Structural Pathology in Inter-organizational Networks and the Decision-Making Autonomy of Its Members

Abstract

In inter-organizational networks, organizations choose to set up multilateral relations when cooperation creates significant opportunities which can be achieved only collectively. However, members operating within network structures are obliged to bear specific costs, which are linked to the reconciliation of the self-interest of the network members with preferences resulting from joint operations. Often, the interests of individual firms—belonging to the network—are mutually contradictory. Therefore, the settlement cost may appear in the overall costs of the decision-making process of the network members. The decision-making autonomy of the network member depends on several conditions: a strong position in the network structure, access to both strategic (for the network members) or scarce resources, innovativeness, control of resource flow, operational interdependence, and the character of ties between nodes. Companies opt for cooperation in the inter-organizational network, if the benefits derived from participation are higher than the costs relating to operations within that business constellation. However, numerous pathologies can be detected in inter-organizational networks. They are identified in various areas of network activities; however the most spectacular pathologies are of a structural nature as they quickly eliminate benefits achieved as a result of collective and multilateral cooperation. The main structural pathologies concern: position in the network structure, the formalization and strength of ties within the network, and the density thereof. The chapter clearly demonstrates that structural pathologies in inter-organizational networks may result in the erosion of benefits gained from multilateral cooperation. These pathologies also increase the cost of functioning in the network, including a significant or even total loss of decision-making autonomy for network members.