Relational Contracting and Network Management

Abstract

Our argument connects the management of relational contracts with the management of policy networks. Thinking about bilateral, horizontal extensions of governmental authority in a state of agents can be enhanced, we claim, because of the rich offerings of relational contracting theory. We review key results from economic theories of relational contracting, provide public-sector examples, and present a set of testable propositions that suggest a rationale for the creation and expansion of policy networks through relational contracting and its management. While adding theoretical leverage to research on public sector contracting, our approach provides one means of explaining the emergence of policy networks, and implications for managing within them.

Keywords: Relational Contracting, Public Administration, Governance, Public-Private Partnership

JEL Classification: H11, H83