business units
According to top company managers, the online and ofine
business units have their own advantages and disadvantages. The
advantages of the ofine business unit are product demonstration,
the shopping experience, service, and trustworthiness, whereas
the advantages of the online business unit are the number of
products, the ability to conduct product searches, exible shopping
time, and digital operations. Because neither business unit has all
of these advantages, there was a possibility for the two to
cooperate and complement one another.
To keep the advantages of both business units, Suning had to
simultaneously manage two business units that have different
institutional logics. Thus, the units had to maintain not only their
coexisting and complementary relationship but also their inde-
pendence. The VP of Information Systems remarked,
Resources in ofine stores are limited by time and space; the
Internet is needed to remove this limitation. Online retail enterprises
have their own disadvantages as well. Thus, we have to sustain the
development of the online and ofine business units based on
combining the two.
4.4.3. Strategy of establishing separate systems based on specialization
Suning planned to combine the operations of the online and
ofine business units, but in the actual operating process, these
two business units are quite different from the viewpoint of
specialization. In most cases, the units must operate separately.
Therefore, after combining the units, Suning has shown more
independence in terms of specialized management. A VP of HR
explained,
We have to hold on to some core things in order to balance the
changes and the unchanged. A large enterprise must intensify the
division of labor to maintain its efciency, and it is necessary to make a
clear distinction between shared businesses, business support and
independent businesses and make the concentrated more concentrat-
ed and the dispersed more dispersed.
4.5. Improving capabilities for combination
4.5.1. Integrating resources between the two business units
When Suning combined the units, each business unit had to
absorb and integrate the other units resources. The company had
to improve its capabilities. This type of integration is primarily
displayed in two aspects the unication of the online and ofine
products at the management level and data resources.
In terms of integrating product resources, Suning took three
actions. The rst was to unify the products sold online and ofine.
The ofine business units sold household appliances and the
online business units sold all product categories. Through
digitization, the products in the online and ofine business units
became unied. Second, the company adjusted the prices of all of
its products to ensure that the online and ofine prices were the
same. The last measure was to maintain consistent online and
ofine promotional activities. For instance, online coupons can
now be used in ofine stores. The VP of Operations said,
The basic logic for our O2O is to keep products, prices, and
promotions unied. What we did rst was digitization of products,
breaking the boundary between online and ofine units so that the
large amount of products online could also be displayed in ofine
stores. Theoretically speaking, the quantity of products sold in a 3000-
square-meter store is the same as that in a 10,000-square-meter store.
At the same time, we keep the products online prices consistent with
their ofine prices to meet consumer demand to the greatest extent.
309
In terms of integrating data resources, Suning established an
information system that connects the online business units to the
ofine business units by building a single source data system that
includes online and ofine information. In addition, Suning
obtained knowledge about consumer behavior through data
analyses to provide additional consumer service and precise
marketing. Thus, building the capability to collect, analyze, and use
data was important for the company. The VP of Information
Systems explained,
The data resources, after breaking the boundary between online
and ofine business units, will become Sunings core assets, which is
an advantage other competitors do not have. We can further
understand consumer demand through data analysis and provide
better services. For this purpose, we have exerted great effort in the
collection, analysis, and use of data, set up two information research
and development centers at local and overseas locations, and
employed many staff members in information management.
4.5.2. Cooperation between the two business units
After Suning combined its online and ofine business units, the
two had to not only coexist well to complement one another but
also operate independently. Suning needed to gain the capabilities
for cross-boundary operations. These capabilities are largely
revealed through culture, knowledge, service, logistics, and other
aspects.
First, culturally, Sunings management realized that online and
ofine retailing have different institutional logics. Online retailing
is open, has a high degree of participation, and involves bottom-up
decision-making. Ofine retailing emphasizes a concentration of
power, standardization of the decision-making process, and a top-
down decision-making mode. Thus, there are many challenges to
combine these two types of business units, particularly for
employees, who must adapt to two different management systems
with different cultures. The CEO said,
In the past, the enterprise culture of our retail industry was too
rigorous and was particular about standards and implementation. As
we are undergoing a transformation centered on the Internet, we also
demand our enterprise culture be more open, more tolerant, and more
individualized. This change in management mode seems to be the
opposite of our traditional way of management, but actually, they are
not contradictory.
