Introducing “Strategy and Governance of Networks”

There are many types of enterprises, like investor owned enterprises, consumer retail cooperatives, mutual insurance companies, mutual banking institutions, wholesale and supply cooperatives, public utility cooperatives, worker-owned firms, agricultural processing and marketing cooperatives, family owned enterprises, and nonprofit firms (Hansmann 1996). This raises the issue of the relative efficiency of the strategy and governance of an enterprise. Most research attention has been dedicated to enterprises collectively owned by investors of capital. The third international conference on economics and management of networks (EMNet) was dedicated to developments in organizational economics and management of networks, especially cooperatives, franchises, and strategic alliances. It took place at the Rotterdam School of Management, Erasmus University Rotterdam, from June 28 to June 30, 2007.

The strategy and governance of enterprises has to address problems of conflicting interests between its stakeholders, problems of joint interests, as well as problems of bounded cognition. Situations with conflicting interests require alignment of incentives (by allocating ownership, control, and income rights) to a certain extent. Situations with a joint interest problem require coordination by some mechanism, while the organization of the stakeholders has the potential to handle bounded cognition in ways to produce results impossible to achieve for one person. Successful strategy and governance of enterprises will contribute to accomplishing the three goals of limiting activities outside the interest of the network, coordinating the optimal combination of productive resources across parties, and to deal with the cognitive limitations of individual network parties. The large majority of enterprise studies address the first problem, with a focus on mitigating the risks of opportunistic behavior.