Networks Governance, Partnership Management and Coalitions Federation

Christophe Assens, Aline Courie Lemeur

• Publisher: Palgrave Macmillan
• Year: 2016
• ISBN:
  9781137566638
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

This book explores the governance of networks. A network's governance mechanisms are based on trust and confidence, which go beyond a simple economic logic. As the network's boundaries expand to include clusters of businesses and stakeholders and the emergence of coalitions of all kinds, the trust will gradually dilute and the network's unifying role will be lost. The organization then evolves into the form of a network of networks, where the challenge is to bring together coalitions. Using examples from the European Union and the Regional Health Federation of Networks, this book explores the political and socio-economic challenges, including the decision making and division of tasks, faced by network organizations which move to a federation model of governance.

1

Network Governance: The Theory

Abstract: Relationship management in firms is as important as resources and skills management. To minimize uncertainty, enterprises try to organize their partner relationships into a network, in which the principles of trust and reciprocity prevail. By definition, a network is a collaborative structure, which depends neither on the market, nor on the hierarchy. Such networks are formed by several financially and legally independent partners with autonomous management that are, however, mutually dependent to achieve common goals. Thus traditional theories on governance, such as control of the board of directors in the private enterprise or the state’s supervision of public bodies, may not apply to the network. In this chapter, we focus on governance network theory.

Key words: governance; network; trust; reciprocity; collaboration

Assens, Christophe, and Aline Courie Lemeur. Networks Governance, Partnership Management and Coalitions Federation. Basingstoke: Palgrave Macmillan, 2016. DOI: 10.1057/9781137566638.0005.

1Introduction

At the beginning of the twentieth century the principles of continuity of place, time and action characteristic of Greek tragedy became a reference for settled companies which produced locally to meet local demand, with a unity of command. Nowadays, business life is subject to many sometimes conflicting rules, the definitions of which are often vague and dubious. First, an extension of the boundaries puts into question continuity of place and induces businesses to make room for new regulatory principles and modes of coordination for their activities within networks or cooperative international ventures. Outsourcing of tasks and infrastructure relocation have a pivotal role in this development which exploits countries’ comparative advantages. With the opening of the markets, the national territory is no longer a sufficiently safe haven to compensate for the competitive weaknesses of overly sedentary firms that operate at the local level. Second, new information and communication technologies (NICT) have removed temporal barriers to effective coordination and control of offshore activities. Information flow becomes the major concern of business leaders responsible for acquisition and sharing of knowledge in learning organizations. Placed at a crossroads in a communication network, an enterprise becomes a node, storing knowledge which it exchanges with its environment. Thus, knowledge management becomes strategic in the enterprise policy. Third, unity of action becomes irrelevant because the focus is on sharing responsibilities between several partner companies that are not subject to the same principle of command. Therefore, the delegation of decision-making power creates new regulation issues in an organization with extended boundaries and scattered responsibilities, in which creation of economic value is assigned to various independent players.

We focus here on relationship management which, with the opening of the borders, development in telecommunications and corporate alliances, becomes as important as resources and skills management. Yet, relationship management is certainly the most difficult task, for it’s not easy to foresee or to control reactions of others. To minimize uncertainty, enterprises try to organize their partner relationships into a network, in which the principles of trust and reciprocity prevail.

By definition, a network is a collaborative structure, an exchange convention which depends neither on the market nor on the hierarchy, according to Powell (1990), Williamson (1991) and Ouchi (1980). Such networking is formed by several financially and legally independent partners with autonomous management, which are however mutually dependent to achieve common goals. Like an ecosystem in the meaning of Moore (1996), the network nourishes itself in exchanges with its exterior, which prompts it to extend its sphere of influence and to constantly challenge its limits. However, as the network expands, it becomes more difficult to regulate, given the increasing appearance of interacting components. And conversely, if the network stops growing, the connectivity loses its flexibility and modularity, giving way to rigidity causing the asymmetry of power for some members.

2The concept of governance

Historically, “governance” is a term first used in eighteenth-century Germany in political science, to mean the process of governing, the aim of which is to optimize the resources of the state, to fulfill the social needs of the population in the best manner and, to achieve this, to ensure economic prosperity. Around 1930, the concept of governance was introduced in the business world for the allocation of the roles of the funders (shareholders) and the corporate officers (executives). This is where the notion of corporate governance is introduced, to define the shareholders’ monitoring power over the executives, which results in the gradual restructuring of the boards of directors. The latter aims to replace non-executive directors with more experienced directors among retired executive officers, representation of which in the boards increased from 75% in 1995 to 91% in 2001.¹ From 1981, the modern concept of governance has implied multi-stakeholder partnerships which share the responsibility for the company’s conduct outside the state and corporate realm, according to Hermet (2005).

