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Regulation, Governance & Strategic Behaviour in Business
Networks
Dr. Emanuela Todeva Director of Research Centre for Business Clusters, Networks and Economic Development, University of Surrey
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• Regulation– Todeva, E. (2010) ‘Theoretical Tensions Between Regulation,
Governance, and Strategic Behaviour in a Federated World Order’, International Journal of Social Economics, 37 (10): 784- 801.
• Governance• Todeva, E. (2005) ‘Governance, Control & Coordination in Network
Context: The Cases of Japanese Keiretsu and Sogo Shosha’, Journal of International Management, 11(1): 87-109.
• Strategic Behaviour– Todeva, E. (2013) ‘Governance of Innovation and Intermediation in
The Triple Helix Interactions’, Industry and Higher Education, 27(4): 263-278.
– Todeva, E. (2006) Business Networks: Strategy and Structure, New York: Taylor & Francis.
– Todeva, E. (2015) Managing International Business Networks, New York: Taylor & Francis
• Coordination Mechanisms for Policy Intervention
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Shift in Our Vision - From Autonomous Actors to Interconnected Actors and
Systems
… In a universe of good will, perfect moral order, and universal peace, the world’s citizenship should be organised in a federated system ofstates, free to choose their own universal laws … (Immanuel Kant).
Governments as regulators of national socio-economic systems are strategic actors in their capacity to actively shape the regulatory environment, implementing various coordination mechanisms that facilitate the functioning of the economy and the society (Todeva)
Wealth Creation and Distribution in an Interconnected World
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normativeframework
relationsbehaviour
Paradigm Shift in Regulation and Institutional Theory:Coercion vs. Consent
Institutions involve an umbrella of laws, contracts, agreements, norms, conventions, practices, procedures, routines and expectations that represent selection choices
Regulation, law, incentives, compliance & control
Institutions, policies normative
constraints
INSTITUTIONS Embody INCENTIVES AND ENVIRONMENTAL CONSTRAINTS that Shape Actors Behaviour
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© Todeva (2012)
• Designing and maintaining the Innovation System – for reproduction of knowledge and novelty creation
• Efficient Political Leadership and Normative Control• Oversight of the Market process, and the Innovation
Process of knowledge & technology transfer• Oversight of the Innovation Outcomes
• Efficient employment of the Factors of Production
• Efficient management of the Factors of Innovation
• Governing of Relationships at the Intersection
between the Public and the Private Sector
Challenges to Governance of Innovation & the Role of Triple Helix:
Government, University & Industry
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Challenges to Governance of Innovation & the Role of Triple Helix:
Government, University & Industry
• Governance of Innovation - Regulation and Administration of the Innovation Process
• Financing of Innovation
• Evaluation of Innovation Outcomes - Sustainability, market acceptance & the measurement of externalities
• Facilitation of Transactions, Interactions, Communications and Decisions Related to Innovation
• Coordination and Facilitation of R&D Collaborations and Technology Transfer Between Industry & University
© Todeva (2012)
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The Nature of Government Intervention
• Government intervention and financing of innovation policies:– Mission Policies (i.e. setting priorities and targets)– Infrastructure Policies (i.e. defence, transportation,
security)– Diffusion and Technology Transfer Policies (i.e.
patents)– Technological Districts and Cluster Policies (i.e.
