Unreached potential
A study into the effectiveness of a small scale sustainable
network in the
Netherlands
Fabienne Miltenburg
Master’s Thesis
Public Administration
Unreached potential
A study into the effectiveness of a small scale sustainable
network in the
Netherlands
Fabienne R. L. M. Miltenburg (s1630687)
ThesisUniversiteit Leiden
Faculty of Governance and Global Affairs Master Public Administration (MSc)
Specialization: Public Management and Leadership
Supervisor
Dr. J. Schalk
Second reader
Dr. P.E.A. van den Bekerom March 2020
Preface
By working on this thesis, I have learned a lot about network cooperation. But more, it has taught me what amazing initiatives there are in the Netherlands alone for battling food waste. I had the privilege to speak with entrepreneurs with a great passion for their product and their drive to make the world more sustainable, even if it is a little bit. I have gained such respect for these creative, innovative, and above all brave people. Thank you. I have gained insights on the giant problem of food waste. On average, one-thirds of our food is wasted. Obviously, this occurs in the production process, and in transportation. But above all: we as consumers are the accelerators of this problem. We as consumers have taught ourselves that only perfectly looking food products are tasty, that expiration dates are laws set in stone, and that leftovers are just as well off in the garbage bin. But food is food, and we should regain love for it - as I have seen with these entrepreneurs. I certainly have.
I wish to thank my family and friends for listening to my process, helping me with new ideas, and encouraging me when I was not believing in it anymore myself. I thank everyone who along the way gave me new tips or insights. Thanks to my supervisor Jelmer Schalk who kept me on the ground with all my ideas.
I do not have the technical or agricultural, or even culinary skills to lessen the food waste problem in the way the entrepreneurs in this thesis do, but I hope that my organizational insights can somehow change how the government looks at food waste and these network initiatives to battle it. That it will perhaps influence policy, or that it reaches other food waste initiatives to help improve their effectiveness. Or that it will inspire the reader to look up these initiatives, and read this thesis perhaps while enjoying some iced tea from outcast fruits, or soup from deformed tomatoes, or chutney from rejected onions.
Have a good read, Fabienne Miltenburg
Contents
Abstract ---6
List of abbreviations, figures, tables and images ---7
1. Introduction ---8
1.1 Problem indication ---8
1.1.1 Aim of the research ---9
1.2 Case selection ---10 1.3 Structure ---10 1.4 Relevance ---11 1.4.1 Societal relevance ---11 1.4.2 Scientific relevance ---11 2. Theoretical framework ---12
2.1 Literature on sustainable businesses ---12
2.1.1 Goals for sustainable businesses ---13
2.1.2 Challenge: Stakeholder value ---14
2.1.3 Challenge: Scalability ---14
2.1.4 Concluding on sustainable businesses ---14
2.2 Theory on network effectiveness ---15
2.2.1 Effectiveness ---16
2.2.2 Structure of the network ---17
2.2.3 Network goal: Cost efficiency ---17
2.2.4 Network goal: Fast adaptations ---18
2.2.5 Costs ---18
2.2.6 Conflict ---19
2.3 Lessons from effectiveness in networks in the sustainability sector ---20
2.3.1 Sets of measures of effectiveness ---21
2.3.2 Network structure: Centralization and a champion ---22
2.3.3 Network communication ---24
2.3.4 Network resources and costs ---25
2.4 Definition of concepts ---26 2.5 Conceptual model ---27 3. Empirical context ---29 3.1 Verspilling is Verrukkelijk ---29 3.1.1 Member organizations ---29 3.1.2 Mission ---32 3.1.3 Organizational structure ---32 3.2 Sustainable businesses ---33 4. Methodology ---34 4.1 Case selection ---34 4.2 Data collection ---36 4.2.1 Participant selection ---36
4.2.2 Websites ---36 4.2.3 Interviews ---37 4.2.4 Respondents ---38 4.2.5 Interview transcripts ---40 4.3 Operationalization ---40 4.3.1 Interview questions ---43 5. Analysis ---44 5.1 Initial findings ---44 5.2 Core findings ---47
5.2.1 The establishment of ViV: Goal and scalability ---48
5.2.2 Centralization ---49
5.2.3 The presence of a champion ---52
5.2.4 Communication ---54 5.2.5 Costs ---56 5.3 Study results ---60 5.4 Additional remarks ---60 5.5 Analytical inference ---63 5.5.1 Alternative model ---64 6. Conclusion ---67
6.1 Answering the research question ---67
6.2 Discussion ---67
6.2.1 Tensions within ViV ---67
