Title: How to manage networks? The role of network attributes and incentives in network governance

Authors: Elisabeth Mueller

Addresses: University of Passau, Innstrasse 27, D-94032 Passau, Germany

Abstract: The question of how a network is managed is a relevant issue in network governance as the implementation of a certain governance regime induces sunk costs, path dependencies, and lock-in effects. Therefore, I analyse in this conceptual study what form of network governance fits to which kind of networks. I examine from an economic perspective two important forms of network governance with regard to their incentive systems: 1) lead-firm governance; 2) third-party governance. In (1) I identify rather strong incentives for the network manager to foster the network|s development, but also to exploit his or her discretionary freedom, whereas (2) implies somewhat weaker incentives to actively promote the network, but also to act opportunistically. As a result, the article discusses that the conditions in a cooperative, vertical network with stable relationships tend to favour a lead-firm network manager despite the large discretionary freedom that the network manager has. By contrast, horizontal networks that are characterised by flexible and more competitive relations seem to require a neutral, third-party network manager.

Keywords: incentives; network governance; network managers; network attributes; lead-firm governance; third-party governance; governance regimes; sunk costs; path dependencies; lock-in effects; economic perspectives; incentive systems; network development; discretionary freedom; cooperative networks; vertical networks; stable relationships; horizontal networks; flexible relations; competitive relations; neutral managers; third-party networks; small and medium-sized enterprises; SMEs; entrepreneurs; entrepreneurship; interdisciplinary research; Europe.

DOI: 10.1504/IJESB.2012.044589

International Journal of Entrepreneurship and Small Business, 2012 Vol.15 No.1, pp.57 - 75

Published online: 29 Dec 2011 *

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