The VP of HR said,
The traditional retail industry normally adopts the synergistic and
top-down management mode. However, the Internet stresses teams
and small groups, which is a bottom-up management mode.
Combining online and ofine business units does not mean that
well abandon the coordinated management mode Suning used to
take. We need to accommodate two different kinds of modes.
Second, in terms of knowledge, Sunings employees had to learn
more. For example, the ofine staff had to learn about online sales,
while the online staff also had to know about the ofine retail
business so that the two lines complement one another. This new
learning was not easy because most of the salespersons in the
ofine stores are not young. Thus, for them, learning how to sell
online was difcult. Suning solved this problem with training. A
Suning store manager explained,
In the beginning, it was difcult for salespersons to accept new
knowledge. They didnt know how to help customers buy online stuff
in the ofine store. Through training and morning calls, they gradually
learned how to do it. Similarly, online salespersons also need to know
about the operation of ofine stores. We achieved this through
communication and real experiences.
Third, in terms of sales service, Suning had to perform well in
both online and ofine sales and make the two lines complemen-
tary. For example, ofine salespersons can help consumers shop
online in the store. In addition to ofine sales, employees are
310 J.-S. Huang et al. / Information & Management 54 (2017) 304316
expected to perform well in online sales. Consumers are always
dissatised with in-store payments. Suning introduced mobile
payments and other online payment methods. Regarding the
mutual support between the online and ofine sales teams, a store
manager explained,
Each of the online and ofine business units has its own
advantages. The advantage of the ofine business lies in product
experience, live consultation, and service, whereas the online
business is more advantageous in product demonstration and
business hours. We emphasize their mutual expanding customer
base. Take the current Google Glass experience, for example. We
demand that consumers make an appointment online before they
come to experience it in the store.
Fourth, in terms of logistics, Sunings distribution system had to
meet the distribution demand for online and ofine products
simultaneously. By integrating the distribution centers, stores, and
maintenance service stations, Suning now has a distribution
system with 58 distribution centers in 12 districts, 322 city
distribution centers, 1696 collection and delivery points, and
>5000 service centers. The VP of Logistics said,
In the past, Sunings ofine stores mainly distributed household
appliances. The prices for those products were high, and the volume of
distribution was usually small. However, what the online sales system
distributed was usually small in size but large in volume. After the
combination of the online and ofine businesses, our ofine stores
have become part of the distribution system, which are not only
collection points but also delivery points. Ofine employees also serve
as part-time couriers. In this way, the cost is greatly decreased.
4.5.3. Establishing separate operation systems for the two business
units
Suning planned to keep each business unit independent in
terms of specialization to improve operational efciency. Suning
enhanced its autonomous capability in two aspects: regulation and
functions.
In terms of the management system, although emphasizing the
synergistic operation of the online and ofine businesses, Suning
maintained the independence of the units, and each unit has
corresponding rules and regulations. The units are independent in
their specialized elds and develop in a balanced manner, instead
of one prospering while the other languishes. A store manager
explained,
The online and ofine business units have their respective tasks. If
we did not separate the online and ofine tasks after the combination,
then the salespersons would slack off. So now, the salespersons online
sales performance and ofine sales performance are both assessed. We
need to maintain the rapid growth of both sides.
In terms of specialized functions, after combining, Suning
further strengthened the independence and specialization of each
units functions through segmentation. Specically, Suning sepa-
rated several nancial areas from the two specialized areas. After
combining the online and ofine business units, Suning founded
several independent branch companies, including a logistics
company, a nancial company, an IT company, and a virtual
operating company, and set up many business divisions for
specialized operations. The VP of Operations explained,
We set up 28 business divisions according to product categories,
operation modes, and units because our projects became increasingly
independent. A large enterprise has to do this. Efciency comes with
labor division. Moreover, we separated out some growing areas and
areas with different major businesses and founded eight companies
that operate independently. Under these independent companies, we
use a project scheme to break down the barriers to regular
management.
