Page 44 - The Handbook - Legal and Accounting Networks 81
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Law and Accounting Networks and Associations
process is the motivation of each member’s self-interest. This is not conducive to designing a process when
each member has his/her own reason for action. Increasing capacities is better in a network because the network
expands the resources that are actually available. Governance and operations must be balanced against each
other to achieve the standards and objectives of the members.
Governance’s objective is to provide an efficient method to meet the expectations of each independent member.
This section will deal with governance of Levels 2 and 3 networks, in that Level 4 networks are in fact governed
like hierarchical management structures.198
This section’s format will first set out the theory and literature — found in excerpts from an extremely
comprehensive article by Michael Van Alstyne199 entitled “The State of Network Organizations: A Survey of
Three Frameworks” — that are the foundation of network governance. This article sets out three different
perspectives on networks — computing, economic, and sociological — to evaluate all types of networks. While
not directly discussing professional services networks, Professor Van Alstyne’s observations provide insight
to professional services networks. The second part of each section will provide remarks on professional
services networks in the context of Van Alstyne’s general observations.
Governance
Theory and Literature:
The underlying basis for a professional services network is mutual collaboration to achieve results from which
the members benefit. However, “[n]etworks are complex entities whose operations and governance are tied
together. Mutual trust and economic interests determine governance structures.”200 Members are willing to
concede control to meet their self-interests. Network governance itself is also not able to create trust unless it
relinquishes authority. Therefore, “[n]etwork governance is very different from the command and control
model used in hierarchical organizations.”201 Trust arises out of the interface and interaction of the members
with the leadership of the governing bodies. It does not come from a command and control model common in
hierarchical organizations.
Networks are about creating interaction among professionals through governance structures. This is
particularly complex because “[m]embers tend to judge actions for consistency with identity, using peer
pressure to sanction behaviors apposite of group norms: the nail that sticks up is the one hammered down.”202
The governing bodies define the structure in the context of the environmental realities. “Groups then benefit
organizations through coordinating joint activities, promoting specialization, and facilitating organizational
learning.”
Because network organizations as societies are burdened with identity maintenance
activity, relationship building, power seeking, and politics influence its actions. They
constantly engage in attempts to control the social construction of boundaries and at the
same time, via integration mechanisms, to penetrate these boundaries. Aside from
198 See infra Chapter 7, Regulations and Other Legal Considerations for Networks.
199 Van Alstyne, supra note 9.: Van Alstyne sets out with great precision the characteristics of networks from three different perspectives. Additional
information that related to legal and accounting professional networks have been added to illustrate a number of Van Alstyne’s observations and
conclusions. See also J. C. Jarillo, On Strategic Networks, 9 STRATEGIC MGMT J. 31, 41 (1988); see also J. C. Jarillo & J. E. Ricart, Sustaining Networks,
Sustaining Networks, 5 INTERFACES 82, 91 (1987); see also H. Thorelli, Networks: Between Markets and Hierarchies, 7 STRATEGIC MGMT. J. 37, 37-
51 (1986).
200 Van Alstyne, supra note 9, citing Powell; see also Walter W. Powell, Neither Market Nor Hierarchy: Network Forms of Organizations, 12 RES. IN
ORG. BEHAVIOR 295, 293-330 (1990); see also C. Sabel, Mobius-Strip Organizations and Open Labor Markets: Some Consequences of the
Reintegration of Conception and Execution in a Volatile Economy, SOCIAL THEORY FOR A CHANGING SOCIETY 23-61 (P. Bairdieu & J. S. Coleman,
Eds. 1991).
201 R. E. Miles & C. C. Snow, Organizations: New Concepts for New Forms, 28 CAL. MGMT. REV. 62, 62-73 (1986).
202 Van Alstyne, supra note 9.
32
process is the motivation of each member’s self-interest. This is not conducive to designing a process when
each member has his/her own reason for action. Increasing capacities is better in a network because the network
expands the resources that are actually available. Governance and operations must be balanced against each
other to achieve the standards and objectives of the members.
Governance’s objective is to provide an efficient method to meet the expectations of each independent member.
This section will deal with governance of Levels 2 and 3 networks, in that Level 4 networks are in fact governed
like hierarchical management structures.198
This section’s format will first set out the theory and literature — found in excerpts from an extremely
comprehensive article by Michael Van Alstyne199 entitled “The State of Network Organizations: A Survey of
Three Frameworks” — that are the foundation of network governance. This article sets out three different
perspectives on networks — computing, economic, and sociological — to evaluate all types of networks. While
not directly discussing professional services networks, Professor Van Alstyne’s observations provide insight
to professional services networks. The second part of each section will provide remarks on professional
services networks in the context of Van Alstyne’s general observations.
Governance
Theory and Literature:
The underlying basis for a professional services network is mutual collaboration to achieve results from which
the members benefit. However, “[n]etworks are complex entities whose operations and governance are tied
together. Mutual trust and economic interests determine governance structures.”200 Members are willing to
concede control to meet their self-interests. Network governance itself is also not able to create trust unless it
relinquishes authority. Therefore, “[n]etwork governance is very different from the command and control
model used in hierarchical organizations.”201 Trust arises out of the interface and interaction of the members
with the leadership of the governing bodies. It does not come from a command and control model common in
hierarchical organizations.
Networks are about creating interaction among professionals through governance structures. This is
particularly complex because “[m]embers tend to judge actions for consistency with identity, using peer
pressure to sanction behaviors apposite of group norms: the nail that sticks up is the one hammered down.”202
The governing bodies define the structure in the context of the environmental realities. “Groups then benefit
organizations through coordinating joint activities, promoting specialization, and facilitating organizational
learning.”
Because network organizations as societies are burdened with identity maintenance
activity, relationship building, power seeking, and politics influence its actions. They
constantly engage in attempts to control the social construction of boundaries and at the
same time, via integration mechanisms, to penetrate these boundaries. Aside from
198 See infra Chapter 7, Regulations and Other Legal Considerations for Networks.
199 Van Alstyne, supra note 9.: Van Alstyne sets out with great precision the characteristics of networks from three different perspectives. Additional
information that related to legal and accounting professional networks have been added to illustrate a number of Van Alstyne’s observations and
conclusions. See also J. C. Jarillo, On Strategic Networks, 9 STRATEGIC MGMT J. 31, 41 (1988); see also J. C. Jarillo & J. E. Ricart, Sustaining Networks,
Sustaining Networks, 5 INTERFACES 82, 91 (1987); see also H. Thorelli, Networks: Between Markets and Hierarchies, 7 STRATEGIC MGMT. J. 37, 37-
51 (1986).
200 Van Alstyne, supra note 9, citing Powell; see also Walter W. Powell, Neither Market Nor Hierarchy: Network Forms of Organizations, 12 RES. IN
ORG. BEHAVIOR 295, 293-330 (1990); see also C. Sabel, Mobius-Strip Organizations and Open Labor Markets: Some Consequences of the
Reintegration of Conception and Execution in a Volatile Economy, SOCIAL THEORY FOR A CHANGING SOCIETY 23-61 (P. Bairdieu & J. S. Coleman,
Eds. 1991).
201 R. E. Miles & C. C. Snow, Organizations: New Concepts for New Forms, 28 CAL. MGMT. REV. 62, 62-73 (1986).
202 Van Alstyne, supra note 9.
32
