Abstract
Networks are finally accepted as a governance structure of their own. They are not a transitory and unstable form, which eventually will become a hierarchy or a market. In fact networks seem to be the most important way to organise economic activity within the framework of globalisation, the knowledge society and the deep technological changes taking place. Networks seem to appear whenever turmoil or even chaos prevails. The Network Theory contests classical undersocialised theories by viewing economic and business activity as socially embedded. Business activity is conducted in a co-operative and trustful atmosphere. Writings on the Network Theory, however, tend to be oversocialised. Economic activity is assumed but not explicitly dealt with. This paper aims to discuss classical economic issues (profit objectives, transaction costs, optimal decision making, uncertainty and risk, innovation etc.) and how the Network Theory accommodates these classical economic and business issues. At the end of the paper, implications for management and research are briefly outlined, indicating that with the Network Theory coming of age, it is essential to more explicitly formulate the theory as an economic theory which strikes a better balance between the economic and the human side.
Highlights
Over the last 10-15 years, the market economies of the world have undergone deep changes. This is reflected in names and concepts such as the Learning Economy, Knowledge Society, the New Economy, the Economy ofAlliances or the Network Economy, and the Globalisation ofthe Economy
The changes indicate that knowledge has become one of the most important competitive parameters; that the Internet and ICf in general have transformed the market economy and its rhythms and structure, and that networks dominate the way economic actors relate to each other and transact
The strength of the network theory is that it contests conventional economic rationality assumptions underlying, for example, Transaction Cost Theory, Strategic Planning Theory and the classical Transaction Marketing Theory, and replaces these under-socialised theories with an understanding of business activity as socially embedded
Summary
Over the last 10-15 years, the market economies of the world have undergone deep changes. The present writings on Network Theory have a tendency to be over-socialised and forget that business is first and foremost about money and position. This being so, it is of interest to know how basic and classical economic business issues are resolved if business is conducted and structured according to the network thinking. A number of the classical economic business problems are presented and discussed within a network framework.
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