5. Discussion
In Section 4, we illustrate how Suning combined the online and
ofine business units. In this section, on the basis of Sunings case,
we analyze how to combine online and ofine business units to
form a hybrid organization. As shown in Fig. 1, we summarize the
case and create a model for forming a hybrid organization.
5.1. Formation process of an onlineOfine hybrid organization
5.1.1. Capacity-seeking process of hybridization
Fig. 1 reveals that the formation process of an online and ofine
hybrid organization is a capacity-seeking process that begins with
triggers, followed by the development of strategies, and nally
leads to the building of capabilities in accordance with the
strategys requirements [11]. In this process, the company does not
consider its own capability limitations. Senior managers believe
that they can gain those necessary capabilities; therefore, they
create strategies according to the companys development
orientation [38]. Thereafter, the company successfully cultivates
the corresponding capabilities that meet the requirements of the
strategies [54] and forms a hybrid organization. Therefore, the
formation process of a hybrid organization is a mechanism of
strategic responses [26]. When executing the capacity-seeking
process, three conicting paths are adopted simultaneously,
namely, a complete permeability path, a partial permeability
path, and a preventive permeability path. The fact that a hybrid
organization is formed through a capacity-seeking process is a
nding that differs from previous research.
5.1.2. Three permeability paths of hybridization
Under the complete permeability path (see Fig. 1), Suning rst
established an absorptive strategy, and the company then achieved
assimilation by letting the resources permeate by blurring the
boundaries between the two business units [24]. Sunings
intention was to integrate some resources from different business
units into one unit. To achieve this goal, Suning enhanced its
assimilative capability, blurred the boundaries between the two
units, and completely integrated some resources from the different
units into a unied one. Under the partial permeability path (see
Fig. 1), Suning developed a symbiotic strategy, namely a strategy
with high interdependence as well as a great need for organiza-
tional autonomy [24]. The purpose of the symbiotic strategy was to
allow the online and ofine business units to enjoy complementa-
ry advantages while preserving their independent operations. To
achieve this purpose, Suning improved its ambidextrous capability
to enable the online and ofine business units to use cross-
boundary resources that are both highly interdependent and
highly independent. Under the preventive permeability path (see
Fig. 1), Suning developed and implemented a preservative strategy
that recognized the need for a low degree of interdependence and a
high level of autonomy, in which the hybridizing business units are
integrated only to a modest degree and are managed using a
preservative approach [24]. To achieve this strategy, Suning
improved its autonomous capability and maintained the two
units as independent with rigid boundaries to enable the two
business units to focus on their respective expertise.
In the following sections, we will explain the role of boundary
permeability in the capacity-seeking process. We discuss this
process based on the paths of triggers of hybridization!boundary
permeability strategies ! boundary permeability capability (see
the lower part of Fig. 1).
5.2 Triggers of hybridization
The current case reveals that three factors trigger the formation
of a hybrid organization in which a company combines online and
ofine business units: the companys internal needs, consumer
 J.-S. Huang et al. / Information & Management 54 (2017) 304316
Fig. 1. Process model for forming an onlineofine hybrid organization.
demand, and competitor pressure. These drivers involve internal
and external factors and reveal two different mechanisms for
forming a hybrid organization. One mechanism comes from
conicting and complementary internal demands (the company
must improve its internal resource efciency), whereas the other
mechanism is derived from conicting external demands that
require the company to respond to changes in consumer demands
and competitor pressure simultaneously [26].
5.2.1. Company needs
This case reveals that Suning faced both conicting internal
demands [26] and complementary internal demands [17], which
drove the company to combine the two units to reduce the
conicts and obtain synergistic effects. There are three types of
demands. The rst involves a need to integrate different
institutional logics. Because online and ofine business units have
different institutional logics [32], a company that operates both
generates conicts and problems; thus, it would want to combine
the two into one to reduce the problems [5]. The second is a need to
unify management systems. Sunings online and ofine business
units had different products, personnel, and organizational
structures that had to be bridged. Unifying the management
systems improves the organizational efciency of the entire
company. The third is to address complementary internal
demands. Because online and ofine business units meet different
demands, Suning could combine the two to make them
complementary [43]. Therefore, reducing tensions and improving
311
cooperation between online and ofine business units are triggers
for a combination.
