Lateral Network Governance: Legitimacy and the Relational Delegation of Decision-Making Authority

Abstract

This article goes beyond the acknowledgement of networks as a governance mode to elaborate on the actual forms of governance that convey legitimate and acceptable coordination. It advances the concept of lateral network governance in the empirical context of organized networks, in which firms pool resources and join their interests in the pursuit of common goals. To solve the puzzle of having independent equals commit themselves to coordinating their actions, the paper aims to overcome the traditional dualism between formal and informal mechanisms of governance. Instead it conceives lateral network governance as a structure for the legitimate delegation of decision-making. It develops a social network analytic approach to assessing the relational distribution of legitimacy. The empirical analysis of two case studies of inter-firm network organizations illustrates the degree to which the actual legitimacy distribution diverges from formal governance authority. Lateral network governance has practical implications for inter-organizational networks and network managers.