Systemic Risk in Networked Services over Time: Implications for Governance

Abstract

Government increasingly relies on complex arrangements of contracted providers to implement public policy but does not consider the possibility of systemic risk- the risk the contract system will collapse. Most public management research on contract management focuses on dyadic interactions between funders and contractors while interorganizational network scholarship overlooks the potential for network failure. This study examines systemic risk in complex, networked services funded by government and produced by a mix of public, nonprofit, and for-profit actors. I employ affiliation network methods to understand network level systemic risk and to develop an index ranking the importance of individual actors in maintaining system stability. The empirical context for this study is state funded juvenile justice services over a five year period. Findings indicate that though the state has a well-designed contract management system, it does not consider systemic risk when awarding individual contracts. Over time...