5.2.2. Customer demands
This case reveals that customers demand the opportunity to
obtain all of the benets from both online and ofine business
units because the two units have their own advantages and
disadvantages. Online shopping has advantages in product
quantity, product comparisons, shopping time, and limitations
on physical location, whereas the merits of ofine shopping
include the shopping experience and shopping services [31,43].
However, consumers often hope to obtain the benets of both
online and ofine shopping, which is a hope that reects
conicting external demands [26]. Therefore, Suning had to
provide online and ofine services by combining the two business
units. This onlineofine hybrid organization is different from a
publicprivate one because of its interesting multiple and
conicting customer demands.
5.2.3. Competitor pressure
In terms of external competitive pressure, Suning faced
considerable external competition from online retailers. However,
compared with these companies, Suning had unique advantages in
operating online and ofine business units simultaneously that
could meet consumers dual demands for online and ofine
shopping [16]. Moreover, these two business units could develop
synergistically [10,17]. Therefore, Suning wanted to combine the
312 J.-S. Huang et al. / Information & Management 54 (2017) 304316
two business units to alleviate the competitive pressure from e-
commerce companies. External competitive pressure is also a key
trigger. As compared with publicprivate hybrid organizations,
external demands are a unique feature of onlineofine hybrid
organizations; moreover, the fact that the two business units can
operate separately to service customers, which is different from
publicprivate hybrid organizations.
Overall, combining online and ofine business units into an
onlineofine hybrid organization solves several unique issues.
First, the two business units have different institutional logics, and
it is difcult to operate them simultaneously. This internal conict
is a driving force for combining the units. Second, the two business
units cannot meet all consumer demands individually. Each unit
has disadvantages, and combining the two is a solution. Finally, the
two business units can adopt exible approaches such as
substitution, integration, complementation, and separation [47];
therefore, combining these two business units in a special
relationship provides multiple operation alternatives to managers.
A publicprivate hybrid organization is often triggered by internal
needs rather than customers demands and competitors pressures
[40], which is one of the key differences between onlineofine
and publicprivate hybrid organizations.
5.3. Boundary permeability strategies
5.3.1. Absorptive strategy
Our analysis shows that Suning adopted an absorptive strategy
to integrate the resources of its online and ofine business units.
When the boundaries of units are blurred and opened, resources
such as products and information from different units can be
permeated and absorbed mutually; therefore, some elements from
different units can come together as one [19]. In the current case,
the reason why the absorptive strategy was adopted was that
customers often purchase products from different online and
ofine channels, and they compare one channel with the others.
Hence, Suning had to blur the boundaries between its online and
ofine business units to permeate the resources mutually to make
the services of the different units consistent and improve customer
satisfaction and loyalty. Therefore, the purpose of an absorptive
strategy is to make the resources from different units permeate
completely to unify customers perceptions of different purchase
channels. The absorptive strategy, in which elements from
different units are integrated, is often related to short-term
motives and customers [34,47]. Under the capacity-seeking logic,
an organization must seek and improve its corresponding
capabilities to achieve a proposed strategy. Under the absorptive
strategy, the capability that Suning needed to improve was an
assimilative capability (see Fig. 1).
5.3.2. Symbiotic strategy
Our analysis shows that Suning adopted a symbiotic strategy to
enhance cooperation between the online and ofine business
units. Suning believed that having more interdependent business
units in a combination would result in a greater need for boundary
permeability[6]. In the current case, Suning intended for the
resources of one business unit to be shared with another to
enhance resource efciency. Therefore, under a symbiotic strategy,
Suning let part of one units resources across boundaries to
permeate the other unit, which allows one type of institutional
logic to complement and cooperate with another. In the current
case, the symbiotic strategy was adopted because Suning intended
to operate its business units both separately and cooperatively,
which is a strategy that is related to partial permeability. Under the
capacity-seeking logic, the organization must seek to improve the
corresponding capability to achieve a symbiotic strategy. Under a
symbiotic strategy, the capability that Suning had to improve was
its ambidextrous capability (see Fig. 1).
