Network governance
Encyclopedia
Network governance is "interfirm coordination that is characterized by organic or informal social system, in contrast to bureaucratic structures within firms and formal contractual relationships between them. The concepts of privatization
, public private partnership, and contracting are defined in this context.
Network governance constitutes a “distinct form of coordinating economic activity” (p. 301) which contrasts and competes with markets and hierarchies. As such, governance networks distinguish themselves from the hierarchical control
of the state and the competitive regulation of the market in at least three ways:
As a concept, Network Governance explains increased efficiency and reduced agency problems for organizations existing in highly turbulent environments. On the one hand, the efficiency is enhanced through distributed knowledge acquisition
and decentralised problem solving; on the other, the effectiveness is improved through the emergence of collective solutions to global problems in different self-regulated sectors of activity. Due to the rapid pace of modern society and competitive pressures from globalization
, network governance has gained prominence and development among sociological theorists
.
Network governance first depends on the comprehension of the short and long term global business risks. It’s based on the definition of the IT
key objectives and their influence on the network. It includes the negotiation of the satisfaction criteria for the business lines and integrates processes for the measurement and improvement of the global efficiency and end user satisfaction. Beyond that, it allows the constitution and piloting of internal teams and external partners as well as the setting up of a control system enabling to validate the performance of the whole. Finally, it ensures permanent communication at all the various management levels.
In the public sector
, network governance is not universally accepted as a positive development by all public administration scholars. Some doubt its ability to adequately perform as a democratic governance structure
while others view it as phenomenon that promotes efficient and effective delivery of public goods and services.
With this definition in mind, Sorenson and Torfing identify four points of democratic anchorage for use in assessing the democratic performance of a governance network. These points are the extent to which the network:
, “new” modes of governance
have been proposed in recent years. Network governance is the mode most commonly associated with the concept of governance, in which autonomous stakeholders work together to achieve common goals.
The emergence of network governance can be characterised by an attempt to take into account the increasing importance of NGOs, the private sector
, scientific networks and international institutions in the performance of various functions of governance. Prominent examples of such networks that have been instrumental in forming successful working arrangements are the World Commission on Dams
, the Global Environmental Facility and the flexible mechanism
of the Kyoto Protocol
. Another ongoing effort is the United Nations Global Compact which combines multiple stakeholders in a trilateral construction including representatives from governments, private sector and the NGO community. (p. 6)
One main reason for the proliferation of network approaches in environmental governance
is their potential to integrate and make available different sources of knowledge and competences and to encourage individual and collective learning. Currently, environmental governance faces various challenges that are characterised by complexities and uncertainties inherent to environmental and sustainable problems. Network governance can provide a means to address these governance problems by institutionalising learning on facts and deliberation on value judgements. For example, in the realm of global chemical safety, transnational networks have formed around initiatives by international organisations and successfully developed rules for addressing global chemical issues many of which have been implemented by national legislations. Most notably, these transnational networks made it possible to avoid the institutional apathy that is typically found in political settings with many actors of conflicting interests, especially on a global level.
Through integration of actors from different sectors, governance networks are able to provide an innovative environment of learning, laying the way for adaptive and effective governance. One particular form of networks important to governance problems is ‘epistemic communities
’ in which actors share the same basic casual beliefs and normative values. (p. 3) Although participation in these epistemic communities requires an interest in the problem at stake, the actors involved do not necessarily share the same interest. In general, the interests are interdependent but can also be different or sometimes contesting, stressing the need for consensus building and the development of cognitive commodities. (p. 26)
The main argument in the literature for the advantage of network governance over traditional command and control regulation or, alternatively, recourse to market regulation, is its capacity to deal with situations of intrinsic uncertainty and decision making under bounded rationality
. This is typically the case in the field of global environmental governance where one has to deal with complex and interrelated problems. In these situations, network institutions can create a synergy between different competences and sources of knowledge allowing dealing with complex and interlined problems.
