Why do network organizations fail?

This paper examines 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. 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. Our 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”). The results of our 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. We explain such differences, considering them according to the expected goals declared by the two different types of networks.