The Governance of Networks and Economic Power: The Nature and Impact of Subcontracting Relationships

23 Pages Posted: 4 Jan 2004

See all articles by Silvia Sacchetti, Phd

Silvia Sacchetti, Phd

University of Trento; European Research Institute on Cooperative & Social Enterprises (EURICSE)

Roger Sugden

University of Birmingham - Birmingham Business School

Abstract

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.

Suggested Citation

Sacchetti, Silvia and Sugden, Roger, The Governance of Networks and Economic Power: The Nature and Impact of Subcontracting Relationships. Journal of Economic Surveys, Vol. 17, pp. 669-692, December 2003. Available at SSRN: https://ssrn.com/abstract=467741

Silvia Sacchetti (Contact Author)

University of Trento ( email )

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

European Research Institute on Cooperative & Social Enterprises (EURICSE)

Via S. Giovanni 36
38122 Trento (TN)
Italy

Roger Sugden

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom
+44 (0)121 414 6225 (Phone)
+44 (0)121 414 7380 (Fax)

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