6.2.2 Contributions, limitations and further research ---69
6.3 Policy recommendations ---71
6.3.1 Cost reduction ---71
6.3.2 Network guidance ---72
7. Bibliography ---73
Appendix 1: Visualized theoretical framework ---79
Appendix 2: Members of Verspilling is Verrukkelijk ---80
Appendix 3a and 3b: ViV members in March 2018 and December 2019 ---83
Appendix 4: Email sent to all the members of ViV ---84
Appendix 5: Attempts to contact the ViV organizations ---85
Appendix 6a and 6b: Emails from Bokkenbunker and MVO Nederland ---87
Appendix 7: Interview questions in Dutch ---88
Appendix 8: Interview Glorious Bastards ---89
Appendix 9: Interview Kromkommer ---95
Appendix 10: Interview Hutten ---98
Appendix 11: Interview De Lekkere Man ---107
Appendix 12: Interview The Ketchup Project ---116
Appendix 13: Interview De Verspillingsfabriek ---121
Abstract
Sustainable businesses often form alliances with partners to battle the problem of scalability and profitability. Sustainable businesses in the circular food sector battle a ‘wicked’ problem, and gather in networks to enlarge their network and to minimize costs. It is assumed that cooperation with similar businesses creates a stronger position against large clients, because of the benefit of collectivity. However, a network is no insurance for success. In order to act as a collective, the network should be structured as a collective. This, however, is not self-evident. To find out what leads to effectiveness of a network of small sustainable businesses, its relation with centralization is researched. More specifically, it is studied whether more centralization within the network leads to network effectiveness. To examine this possible connection, interviews are conducted with the member organizations of a Dutch network of small sustainable businesses, Verspilling is Verrukkelijk. The results, based on the case study of Verspilling is Verrukkelijk and the interviews, have not identified a positive relation between network centralization and network effectiveness. This conclusion was reached not because the link is unidentifiable, but because the link was negatively established. The case experienced low centralization, which was the cause of low effectiveness. Thus, the hypothesis is not dismissed, it is rather not proven. The relation was hypothesized to be supported by a champion and by communication. These were not proven. This does not entail that the concepts are not correlated whatsoever, however, it challenges for more elaborate research into the connection between centralization and effectiveness. The influence of costs on the effectiveness of networks, however, was strongly present. The presence of costs has a strong negative effect on the activities performed within the network, and the efforts of the member organizations. Because of the weak connection between centralization and effectiveness, it is recommended to conduct more research on the effect of costs on the relationship between those concepts. A new conceptual framework for this further research is proposed, in which the important role of costs for network effectiveness is studied more in depth.
Key concepts: centralization, effectiveness, network, sustainable business, communication, champion, costs, resources, network governance, network structure, network context.
List of abbreviations, figures, tables and images
NOSB: Network of sustainable businesses ViV: Verspilling is Verrukkelijk
Figure 1: Conceptual model
Figure 2: Visualized theoretical framework Figure 3: Alternative conceptual model Table 1: Key concepts and definitions Table 2: Respondents
Table 3: Key concepts, operationalization and interview questions Table 4: Centrality of ViV for the member organizations
Table 5: Analytical overview
Table 6: Members of Verspilling is Verrukkelijk
Table 7: Attempts to get in contact with the organizations Image 1: Members of ViV March 2018
Image 2: Members of ViV December 2019 Image 3: Email from Bokkenbunker Image 4: Email from MVO Nederland
1. Introduction
The main question in this thesis is to what extent centralization leads to improved effectiveness of a network. Specifically, this thesis will focus on the effectiveness of a network of small-scale sustainable businesses through centralization, the presence of a champion, communication and costs. In this section, I will explain the motivations for this thesis, and the puzzle that I am attempting to solve around network effectiveness and sustainable businesses.