Network governance, in the form of NGOs, is effectively bringing to light “bad practices” by corporations, as well as highlighting those actively working to reduce their carbon footprints. Private governance networks such as CSRHUB and the Carbon Disclosure Project (CDP) are entities that hold corporations accountable for their amount of corporate social responsibility. Founded to accelerate solutions to climate change and water management, the CDP discloses information and data on water management, greenhouse gas emissions, and climate change strategies on over 3,000 companies worldwide. It is the only global climate change reporting system and encourages corporations to engage in “best practices” regarding environmental impact by making their formerly private or unknown environmental impact information available to anyone, including the general public. This information can be used (by a variety of entities) to make consumer purchase and investment decisions, formulate governmental as well as corporate policy, educate people, develop less harmful business methods for corporations and formulate action plans by environmental advocacy groups, to name a few. "The first step towards managing carbon emissions is to measure them because in business what gets measured gets managed. The Carbon Disclosure Project has played a crucial role in encouraging companies to take the first steps in that measurement and management path".This quote by Lord Adair Turner, Chairman of the UK Financial Services Authority, illustrates how network governance is enhancing CSR.
Leading European business schools joined with more than sixty multinationals to launch the European Academy of Business in Society, the mission of which is to push CSR to the forefront of business practice. Their main activities in pursuing this goal are: 1)developing ‘best-in-class’ training practices and learning resources for businesses and corporate academies, 2) including the changing role of business in society in business education and 3)creating a global research bank on the role of business in society and delivering interdisciplinary research on CSR. This is an example of network governance using education to improve Corporate Social Responsibility. Use of organization of networks in today’s society is a valid means of moving forward in preserving our environment.
IFCS Intergovernmental Forum on Chemical Safety. 2011. [online] URL: http://www.who.int/ifcs/en/
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
, public private partnership, and contracting are defined in this context.
Network governance constitutes a “distinct form of coordinating economic activity” (p. 301) which contrasts and competes with markets and hierarchies. As such, governance networks distinguish themselves from the hierarchical control
Hierarchical control system
A Hierarchical control system is a form of Control System in which a set of devices and governing software is arranged in a hierarchical tree. When the links in the tree are implemented by a computer network, then that hierarchical control system is also a form of Networked control system.-...
of the state and the competitive regulation of the market in at least three ways:
- In terms of the relationship between the actors, governance networks can be described as a "pluricentric governance system" as opposed to the "unicentric system of state rule and the multicentric system of market competition" (p. 151). In contrast to state rule and competitive market regulation, governance networks involve a large number of interdependent actors who interact in order to produce public purpose.
- In terms of decision making, governance networks are based on negotiation rationality as opposed to the substantial rationality that governs state rule and the procedural rationality that governs market competition (p. 46)
- Compliance is ensured through trust and political obligation which, over time, becomes sustained by self-constituted rules and norms.
As a concept, Network Governance explains increased efficiency and reduced agency problems for organizations existing in highly turbulent environments. On the one hand, the efficiency is enhanced through distributed knowledge acquisition
Knowledge acquisition
Knowledge acquisition is a method of learning, first proposed by Aristotle in his seminal work "Organon". Aristotle proposed that the mind at birth is a blank slate, or tabula rasa...
and decentralised problem solving; on the other, the effectiveness is improved through the emergence of collective solutions to global problems in different self-regulated sectors of activity. Due to the rapid pace of modern society and competitive pressures from globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
, network governance has gained prominence and development among sociological theorists
Sociological theory
In sociology, sociological perspectives, theories, or paradigms are complex theoretical and methodological frameworks used to analyze and explain objects of social study. They facilitate organizing sociological knowledge...
.
