Multinetwork Management: Collaboration and the Hollow State in Local Economic Policy

Systematic study and understanding of multiorganizational settings under hollow state conditions has lagged behind the managerial practice of operating in networks, which has become an important element of governance. This article bridges this knowledge gap by exploring the intergovernmental networking component of economic development in 237 cities. The analysis distinguishes three different strategic types of networks, identifies determinants of the variation in the structure and composition of networks across strategic purposes, and demonstrates that the capacities required for operating in networks are different from that of single organizations. The implications for public management practice and theory lie not simply in the extent to which networks have become a primary organizational setting for designing and executing policy, but in the number and type of networks that exist within the policy making realm of a single city. Public management is now thought of as involving operation of bureaucracies plus connections with other institutions through the processes of governance. According to Frederickson (1997, 84), governance involves "the wide range of types of organizations and institutions that are linked together and engaged in public activities." In many policy arenas, such as in the broadly defined area of economic development, mutually reinforcing trends like fiscal decentralization and localization of policy responsibility mean that cities increasingly manage their affairs through mechanisms of collaboration, which puts government in a position resembling the "hollow state" (Milward et al. 1993). The hollow state concept refers to units of government that are separated from their outputs, where negotiated contracts or other This research is sponsored by the Ameritech Foundation Research Program in Management and Organizational Studies, Institute for Developmental Strategies, Indiana University. An earlier version of this article was delivered at the XVII World Congress of the International Political Science Association in Seoul, Korea, August 1997. Thanks are due to H. George Frederickson and Laurence O'Toole for their very useful comments. J-PART 8(1998): 1:67-91 67/Journal of Public Administration Research and Theory This content downloaded from 157.55.39.129 on Thu, 28 Jul 2016 04:03:12 UTC All use subject to http://about.jstor.org/terms Multinetwork Management agreements link organizations. In the case of local economic development, persons who represent government agencies spend a great deal of time arranging and operating in networks; this contrasts with the conventional view of hierarchically organizing economic policy objectives (e.g., business recruitment) through a single government agency (Fosler 1992) or acceding entirely to market forces for changes in the economy. In this article we address management in network settings by demonstrating empirically the governance context of local economic policy making and by considering the implications of this context for public management. While scholars of public management increasingly identify networks or other forms of interorganizational activity as important elements of governance, few have treated them seriously as objects of careful study, and the implications for management practice have not been systematically developed (O'Toole 1997). Toward that end, we explore networking through a comprehensive data set of the intergovernmental networking component of economic development in 237 cities. After an initial discussion of the importance of network theory and practice for local economic policy, we examine the structure of horizontal or interlocal networking and the varied contexts in which local networks occur. We also attempt to explain the variation in network activity across cities. We then draw on the study findings to provide descriptive and theoretical conclusions regarding networking and governance within the hollowing state. From an empirical standpoint, the research focuses on the dimensionality or variation of networking by strategic purpose as well as the depth or extent of network partners. Theoretically, we emphasize the link between the multidimensionality of networking in our findings and its implications for the capacity to manage within governance. Praxis involving the forces that engender networking, along with knowledge and practical information, thus is what this analysis attempts. The unique empirical contribution of local economic development policy to the study and practice of contemporary public management lies not simply in the extent to which networks are the primary organizational setting for designing and executing policy, but, more importantly, in the number and type of networks that exist within the policy-making realm of a single city. Like the many public problems that defy taming into simple, manageable steps, local development managers attend to multiple strategic tasks within the context of designing and executing economic policy. As a result, even the fundamental, routine tasks of the development manager-such as building organizations, designing strategies, marketing the area, seeking out finances, or organizing numerous development projects (Blakely 1994; Levy 681J-PART, January 1998 This content downloaded from 157.55.39.129 on Thu, 28 Jul 2016 04:03:12 UTC All use subject to http://about.jstor.org/terms Multinetwork Management 1990)-cannot be carried out alone or with the same set of actors. Like the hub of a multispoked wheel, the development manager is connected to all of the spokes-each representing a different strategic task; each consisting of networks of different composition, scope, and size; and each with its own set of management challenges and responsibilities. Managers in networks are continually faced with problems that can lead to instability (Milward 1996), and these concerns are compounded by the number of networks that constitute local economic policy making. Insofar as the performance of a particular policy sector is dependent on the effectiveness of organizational and network design, development of the capacity to organize and manage these processes is critical to both public policy and management. In this regard, public management in such complex settings likely effectuates policy to a greater degree and is more "consequential"9 (O'Toole 1996, 241) than public management in traditional bureaucratic contexts. LOCAL ECONOMIC POLICY AND THE EMERGENCE OF NETWORKING Since the early 1980s when local governments returned in earnest to economic policy making, the number of actors that have a stake in developing local economies and thus must be mobilized in order to effectively facilitate and influence economic activity has increased substantially. Consequently, local economic development is fraught with organizational maladies. Like most multiorganizational settings, multiplicity of goals is ubiquitous. Goals are so complex and so often contradictory that one analyst suggests such activity cannot be viewed as policy making because it is nearly impossible to appraise it with reference to specific goals and objectives. Instead, local economic development should be viewed solely as a political arena (Keating 1995). This arena incorporates a host of local public and private actors and organizations-as well as higher level governments-that set the development context and are potential loci of assistance. Additionally, actors involved in local economic development decision making operate in an environment that is "complex and undefined and involves an uncertain technology . . ." (Rubin 1988, 237). This uncertainty is exacerbated by a degree of information asymmetry analogous to a poker game where all of the players know what the manager is holding but the manager is not even sure of the game. Faced with the need to acquire financial resources to enhance local revenues as well as information and expertise to compensate for the complexity and uncertainty of the policy area, the development manager has become dependent on many other 69/J-PART, January 1998 This content downloaded from 157.55.39.129 on Thu, 28 Jul 2016 04:03:12 UTC All use subject to http://about.jstor.org/terms Multinetwork Management actors inside and outside the community. The governance instruments through which cities now plan, design, and execute economic development policy are complex, multiorganizational arrangements referred to as networks. Networks constitute the basic social form that permits interorganizational interactions of exchange, concerted action, and joint production (Alter and Hage 1993). O'Toole (1997, 45) defines networks as "structures of interdependence involving multiple organizations or parts thereof, where one unit is not merely the formal subordinate of the others in some larger hierarchical arrangement." Network connections among units can be either formal or informal. Multiorganizational arrangements like those that characterize local economic policy making are intersectoral and built upon the idea of collaborative problem solving (Radin et al. 1996, 151). Such networks are not merely mechanisms for coordination; they are arrangements for solving interorganizational problems that cannot be achieved by single organizations. Key actors in economic policy settings operate in networks that are mechanisms of joint production and joint service delivery, within contexts where strategic interdependence is complementary (Pennings 1981, 434). Networking then is the act of creating and/or maintaining a cluster of organizations for the purpose of exchanging, acting, or producing among the member organizations (Alter and Hage 1993, 46).