Principles for Controlling Agents: The Political Economy of Network Structure

Abstract

The authors of this article have developed a preliminary theory of network effectiveness wherein the unit of analysis is not the organization but the ties between the parts of a network of organizations that jointly produce a service (Provan and Milward 1995). This theory and the study that produced it differ from most studies of interorganizational relations and networks in that it has a performance-based dependent variable. The leading text in the field of public organizations, Hal G. Rainey's Understanding and Managing Public Organizations (1996, 140), calls the article “particularly important [for] new insights and direction for research and thought on effectiveness of government services.…” The conclusions, which were based on a four-city study, were that the most effective community mental health network was not flexible or adaptive. The most effective network was controlled by a monopoly provider that dominated both services provision and the terms under which mental health services and funding were provided by other agencies. Most notably, this nonprofit agency had veto power over government contracts with other providers regarding services for mental illness.