Dynamics of Network Governance: A Contribution to the Study of Complex Forms

Abstract

The architecture of complex forms of governance is the focus of this paper. Networks are complex forms of organization designed to govern inter-firm transactions involving horizontal and vertical coordination. The choice among alternative institutional arrangements is affected by relation-specific investments, distributive mechanisms, and dynamic aspects based on relational contractual mechanisms, trust being relevant. The way in which horizontal and vertical coordination levels are connected is an important question. This paper recognizes that price incentives can keep networks structured in addition it introduces the effect of network externalities, offering likewise incentives. The paper presents a semi-formal model that considers the existence of network externalities and applies a game approach to explain the choice among alternative strategies. The concept is applied to two cases of network architecture in agro-industrial relations.

Keywords: Network governance, agro-industrial networks

JEL Classification: B52, D23