Network Governance and Organizational Form: Captive to the Past or Rational Reconstruction? A Framework for Assessing What Works Best.

Abstract

This paper provides an overview of key factors to consider in assessing the merits of alternative network governance structures for inter-jurisdictional alliances and networks. The analysis draws on transaction cost economics, strategic management theory, social network theory and agency theory to propose a comprehensive framework for assessing the relative merits of various organizational forms and governance structures. It reports on the application of the analytic framework to one case and applies it retrospectively to an earlier case study. This analysis suggests that for a governance form to emerge and thrive, it must address problems of adapting, coordinating, and safeguarding exchanges and fulfilling accountability expectations more efficiently than other governance forms. Exchange conditions interact with local needs, social and accountability mechanisms to inform a decision as to whether a network is better governed by a particular organizational form.

The primary determinants of organizational form, in which two or more organizational entities govern their combined or collective efforts to advance common interests or objectives, should be the efficiency and effectiveness of the particular organizational form and governance structure in managing and governing those collective efforts, the transactions between them, the frequency of those transactions, the enduring nature of their common interests, the degree to which they interact with common or shared third parties, the degree of responsiveness to local needs and changing business environments, the range of social mechanisms necessary to safeguard the assets, exchanges and reputation of the organization and provide proper accountability to stakeholders. Organizational forms commonly used to advance collective interests range on a continuum from loosely knit ‘horizontal’ coalitions of independent organizations with informal links, to tightly knit ‘vertical’ organizations with ‘wholly-owned’ subsidiaries or satellite/branch offices.

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