DYNAMICS OF NETWORK GOVERNANCE: A CONTRIBUTION TO THE STUDY OF COMPLEX FORMS

Abstract

The focus of this paper is the architecture of complex forms of governance, specifically, the architecture of networks. A network is a complex form of organization designed to govern inter-firm transactions involving horizontal and vertical coordination. The agent´s choice among various institutional arrangements is affected by relation-specific investments, distributive mechanisms, and dynamic aspects based on relational contractual mechanisms, trust being a relevant variable. This paper investigates how horizontal and vertical coordination levels are connected. It recognizes that price incentives are important and introduces the effect of network externalities that also offer incentives. The paper presents a semiformal model that considers the existence of network externalities and applies a game approach to explain the choice among alternative strategies. The conceptual model is applied to two cases of network architecture in agro-industrial relations.