General Characteristics Of Network Governance Commerce Essay

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Modern societies went in recent decades through a destabilization period of the traditional governing mechanisms which led to the emergence of new governance arrangements (van Kersbergen & van Waarden, 2004, p.143). This so called 'shift in governance' occurred because of several reasons; the ideological shift towards markets, the emergence of new public management, globalisation and the ideological shift towards private actors' responsibility are examples of this. This means that governance has become more and more important the last couple of decades, but despite this there are various meanings of the concept governance and a clear meaning is missing. A clear common is that they all refer to relations among individuals, groups and organizations and that they describe and analyze so called 'shifts in governance' (van Kersbergen & van Waarden, 2004, p.144).

The shifts in governance have occurred at three levels; the macro, micro and meso level. The macro level refers to the level of the state. In this way the concept of governance refers to the advancement of solid and sustainable economic development which consists of an efficient government, an effective civil society and a successful private sector. The micro level is more specific and refers to the level of an organization. It comprises a set of processes, customs, policies, laws and institutions which affect the way a corporation is managed. Also the relationships among the stakeholders which are involved is important in this. The last level, the meso level is also called the inter-organizational level. It refers to the steering of society through the coordination of public and non-public actors in network structures and is a typical example of the development from government to governance ( Klok, 2011, HC1-sheet5-7). In this paper the focus will be on the municipality and the possible cooperation with public and non-public actors in the specific policy field. Therefore the focus in this memo will be on the meso-level of governance.

At the meso level three modes of governance can be distinguished as is being argued by van Heffen and Klok (2000). They refer to modes like hierarchies, markets and networks as action arenas. The hierarchy is characterized by a uni-centric action arena which consists of authorities and citizens. In this case the authorities have the freedom to make decisions assigned to position by constitution legal rules which are in accordance with procedures. The citizens on the other hand have the freedom to use their civil rights also in relation to authorities. A market action arena is characterized by sellers and buyers where there is the freedom to act on own property which is limited only by constitutional and general legal rules. In this case the aggregation is a bilateral agreement and spontaneous through individual action and price setting. Next to this a market is characterized by a exchange of goods through payment and is produced by personal interest. The last mode of governance are networks which are characterized by members and non-members. The boundaries of a network can be restrictive or non-restrictive, this depends on the decisions members make. In a network members with specific positions can have specific authority, but members are mostly included in collective decisions. Non-members have no specific authority, only as a citizen. A network is also characterized by interconnectedness among the members and a mix of common (members only) and personal interest (Van Heffen & Klok, 2000, p.4).

If a closer look on networking is proved, it can be said that networking refers to the ability of actors to develop relatively stable, sometimes informal, relations. With these relations it will be possible for the actors to make decisions or to coordinate actions by negotiation and consensus building. In this way actors can make the strategic choice to network because of common agendas or because of the fact that collective action can accomplish specific goals. Another important characteristic of networking is the fact that the network members contribute different resources to become more effective or efficient which is sometimes aimed towards legitimacy and innovation (van Heffen & Klok, 2000).

Which factors should play a role in deciding to invest in network governance (or not to do so)?

There are different factors which determine for an actor, in this case the municipality, whether to network or not to network. This can depend on the other actors involved, on which activities an actor wants to network and to what extent or the level of autonomy an actor is prepared to network (Hay & Richards, 2000, p.17-18). Other examples of factors which determine whether an actor is prepared to network are effectiveness, efficiency and legitimacy. An important aspect of these factors is that they are driven by the structure vs. agency debate. This debate is about two kind of ways how networks are created. On the one hand it is argued that networks are created from structural relations between actors, also called resource or outcome interdependency. Given these conditions, network structures will develop and actors will act according to these structures. In this way networks can be seen as objects and they have an effect on an actor's performance. On the other hand it is argued that networks are created from the strategic choices actors make in deciding to network or not. In this context, networks develop because of actors choices to invest in the networks and behave according to the network's logic. Networks are because of this seen as processes in action and are, in contradiction to the structure view, the dependent variable (Klok, 2011, HC2-sheet14).

As is being mentioned before, there are several reasons for an actor, in this case the municipality, to decide on whether to network or not. The two most important theories on this question are the resource dependency theory and a combination of transaction cost economics and social network theory.

The resource dependency theory is an example of a theory which is based on the structure part of the structure vs. agency debate. As Hay and Richards (2000) argue, the assumption is that networks are always already present and pre-constituted. There must be the recognition of potential mutual advantage and potential for enhancing strategic capacities through pooling strategic resources, but also the establishment of conditions of network feasibility (Hay & Richards, 2000, p.17-20). In this way actors lack all the necessary resources they need, examples can be knowledge, money or information. By working together, forming a network, it will be possible for actors to obtain the resources they need and be more effective and/or efficient.

The second theory integrates transaction costs economics and social network theory provided by Jones et al (1997). The theory provides a comparative framework for assessing alternative governance forms, in this case a network over hierarchies and markets, and it is able to identify the conditions that predict where network governance is likely to emerge. The theory states that a rational choice reflects the choices actors make which are based on a comparison of the costs and benefits in order to gain the greatest benefits at the lowest costs with an action. In this case the network form of governance is a response to exchange conditions of asset specificity, demand uncertainty, high task complexity combined with time pressure, and frequency of exchanges among network partners. If all of these four conditions are met, actors are driven towards a structural embeddedness of their transactions. By doing this, actors are able to use social mechanisms for the coordination and safeguarding of exchanges (Jones, Hesterly & Borgatti, 1997, p. 911).