5.3.3. Preservative strategy
Our process model suggests that Suning not only adopted
absorptive and symbiotic strategies but also developed a
preservative strategy. Under the preservative strategy, Suning
strengthened the boundary between business units to prevent
resources from permeating mutually, and it maintained the gap
between the different institutional logics [2]. Thus, the preserva-
tive strategy is a preventive permeability strategy in which some
boundaries between the two business units remain rigid, and at
certain times, the units will build new boundaries [30]. In the
current case, a preservative strategy was adopted because Suning
intended to promote its specialization through building rigid
boundaries. Under the capacity-seeking logic, an organization
must seek to improve its corresponding capability to achieve a
preservative strategy. The capability that Suning needed to
improve was its autonomous capability under the preservative
strategy (see Fig. 1).
5.4. Boundary permeability capability
5.4.1. Assimilative capability
After proposing an absorptive strategy, our analysis shows that
Suning improved its assimilative capability to blur the units
boundaries, and some resources of the two business units were
completely integrated. Assimilative capability is one type of
permeability capability that refers to an organizations capacity
to accept, use, and institutionalize external resources through open
boundaries [56]. In the current case, Suning rst blurred the
product boundary of the two units so that customers could receive
unied services from the different units and obtain consistent
recognition of products from both the online and ofine units. The
product boundary refers to product-related boundaries in the
sales process, including product categories, sales promotions, and
prices among different business units. Suning also blurred the data
boundary between the two units to use both online and ofine data
to satisfy customers. The data boundary refers to the boundary
between the operations and the consumer data of the two business
units. Overall, the purpose of improving the assimilative capability
is to enable resources from different units to permeate completely
and mutually, thereby combining them as a whole. The purpose of
this combination is to maintain customers consistent perceptions
of services regardless of which units provide those services.
5.4.2. Ambidextrous capability
After proposing a symbiotic strategy, our analysis shows that
Suning made relevant improvements in terms of its ambidextrous
capability. The two business units can cross one anothers culture,
knowledge, service, and logistics boundaries. A culture boundary is
primarily derived from the different cultural logics of online and
ofine business units [25,32]. After combining the units, Suning
had to adapt to two types of cultures simultaneously. A knowledge
boundary is derived from the different knowledge systems of
online and ofine business units [33,52]. After the company
combined the units, employees learned and used their knowledge
about the online and ofine business units simultaneously. A
service boundary appears because different business units provide
different services. Sunings employees now provide online and
ofine services to customers simultaneously. For instance, employ-
ees help consumers make online purchases in the ofine stores. A
logistics boundary is derived from different business units
adopting different logistics systems. Suning now operates and
coordinates the logistics for its online and ofine business units
simultaneously. Suning obtained the ambidextrous capability of
 J.-S. Huang et al. / Information & Management 54 (2017) 304316
logistics through a combination of its online and ofine logistics
systems. For instance, ofine stores often deliver goods from either
the online or the ofine business unit. Overall, improving the
ambidextrous capability enables resources from one unit to be
used in the entire organization. The purpose is to establish
cooperation between business units.
5.4.3. Autonomous capability
Our model suggests that Suning improved its autonomous
capability to preserve and build regulatory and functional
boundaries. As a result, the two business units operate more
independently and more efciently. For a regulatory boundary,
Suning reinforced the system construction of the online and ofine
business units, and the more rigid boundary maintains the
independence and specialization of the two units [22]. For the
functional boundary, Suning built new boundaries by starting
business divisions and new companies and by using other
decoupling approaches to strengthen the creativity and adaptabil-
ity of each business unit. Thus, the organization improved its
autonomous capability to prevent resources from one unit
permeating to another unit by building regulatory and functional
boundaries.
5.5. Features of an onlineofine hybrid organization
Similar to former studies, onlineofine hybrid organizations
also need to incorporate conicting and competitive institutional
logics [5,23] and to implement conicting strategies simulta-
neously [40,47]. However, we nd that there are some distinct
features of onlineofine hybrid organizations that are reected in
the following aspects.
The rst distinct feature lies in conicting institutional logics.