assistance in economic development )
© Todeva (2012)
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Designing Implementation Tools and Institutional Platforms
• strategic direction & financing• enhancing corporate capabilities,• Ensuring accountability and
representation,• transparency and control,• redistribution of rents among
shareholders and residual claimants
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Public Governance & the Role of Government
• Regulation Theory– Governance of the society and the economy– Legitimate laws, rules and procedures– Public agents and Institutions carrying out public interests– Legitimate governance bodies with capacity and capabilities
to govern, create incentives for behavioural changes, supervise implementation, and anticipate future challenges
• Public Administration Theory - Public Choice & Principle-Agent Theory– Democratic choice and control over public agents and their
legislative power– Social contract between Governed and Governors– Synergy and conflict between elected Principals and
appointed Agents– Bureaucratic direction and intervention in the economy– Allocation of resources, control and coordination of economic
activities• Coordination, Intermediation, Facilitation
© Todeva (2007)
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Agency Theory & Transaction Costs Economics
• Involves separation of owners (principals) and managers (agents) of a firm• In Multi-lateral networks agents’ boundaries
become permeable• Involves delegation of decision-making authority by
owners to managers• In dispersed networks the value creation /
dissemination / extraction is fragmented• Potential agency costs from bonding, locking,
contract enforcement and opportunity costs– are difficult to estimate
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© Todeva (2012)
Intermediation Theory: Facilitation & Accountability
Agents that reduce ‘search’, ‘bargaining’, & other transaction costs – wholesalers, retailers, financial institutions
Middlemen integrating markets in cases of market failure
Coordinators in cases of asymmetric information
• Types of Intermediaries• Financial Intermediary• Institutional Intermediary• Consultants & Consulting Organisations
• Types of Intermediation
• Channels of Intermediation
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Financial Intermediaries
Budgetary Establishments
Banks Funding Bodies
Venture Capital Firms
Contracting Agents
© Todeva (2012)
Financial Intermediation
Government Budgetary Establishments (fundamental research)
Funding Bodies - Foundations, Charities, Voluntary Organisations (applied research)
Banks (experimental and developmental research)
Venture Capital Firms (experimental and developmental research)
Contracting Agents
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© Todeva (2012)
Institutional Intermediaries
Government Departments
Public Agencies
Charities
Legal Firms
Licensing Organisations
KTT Offices
NGO’s
Consultants & Experts
Institutional Intermediation & Relationship Management
Institutions are involved in:
- Distribution of resources
- Events management
- Project management
- Representation, certification and legal advice
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© Todeva (2012)
Types of Intermediation
Financing
Searching / Matching / Bridging
Legal Registration
Decision Support
Evaluation Knowledge Translation
Protecting Rights
Types of Intermediation Activities
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© Todeva (2012)
Intermediation Channels
Patents &Licences
Technology Alliances & R&D Outsourcing
Spin-off Companies
Scientific Publications
Education Contract Research
Collaborative Research
Events
Intermediation Channels
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Corporate GovernanceA system / mechanism for allocation of capital and corporate resources,
for co-ordination and control of economic activities at firm level that facilitates: strategic
direction, accountability,transparency, wealth creation
Relational Environment, Relational Embeddedness
Structural EnvironmentNetwork Structure,
Organisational Structure,Efficient Organisational Processes &
Routines, Intra-firm & Inter-firmMonitoring & Control
Institutional Environment,Institutional Embeddedness,
Conventions, Individual Contractual Obligations, Contract Enforcement
Practices
Network GovernanceA system / mechanism for allocation
of capital and network resources, for co-ordination and control of economic
activities at network level
Strategic Decision Making
Actor Attributes, Skills & Capabilities,
Resource Dependencies
Global & Local Environmental Factors,Market Conditions
The Network Governance Mechanisms
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Industry context(wider business
environment)
Industry structure
Strategic choices
- Industry groups- Value chain- Nish product markets- Location of factors of production
- Product portfolio (diversification)- Target markets- Location- Technologies- Value capture- Resource dependencies
first ordereffect
second ordereffect
Strategic Behaviour under Policies, Incentives &
Normative Constraints
Todeva, 2010
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Self-Regulating Market Co-ordination
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Administrative co-ordination
Hierarchy = structuring of collective economic activities
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Family co-ordination - Authority
power = the capacity to affect (effect) organisational outcomes (Mintzberg, 1983)
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Community co-ordination - Representation
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Self-governing co-ordination – Governing Platforms
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Japanese Keiretsu Business Networks
Shacho-kai
First tier suppliers
Second tier suppliers
GROUPBANK
Institution-centred 2-tier governance system Multi-level boundaries of corporate units with
interlocking ties Resource & capabilities -based division of labour Managing through co-ordinated Interdependence
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Japanese Sogo Shosha Business Networks
Sogo Shoshatrading
company
Foreign partners
BANK
Keiretsunetwork
Firms
Intermediary-centred network, utilising mixed ownership & connectivity role
Blurred ownership and control boundaries Asset-based division of labour Managing by controlled autonomy & controlled
Interdependence
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25Lothar Krempel
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26Lothar Krempel
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Conclusions
1. The locus of Innovation is in partnerships and networks that require coordination and facilitation
2. The locus of Governance is in Coordination, Facilitation & Intermediation that reduces Costs and increases Opportunities for all agents, including Universities, Industry and Government
3. Intermediaries provide specialised services and resources (information, capital, advice) to networks and partnerships
4. Intermediation and Facilitation enhances the outcomes from KTT (knowledge and technology transfer)
5. Intermediation and Facilitation employ institutions and hybrid organisations that are difficult to control and govern through traditional methods
6. Empirical evidence demonstrates that intermediaries serve multiple purposes and employ a 2-way communication between intermediate agents and organisations, dealing with conflicts of interests and ethical dilemmas.
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http://www.surrey.ac.uk/bcned
http://ssrn.com/author=1124332
Institutions, Intermediation and Triple Helix RelationshipsSpecial Issues of the Triple Helix: A Journal of University-Industry-Government Innovation & Entrepreneurship (Springer)