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Governance in Network Industries: Lessons Learnt from New Institutional Economics

Author(s): GLACHANT Jean-Michel

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ABSTRACT

Institutional economics provide a useful frame to navigate the fuzzy world of governance structures. Of course markets, firms and relational contracting (or Hybrid Forms) are alternative tools which can complement or substitute each other to frame transactions made among economic agents. However, firms are not a single piece of governance structure as they might handle different transactions very differently. Either inside the firm, such as the day-to-day operational workflow, the hazards of R&D discovery and trials, the long term production of skills and knowledge through organized definition and allocation of tasks, the coordination between today’s and tomorrow’s operations e.g. between the various levels of management and the interactions with the stockholders, or outside the firm in the interactions with suppliers, customers bankers and the social or professional communities. Truly, those firms are all conglomerates of several governance sub-structures. So are the markets conglomerates of several governance mechanisms. It is why we are able to think about designing/redesigning the markets we have and to move to get the markets that we would like to have. Knowing all that: how to apply it to the existing Network Industries?