Network governance construction in a cross-cultural setting: the role of the contract

Several studies on network governance mechanisms have recognized a significant role to contract and accounting measures, as formal mechanisms, and have assigned a central role to trust, as a social mechanism of control. Focusing our attention to business networks in which firms of different countries are embedded, we are interested to better understand how the formal and social governance mechanisms are related. Business networks whose partners come from different countries are cross-cultural contexts where the roles assigned to social governance mechanisms may differ among the partners. In studying such networks, we focus on the network governance construction process, recognizing the contract as the main coordination and control mechanism for stabilizing interfirm relationships and network organizations. This paper aims to examine the process that might lead to the formulation of a contract between firms, viewed as one of the basic mechanisms of governance in a cross-national network organization. This process is described comparing two different theories: the Actor Network Theory (ANT) and the Pragmatic Constructivism (PC). ANT explains how the difference in the parties' interests was a key point in problematizing the introduction of the contract. However, ANT does not offer sufficient reasons to explain why the translation fails in a cross-national network organization, where different national values may be relevant. Then we use the PC to explain a missed integration between national values, considering a contract a way of thinking. Adopting the above theoretical perspectives, a case study is accomplished referring to a process aimed to construct a cross-cultural network between an Italian, an Albanian and a Kosovar firm operating in the artistic lightening system business. The evidence showed that the presence of trust can be an obstacle as is the case for other informal mechanisms like national cultures and values. A negative nexus is highlighted between informal and formal mechanisms of governance. This nexus has been complicated by the interdependence between the two kinds of relations comprised in the informal business network under study.