Network governance first depends on the comprehension of the short and long term global business risks. It’s based on the definition of the IT
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
key objectives and their influence on the network. It includes the negotiation of the satisfaction criteria for the business lines and integrates processes for the measurement and improvement of the global efficiency and end user satisfaction. Beyond that, it allows the constitution and piloting of internal teams and external partners as well as the setting up of a control system enabling to validate the performance of the whole. Finally, it ensures permanent communication at all the various management levels.
In the public sector
Public sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
, network governance is not universally accepted as a positive development by all public administration scholars. Some doubt its ability to adequately perform as a democratic governance structure
Democracy
Democracy is generally defined as a form of government in which all adult citizens have an equal say in the decisions that affect their lives. Ideally, this includes equal participation in the proposal, development and passage of legislation into law...
while others view it as phenomenon that promotes efficient and effective delivery of public goods and services.
Definition and theories
Governance networks have been defined by Sorensen and Torfing as:- "a relatively stable horizontal articulation of interdependent, but operationally autonomous actors
- who interact through negotiations that involve bargaining, deliberation and intense power struggles
- which take place within a relatively institutionalized framework of contingently articulated rules, norms, knowledge and social imaginations
- that is self-regulating within limits set by external agencies and
- which contribute to the production of public purpose in the broad sense of visions, ideas, plans and regulations."(p. 3)
With this definition in mind, Sorenson and Torfing identify four points of democratic anchorage for use in assessing the democratic performance of a governance network. These points are the extent to which the network:
- "is controlled by democratically elected politicians;
- represents the membership basis of the participating groups and organizations;
- is accountable to the territorially defined citizenry; and
- follows the democratic rules specified by a particular grammar of conduct."
Role in environmental governance
In the wake of apparent failures to govern complex environmental problems by the central stateSovereign state
A sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...
, “new” modes of governance
Governance
Governance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of management or leadership processes...
have been proposed in recent years. Network governance is the mode most commonly associated with the concept of governance, in which autonomous stakeholders work together to achieve common goals.
The emergence of network governance can be characterised by an attempt to take into account the increasing importance of NGOs, the private sector
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...
, scientific networks and international institutions in the performance of various functions of governance. Prominent examples of such networks that have been instrumental in forming successful working arrangements are the World Commission on Dams
World Commission on Dams
The World Commission on Dams was formed in April 1997, to research the environmental, social and economic impacts of the development of large dams globally...
, the Global Environmental Facility and the flexible mechanism
Flexible Mechanisms
Flexible mechanisms, also sometimes known as Flexibility Mechanisms or Kyoto Mechanisms), refers to Emissions Trading, the Clean Development Mechanism and Joint Implementation. These are mechanisms defined under the Kyoto Protocol intended to lower the overall costs of achieving its emissions targets...
of the Kyoto Protocol
Kyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
. Another ongoing effort is the United Nations Global Compact which combines multiple stakeholders in a trilateral construction including representatives from governments, private sector and the NGO community. (p. 6)
One main reason for the proliferation of network approaches in environmental governance
Environmental governance
Environmental governance is a concept in political ecology or environmental policy related to defining the elements needed to achieve sustainability. All human activities -- political, social and economic — should be understood and managed as subsets of the environment and ecosystems...
is their potential to integrate and make available different sources of knowledge and competences and to encourage individual and collective learning. Currently, environmental governance faces various challenges that are characterised by complexities and uncertainties inherent to environmental and sustainable problems. Network governance can provide a means to address these governance problems by institutionalising learning on facts and deliberation on value judgements. For example, in the realm of global chemical safety, transnational networks have formed around initiatives by international organisations and successfully developed rules for addressing global chemical issues many of which have been implemented by national legislations. Most notably, these transnational networks made it possible to avoid the institutional apathy that is typically found in political settings with many actors of conflicting interests, especially on a global level.
Through integration of actors from different sectors, governance networks are able to provide an innovative environment of learning, laying the way for adaptive and effective governance. One particular form of networks important to governance problems is ‘epistemic communities
Epistemic community
An epistemic community is a transnational network of knowledge-based experts who help decision-makers to define the problems they face, identify various policy solutions and assess the policy outcomes. The definitive conceptual framework of an epistemic community is widely accepted as that of Peter...