Publicprivate hybrid organizations are designed to achieve the
two purposes of social welfare and commercial logic, which relate
to resource allocation [5]. Conversely, onlineofine hybrid
organizations involve combining two types of operational modes
and functions that relate to resource reconguration. Thus, online
ofine hybrid organizations are more concerned about combining
operations and specic functions, and boundary management
therefore becomes more important. Few previous studies have
discussed hybrid organizations from the boundary management
perspective.
The second distinct feature of onlineofine hybrid organiza-
tions lies in the capacity-seeking process. In contrast to previous
studies, we nd that the formation of an onlineofine hybrid
organization is a capacity-seeking process, which means that
during the hybridization process, organizations often develop
combining strategies without determining their corresponding
capacities. The online and ofine business units are already
operating separately, and hence combining them requires blurring
and crossing boundaries, which means that new capacities are
needed. Thus, the capacity-seeking process is different from the
previous hybridization of strategic responses and managerial
responses [26].
The third distinct feature of onlineofine hybrid organizations
lies in conicting boundary permeability paths. In contrast to
previous studies, we nd that boundary permeability plays a
critical role in driving the onlineofine hybridization process.
Previous studies propose that boundary permeability might affect
the formation of hybrid organizations [6,37], but no studies explore
the actual formation process of hybrid organizations from the
perspective of boundary permeability. We further nd that there
are three conicting boundary permeability paths during online
ofine hybridization. The complete permeability path refers to the
process of developing an absorptive strategy and seeking an
assimilative capability. The partial permeability path refers to the
313
process of developing a symbiotic strategy and seeking an
assimilative capability, while the preventive permeability path
describes the process of developing a preservative strategy and
improving an autonomous capability.
The fourth distinct feature lies in specic boundary behaviors.
We nd different demands for boundary permeability capabilities
corresponding to different boundary behaviors, all of which reect
critical features of onlineofine hybrid organizations. Under the
demands for an assimilative capability, Suning blurred the lines of
the product boundary and the data boundary. Under the demands
for an ambidextrous capability, Suning blurred the lines of the
cultural boundary, the knowledge boundary, the service boundary,
and the logistics boundary between the online and ofine business
units. Under the demands for an autonomous capability, Suning
strengthened the regulatory boundary and the functional bound-
ary.
Overall, the differences between onlineofine hybrid orga-
nizations and publicprivate hybrid organizations lie in their
conicting institutional logics, their strategy and capacity ori-
entations, the role of boundary permeability, and their boundary
management behaviors.
6. Theoretical and practical contributions
This study makes two important theoretical contributions.
First, the study explores the actual formation process of an online
ofine hybrid organization. Previous studies show that a hybrid
organization has multiple and contradictory institutional logics
[5,40], but few studies discuss the actual formation process. This
study extends previous knowledge about the formation of a hybrid
organization and offers a capacity-seeking process that includes
both strategies and capabilities [11]. In the rst stage, the
organization creates three contradictory strategies: absorptive,
symbiotic, and preservative. These strategies involve three
different operational directions: integrating the two units
completely, constructing an interdependent or independent
system, and maintaining autonomy. Under these three strategies,
the company improves its assimilative, ambidextrous, and
autonomous capabilities and forms a hybrid organization. In
contrast to most previous studies that discuss publicprivate
hybrid organizations, this paper focuses on an onlineofine
hybrid organization, which extends the knowledge about hybrid
organizations.
Second, this paper analyzes the role of boundary permeability
in the formation of a hybrid organization. The current case nds
that resources permeate from one unit to another. The three types
of permeating paths, namely, complete, partial, and preventive
permeability paths, operate simultaneously. Under the complete
permeability path, an absorptive strategy is proposed and the
assimilative capability is improved to enable products and data to
permeate between units completely to form a whole. Under the
partial permeability path, a symbiotic strategy and ambidextrous
capability are used to enable culture, knowledge, services, and
logistics to permeate between the two units to increase coopera-
tion. Under the preventive permeability path, a preservative
strategy is proposed and the autonomous capability is improved to
prevent resource boundary permeability between the two units.
This paper shows that different boundary permeability capabilities
apply to different organizational boundaries in the onlineofine
context. Moreover, multiple conicting and competitive boundary
permeability paths can explain why boundary permeability is
closely linked to hybrid organizations.