Thus, one of the major issues we raise on network governance focuses on decision making and distribution of tasks, which is to find the best way to manage collective interest without threatening independence, individual initiative and specificity of relationships. This problem is not easy to solve since the traditional theories on governance that advocate a control of the board of directors in private enterprise or the state’s supervision of public bodies, may not apply to the network.

3Theoretical synthesis

In theory, a network operates according to the principles of democracy, with transparency and collegiality in decision making in line with the universal principles of good governance (Graham et al., 2003) set up in the United Nations Program on Development (UNDP): that is, the legitimacy that gives any actor a voice in decision making in order to reach consensus despite divergent interests; the orientation that benefits all and not just some; efficiency resulting from the rational use of resources to produce the best possible result; accountability of associated members for the transparency of information; and the equity that comes with the principles of equality and impartiality.

According to the suggested grid based on three forms of governance – participative, lead, and administrative – the network does not always shows a stainless example of good governance, undeviatingly respectful of democratic principles. We will review these principles, to discuss the limits of their practical application within the network.

The legitimacy of the network members to participate in collective decisions is questioned particularly in a network governed by a lead organization, where only the pilot has legitimacy to make a decision for everybody’s sake, with the risk that he may exploit the organization for his own interests.

In practice, the network’s orientation is not always beneficial to the network’s majority. In the network administrative organization, the founding members can retain the prerogative to guide the development of the network, giving priority to their own specific interests, before taking into consideration the stakes of new members.

Efficiency is not always guaranteed in the network. Operation in a vacuum, with the phenomena of cooptation, a characteristic of the network administrative organization, or peer control within the participant governed network, can cause adverse effects because of “consanguinity” of judges and members, especially when the membership is subject to “reproductive cloning” of the members already in place. This can lead to inertia or to soft consensus in collective decisions, and result in a loss of individual accountability and immobility of the network as a whole.

The accountability of each member is not always established. In a participant governed network, for example, operating without pilot and without compliance with the charter of best practices, self-governance can lead to the appearance of stowaways who do not wish to get involved in the community, but who do want to enjoy the benefits it provides. The accountability of the members is no longer determined on a fair basis, but on the pursuit of compromise between active and inactive members. If there are no regulatory mechanisms to correct the perverse effects of this self-governance, the network may become discriminatory and rapidly lose its efficiency.

Equity is another principle of good governance put into question in some situations. In a network administrative organization, the more one advocates equity with fair distribution of decision-making power among all members of the network, the higher is the risk of diluting this collegiate power to finally transfer it to the techno-structure (too much democracy kills democracy). In the lead organization governed network, the closer the peripheral members get to the pilot, the higher the risk of increasing the asymmetry of relationships instead of decreasing power differences (too much proximity kills proximity).

Also, in a participant governed network, solidarity based on good will has its limits, because of those who will be active in the structure, and those who will benefit from the structure without getting involved (too much solidarity kills solidarity).

Finally, network governance does not depend on the nature of geographical boundaries. In network administrative organizations, local roots are only a good indicator of solidarity if physical proximity is important for cognitive proximity, for the ability to exchange information and remain supportive. In lead organization governed networks or participant governed networks, territorial division is not enough to understand the real limits of solidarity within the network. This solidarity can be expanded through long-distance communication media, and through the geographical migration of agents(diasporas), mean without affecting the issues of sharing and pooling. Therefore, the true limits of a network are often intangible. They are based on a sense of belonging to a club, or community, with specific rules of cooptation and control. Governance issues are thus dependent on these rules of exchange, established through conventions and based on the balance of power, of bargaining power, for which the location of a member is less important than its position within the network, which indicates its influence as an intermediary or as a pilot in relation to others, even if this influence is exercised remotely.

Also, network structure challenges traditional governance theories because the outline of the network’s territorial, legal or capital borders is not always clear. The network may evolve into a hybrid public and private entity, it is not always embodied by a collective agent with legitimacy to discipline its members, and it does not always have a predetermined objective in its rationale (Kilduff and Tsai, 2003). And not all networks follow the same principles; therefore in Chapter 2 we examine the different typologies of networks.

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Table of contents

• Cover
• Title
• Introduction
• 1  Network Governance: The Theory
• 2  Network Typologies
• 3  From Network to Network of Networks
• 4  The Governance of a Network of Networks: Case Studies
• Conclusion
• Bibliography
• Index