Why do network organizations fail?

Abstract

Purpose The purpose of this paper is to examine network failures and the main reasons why network organizations, intentionally developed by a group of actors to pursue specific goals, become unfruitful and fail in their goals and expectations of creating collective value. The goal of this paper is thus to contribute a better understanding of the reasons network organizations encounter problems in their dynamics that prevent them from reaching the expected outcomes. Design/methodology/approach The study is firstly based on a literature review finalized to identify the main variables considered as potentially impacting on network failures. Secondly, the paper is based on a survey conducted on 189 strategic networks that highlighted difficulties in achieving their goals. An analysis of the 24 questionnaires returned generated the results discussed. The empirical study concerns strategic networks intentionally created and signed by Italian SMEs according to a specific law designed to promote the development of inter-firm cooperation (“network contracts”). Findings The results of the research highlight the role of specific key items related to individual, structural, legitimacy, interaction and governance variables in explaining failures in network organizations. According to the data, failure can occur immediately before the network start-up, resulting in a blocked network or in a subsequent developmental stage, resulting in a dormant network. The empirical research demonstrated that the items affecting network failure differ between blocked and dormant networks. The authors explain such differences, considering them according to the expected goals declared by the two different types of networks. Originality/value The question of why networks fail is relevant in times of disruption and digitalization when new forms of organization are needed to link businesses and various stakeholders and thereby develop innovative and sustainable ideas for an entrepreneurial future. However, very few studies have examined network failure. The study contributes to this field of research by investigating the dynamics of networks intentionally developed to reach shared goals. The findings can be useful to both companies that decide to start up a strategic network and the policymakers that promote, finance and monitor inter-firm collaboration.