This study also makes several practical contributions. First,
creating strategies for combining units is important for many
companies. Because there are many problems and contradictions
between online and ofine business units, companies often face
314 J.-S. Huang et al. / Information & Management 54 (2017) 304316

the troublesome question of what strategies to adopt to combine (Continued)

the two. This paper offers a direction for companies. In addition, it Interviewee Gender Age Place of Key Interview Points
is also difcult for organizations to determine how to combine the Interview
various resources and functions of two units in a practical manner Suning VP of Male 38 Meeting Strategy, operations, and
when the cultures, organizational structures, personnel, and Operations room at combination of online and
operational processes of the two units differ. This study provides Headquarters ofine business units
a road map whereby companies can follow three routes to Suning VP of Male 37 Meeting Logistics management after the
Logistics room at combination
hybridize their business units. The rst route is to let some Headquarters
functions of the two business units completely combine into a Suning VP of Male 36 Meeting Operation and management of
whole through mutual absorption. The second route is to keep the Information Systems room at information systems
two units independent but strengthen their cross-boundary Headquarters
Suning VP of Male 45 Meeting O2O strategy, culture,
cooperation. The third route is to separate the two units functions
Overall room at organizational management,
and maintain their independence and specialization to improve Management Headquarters and operations
operational efciency. The three routes seem contradictory, but Manager of Male 35 Meeting Online sales operations
they can be actualized under the operational logic of a hybrid Online room at
organization. This case also suggests that companies can Business Headquarters
Unit
completely integrate functions that involve customers and Store Female 29 Sunings Store operations, specic
markets by unifying product categories, prices, and sales Manager XinJieKou operations during the
promotions. Specialized organizational functions, such as data retail store combination
analysis and information system construction, can be operated by Finance Female 32 Meeting Financial operations
Manager room at
companies separately. For organizational functions that connect
Headquarters
internal management to external markets, such as customer Store Clerks Three Sunings Online and ofine synergistic
service and logistics, organizations can use cross-boundary (three females XinJieKou operations and specic tasks
cooperation. individuals) retail store during onlineofine business
combination

7. Limitations and future studies

This study also has limitations. We focus on the combination

process of one retailers online and ofine business units, which
represents one form of onlineofine business. We do not discuss
other onlineofine businesses, such as cloud manufacturing,
crowd sourcing, and digitaltraditional media. As compared with
other onlineofine businesses, online and ofine retailing is
unique because the online and ofine units can operate
independently, and they may contradict or complement one
another [43]. In the future, we plan to study other types of online
ofine businesses and further explore the mechanisms behind
onlineofine combinations.
Other factors that affect the combination of online and ofine
business units should also be studied further, such as CEO
characteristics and national cultures. CEO characteristics may
exert certain effects on a combination; for example, if both the
ofine and online business units have strong leaders, the
combination might be affected by the behaviors of the two CEOs.
National culture is another factor that may affect a combination
because different national cultures may yield different organiza-
tional behaviors. Therefore, it is necessary to examine the effects of
national culture on combinations by comparing different cases in
different cultures, such as comparing US and Asian cases.
Acknowledgements
This research is supported by the National Natural Science
Foundation of China (grant nos. 71172015, 71372006, and
71529001).
Appendix B. Excerpts of Data Sources Related to the
Combination.
Ofcial website
[1] http://www.suning.cn/.
[2] Suning Corporate Social Responsibility (CRS) Report 2012
2014. http://www.suning.cn/cms/CSRReport/index.htm.
WeChat papers
[1] Sunings Exploration of O2O Mode. http://mp.weixin.qq.
com/s?__biz=MjM5OTEyMDM0MA==&mi-
d=208627626&idx=1&sn=73c1fb54ec9ec54128595-
f9227a39d1b&3rd=MzA3MDU4NTYzMw==&scene=6#rd.
[2] CEO JinDong Zhang: Sunings Road to O2O. http://mp.
weixin.qq.com/mp/appmsg/show?__biz=MjM5NjM0MjQ0M-
g==&appmsgid=10000164&itemidx=1&sign=c971bba7c2975-
d54734602872e5e8883&3rd=MzA3MDU4NTYzMw==&scene=6#-
wechat_redirect.