’ in which actors share the same basic casual beliefs and normative values. (p. 3) Although participation in these epistemic communities requires an interest in the problem at stake, the actors involved do not necessarily share the same interest. In general, the interests are interdependent but can also be different or sometimes contesting, stressing the need for consensus building and the development of cognitive commodities. (p. 26)
The main argument in the literature for the advantage of network governance over traditional command and control regulation or, alternatively, recourse to market regulation, is its capacity to deal with situations of intrinsic uncertainty and decision making under bounded rationality
Bounded rationality
Bounded rationality is the idea that in decision making, rationality of individuals is limited by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision...
. This is typically the case in the field of global environmental governance where one has to deal with complex and interrelated problems. In these situations, network institutions can create a synergy between different competences and sources of knowledge allowing dealing with complex and interlined problems.
Enhancement of Corporate Social Responsibility
As increasing amounts of scientific data validate concerns about the deterioration of our environment, the role of non-governmental organizations (NGOs) in network governance is being utilized in ever-increasing ways to halt or at least slow this deterioration. One of the ways they are accomplishing this is by directing their activities to focus on improving Corporate Social Responsibility (CSR). As a concept, CSR has existed since the first business was formed in civilization. The French philosopher Rousseau described it as the “social contract” between business and society. As theories about CSR have evolved in keeping with their times, today it is increasingly associated with sustainable practices and development, meaning that businesses have a “moral responsibility” to conduct their operations in an ecologically sustainable manner. It is no longer acceptable for corporations just to grow “the bottom line” and increase profits for their shareholders. Businesses remain free to pursue profits but are increasingly obligated to minimize their negative impact on the environment.Network governance, in the form of NGOs, is effectively bringing to light “bad practices” by corporations, as well as highlighting those actively working to reduce their carbon footprints. Private governance networks such as CSRHUB and the Carbon Disclosure Project (CDP) are entities that hold corporations accountable for their amount of corporate social responsibility. Founded to accelerate solutions to climate change and water management, the CDP discloses information and data on water management, greenhouse gas emissions, and climate change strategies on over 3,000 companies worldwide. It is the only global climate change reporting system and encourages corporations to engage in “best practices” regarding environmental impact by making their formerly private or unknown environmental impact information available to anyone, including the general public. This information can be used (by a variety of entities) to make consumer purchase and investment decisions, formulate governmental as well as corporate policy, educate people, develop less harmful business methods for corporations and formulate action plans by environmental advocacy groups, to name a few. "The first step towards managing carbon emissions is to measure them because in business what gets measured gets managed. The Carbon Disclosure Project has played a crucial role in encouraging companies to take the first steps in that measurement and management path".This quote by Lord Adair Turner, Chairman of the UK Financial Services Authority, illustrates how network governance is enhancing CSR.
Leading European business schools joined with more than sixty multinationals to launch the European Academy of Business in Society, the mission of which is to push CSR to the forefront of business practice. Their main activities in pursuing this goal are: 1)developing ‘best-in-class’ training practices and learning resources for businesses and corporate academies, 2) including the changing role of business in society in business education and 3)creating a global research bank on the role of business in society and delivering interdisciplinary research on CSR. This is an example of network governance using education to improve Corporate Social Responsibility. Use of organization of networks in today’s society is a valid means of moving forward in preserving our environment.
Other literature
Van Alstyne, M. 1997. The State of Network Organization: A Survey in Three Frameworks. Journal of Organizational Computing 7(3) pp 88–151. [online] URL:http://ccs.mit.edu/papers/CCSWP192/CCSWP192.htmlIFCS Intergovernmental Forum on Chemical Safety. 2011. [online] URL: http://www.who.int/ifcs/en/