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The Governance of Networks and Economic Power: The Nature and Impact of Subcontracting Relationships
Author(s) -
Sacchetti Silvia,
Sugden Roger
Publication year - 2003
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1046/j.1467-6419.2003.00209.x
Subject(s) - allocative efficiency , restructuring , corporate governance , flexibility (engineering) , industrial organization , context (archaeology) , production (economics) , process (computing) , network governance , economics , business , economic system , power (physics) , perspective (graphical) , public economics , microeconomics , computer science , management , paleontology , physics , finance , quantum mechanics , artificial intelligence , biology , operating system
. Current debate on networking focuses on network structures and firm strategies. In this perspective, theoretical analysis has been concerned with allocative issues. This essay proposes a different interpretation. Starting from the existing theoretical framework, we emphasise the nature and the implications of different types of networks with respect to socio‐economic development from a distributional point of view. Within this context, we develop the analysis of subcontracting starting from the concept of economic power. We then provide an analysis of governance in production by considering the attitudes and the nature of the actors involved. The externalisation of activities by large transnationals, which characterises current corporate restructuring, is often related to the search for greater flexibility, but also for greater power over governments, labour, and subcontractors. Differently, networks based on the mutual dependence of actors, which are not necessarily built around a large firm, could – under particular conditions – reach large production scales or more complex scopes without breaking the links with territorial systems, thus including local objectives in the strategic decision‐making process. Our conclusion is that the impact of subcontracting networks varies enormously. This is crucial to an understanding of future trends and possibilities. Not least, firms and public policy agencies need to understand the implications of different forms of subcontracting network and how those forms actually differ in practice.