[3] Sunings Evolution and O2O Science. http://mp.weixin.qq.
com/mp/appmsg/show?__biz=MjM5NjM0MjQ0Mg==&appmsgi-
d=10000164&itemidx=1&sign=c971bba7c2975-
d54734602872e5e8883&3rd=MzA3MDU4NTYzMw==&scene=6#-
wechat_redirect.
Journals

Appendix A. List of interviews. [1] H. Peng, M. Huang, Innovations of Retailing Industry under
New Technological Environment: Sunings Case (In Chinese),
Interviewee Gender Age Place of Key Interview Points Macroecon. Res. 13 (2) (2014) 108115.
Interview [2] L. Zhou, Sunings O2O: New Moden Retailing Model(In
Suning CEO Male 51 CEOs ofce Combination strategy of the Chinese), Bus. Cult. 8 (6) (2013) 7678.
online and ofine [3] W. Zou, Transformation Model of Chinese Business entities:
business units
Sunings Case (In Chinese). Commer. Account. 12 (2) (2015) 125
Suning VP of Male 43 Meeting Organizational culture,
HR room at organizational management, 126.
Headquarters and employee training
 J.-S. Huang et al. / Information & Management 54 (2017) 304316
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Further reading
[28] B. Jordan, Blurring boundaries: the real and the virtual in hybrid spaces, Hum.
Organ. 68 (2) (2009); 181193.
[42] H. Peng, M. Huang, Innovations of retailing industry under new technological
environment: sunings case (In Chinese), Macroecon. Res. 13 (2) (2014); 108
115.
[57] L. Zhou, Sunings O2O. New moden retailing model (In chinese), Bus. Cult. 8 (6)
(2013); 7678.
[58] W. Zou, Transformation model of Chinese business entities: Sunings case (In
chinese), Com. Account. 12 (2) (2015); 125126.
[59] CEO JinDong Zhang: Sunings Road to O2O. http://mp.weixin.qq.com/s?
__biz=MjM5OTEyMDM0MA==&mid=208627626&idx=1&sn=73c1fb54e-
c9ec54128595f9227a39d1b&3rd=MzA3MDU4NTYzMw==&scene=6#rd.
[60] Suning Corporate Social Responsibility (CRS) Report (20122014) http://www.
suning.cn/cms/CSRReport/index.htm.
[61] Sunings Evolution and O2O Science. http://mp.weixin.qq.com/mp/appmsg/
show?__biz=MjM5NjM0MjQ0Mg==&appmsgid=10000164&itemidx=1&-
sign=c971bba7c2975d54734602872e5e8883&3rd=MzA3MDU4NTYzMw==&s-
cene=6#wechat_redirect.
[62] Sunings Exploration of O2O Mode. http://mp.weixin.qq.com/mp/appmsg/
show?__biz=MjM5ODAxMjU2MA==&appmsgid=10000774&itemidx=3&sign=-
c08515ee97ac274f1a3e158f2543d085&3rd=MzA3MDU4NTYzMw==&sce-
ne=6#wechat_redirect.
Jin-Song Huang is an associate professor at the School of Economics and
Management, Beihang University, China. He received his masters degree and PhD
degree from Tsinghua University. His papers have appeared in Information &
Management, Journal of Strategic Information Systems, and Journal of Interactive
Marketing.
316 J.-S. Huang et al. / Information & Management 54 (2017) 304316

Systems, and European Journal of Information Systems. He is also currently working

Shan L. Pan is a professor of Information Systems, Technology & Management at the as an Associate Editor of MIS Quarterly, Information Systems Research, Information
Australian School of Business, University of New South Wales, Sydney, Australia. His and Management, and Communications of the Association for Information Systems.
research interests include the IT and e-commerce industry of China, and the
implications of Chinese IT management practices on our understanding of business
models and innovation. He has conducted more than 20 in-depth studies of state- Jie Liu is a professor at the School of Management, Fudan University, Shanghai,
owned enterprises, public organizations, and e-commerce start-ups in China. He China. He received his master and PhD degrees from Tongji University.
has published more than 100 papers in journals such as Information Systems
Research, MIS Quarterly Executive, Journal of the Association for Information