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.