Both theories have shown several factors which determine whether an actor is willing to network. The aspect of autonomy also deserves some more attention in this case. By forming or entering a network, an actor might be able to increase its resources or lower its transaction costs, but this is accompanied by an increase in dependency. Someone's autonomy might get at stake and it is up to the actor to decide whether this is a favorable situation. After all a network brings with it the need to agree on decision making but an obstacle might also be an increase of a partners power over you (van Kersbergen & van Waarden, 2004).

Which benefits might be expected from network governance, but also which problems might occur?

Network governance can be beneficial but can also lead to problems in terms of legitimacy.

By forming a network and in this way including more stakeholders in the policy area, legitimacy can be increased. The municipality might be legitimate in the eyes of citizens from an output legitimacy perspective. Citizens for example feel that the municipality works, performs and is able to deliver the policies they want because of the fact that their voice is being heard. Also from an input legitimacy perspective citizens and other stakeholders can be positive about the municipality and the policies which arise from network governance. By involving stakeholders in the decision-making process the accountability of the municipality can be increased which then also leads to an increase in legitimacy (van Kersbergen & van Waarden, 2004, p. 156). Although the legitimacy for the municipality can be increased by networking, also some problems can occur from this. An important issue refers to the input legitimacy and is about whether the new actors in the network have legitimacy. This can be characterized by the fact whether citizens and other stakeholders trust these new actors or not. Also for the output legitimacy problems might occur; it is important to pay attention to the governability of the network. As van Kersbergen and van Waarden mention "output legitimacy implies that a political system and specific policies are legitimated by their success" (van Kersbergen & van Waarden, 2004, p. 156-159).

In terms of effectiveness and efficiency network governance might be beneficial. From a resource dependency point of view a network might allow the municipality to dispose of more resources. But it might also be possible that with an increase in output legitimacy, as is being mentioned before, also an increase in efficiency and effectiveness might occur. Stakeholders which in first instance might be against a certain policy, might change their opinion because of the fact that they are involved in the decision-making process and their voice is being heard. Next to this, an increase in efficiency and effectiveness might also be reached by the fact that specific actors which are being included in the network bring new knowledge. This new knowledge might increase the effectiveness and efficiency of the decision-making process. But also from an effectiveness and efficiency perspective problems might occur with network governance. An important issue is to try to not involve too many members in a network. This will make decision-making more difficult because these high amount of members can also increase the amount of different opinions on a topic, a decrease in effectiveness will probably occur from this (van Kersbergen & van Waarden, 2004).

In terms of accountability network governance can also lead to problems. With the entering of new actors in a network it might be unclear who is responsible for what and it will become more difficult to hold the responsible organization accountable for its actions. As van Kersbergen and van Waarden state in their article "a consequence of the shifts in authority of and within governance mechanisms might be that traditional instruments for control of power may become less effective" (van Kersbergen & van Waarden, 2004, p.157). Because of this reason it is as a municipality important to determine how to deal with this aspect of accountability and in which extent you want to be accountable for the actions of another actor in the network.

Which aspects should be considered when making actual arrangements for network governance, in order to maximize benefits and minimize problems?

After it is being decided to network, it is important to pay attention on how the network should looks like and which aspects should be considered when making actual arrangements for network governance. Provan and Kenis (2007) provide a framework on this in which they provide three forms of governance. The first form of governance is a participant-governed network in which governance is highly decentralized, all organizations are equal and no distinct administrative entity is present. The second form of governance is a lead organization-governed network in which one organization is the lead organization which coordinates all network-level activities. The third mode of governance is a network administrative organization (NAO). In this network an administrative entity is established to govern the network and is therefore highly brokered, with the NAO as the network broker, and externally governed by the NAO (Provan & Kenis, 2007, p.6-8). The choice on which governance form to chose for a network depends on several factors like trust, the number of participants, goal consensus and the need for network-level competencies. Shared governance is for example the most suitable form of governance when there is a high density of trust, there are a few participants, the goal consensus is high and the need for network-level competencies is low (Provan & Kenis, 2007, p.9).

Also Sydow and Windeler (2003) argue which aspects should be considered when making actual arrangements for network governance but instead of Provan and Kenis (2007) they focus more on the prerequisites of forming a network. These prerequisites are trust, control and knowledge, which go hand in hand with each other and each requires the existence of the other. However, the relationship between these prerequisites is also characterized by tensions and contradictions. To illustrate this interrelatedness of trust, knowledge and control Sydow and Windeler (2003) make use of the structuration theory. The relations between trust, knowledge and control are reciprocal and can have a positive as well as a negative influence on each other in the way that it enables and restrains the capability of agents to act. Because of this management of the tensions and contradictions between the prerequisites is crucial for effective network governance (Sydow & Windeler, 2003).

Besides the previous described aspects which should be taken into consideration when making actual arrangements for network governance, it is also important to pay attention to the aspect of citizen participation. Especially for a municipality it is important to encourage citizen participation and involve citizens in networks. Lowndes et al (2006) provide in their article a diagnostic tool which describes the factors influencing citizen participation. This diagnostic tool is based on the CLEAR-model, which states that citizen participation is most effective when several requirements are met. The first requirement is that citizens can participate, this means they have the resources and knowledge to participate. The second requirement is that citizens like to participate in the way that they have a sense of attachment that reinforces participation. The third refers to the fact that citizens are enabled or have the opportunity to participate. The fourth requirement is that citizens are asked to participate by official bodies or voluntary groups. The last requirement refers to the fact that there is being responded to citizens participation, this means that citizens see evidence that their views have been considered and their input is being appreciated. Especially for a municipality it is important to pay attention to these requirements when one wants to encourage citizen participation and involve citizens in networks. By doing this, also legitimacy as being discussed earlier can be increased (Lowndes, Pratchett & Stoker, 2006).