1.1 Problem indication
Sustainability is hot. In these times where climate change and waste problems dominate the view of our future, circularity appears to be a sustainable solution. In a circular economy, every product is used and reused to a maximum extent. It presents a whole new way of looking at waste, and how to use waste as a resource. In the Netherlands, the national railways have an exhibition on the reuse of old railway parts (NS 2019), electronics multinational Philips redesigns their lighting systems to make it more durable (Philips 2019), and clothing brand G-Star Raw creates jeans from plastic out of the ocean (Van den Outenaar 2016). Next to these large businesses, also smaller initiatives have tried circularity. In order to contribute to a circular economy, an entrepreneur must approach its production process differently: aside from acquiring profits, striving for sustainability is a key part of the entrepreneur’s business plan (Baumgartner & Rauter 2017). However, smaller entrepreneurs may struggle with satisfying both outcomes, because this requires very efficient use of resources. To save efforts, networks of sustainable businesses are established to bundle their resources and address the problem collectively. This thesis will research the effectiveness of a network of small, Dutch organizations that create new (food) products from otherwise wasted food material to battle food waste.
The problem of food waste is a ‘wicked problem’ - a problem that spans so widely that it cannot be solved by a single organization. In these instances, actors can choose to cooperate to reach results faster and in greater multitude. Verspilling is Verrukkelijk (ViV) is one of those cooperative networks. This platform focuses on smaller sustainable entrepreneurs in the food production sector. All participating entrepreneurs process food that would otherwise have been thrown away - surplus products. Additionally, most organizations are quite young and small, and are mainly involved with their own local market. Verspilling is Verrukkelijk is established to unite small sustainable entrepreneurs in order to create more awareness and a larger market (ViV 2019). However, there is a tension between creating a large public for the food waste problem, and the complexity of managing and upholding a sustainable business. How to solve this tension is the
puzzle this thesis will tackle. It becomes clear that a network of sustainable businesses has special requirements to be successful, which this thesis will discuss and analyse. Because of the social relevance of battling food waste, it is interesting to investigate how a network can be effective also for other networks of (small) sustainable businesses.
1.1.1 Aim of the research
In the literature, several relevant factors for network effectiveness are discussed. This is combined with the goals and challenges of sustainable businesses, which are also relevant for the effectiveness of a network of sustainable businesses. In the literature, centralization is found to be an essential factor in reaching effectiveness. The aim of the research is to investigate to what extent centralization can improve network effectiveness in order to lessen the tension for the entrepreneurs between the performance of their own business and the network of small scale sustainable businesses. The case study for this thesis is thus not a regular network, but a network of small scale sustainable businesses. The available literature discusses networks and their effectiveness, and sustainable businesses. Based on this literature, this thesis will additionally focus on the (yet under-researched) role of the small size of the network’s organizations.
Networks are extremely useful in achieving goals that organizations by themselves would not have achieved. In a network, it is possible for organizations to use resources more efficiently, and to create an increased capacity to plan and address complex problems (Provan & Kenis 2007). However, simply the establishment of a network is no guarantee for success. The affiliated organizations need to commit time, effort and resources to the network in order to reach network goals and effectiveness. Although the organizations may stand positively towards the network, a centralized structure is argued to be needed to ensure commitment and effort, which is essential for effectiveness, this thesis argues. The challenge is the implementation of this structure.
This research is interesting, because the sustainability sector is difficult. It is quite new to engage in a circular economy. It is costly in time, effort and resources. These factors together make that effectiveness of this network through cooperation between these sustainable enterprises is quite difficult and effectiveness is not obvious, as this thesis hypothesizes. Centralization increases effectiveness, and is positively influenced by communication and having a champion, but negatively influenced by costs.
The research question is:
To what extent does centralization influence the effectiveness of a network?
By conducting interviews, the members of ViV are questioned about the network. The data is collected and analyzed together with the theory on sustainable businesses and networks to determine whether centralization improves the effectiveness of ViV. Additionally, the hypothesized positive effects of communication and the presence of a champion are studied. Furthermore, costs are negatively connected to structure, because a shortage of (financial) resources complicates the
installment of a solid structure, and increases a focus on the production of the sustainable businesses instead of the network.
1.2 Case selection
The case selected for this thesis is Verspilling is Verrukkelijk. It is a network consisting of small scale Dutch sustainable producers gathered to collectively create awareness about food waste. This network is chosen because it is rather young, and is still in the stage of developing towards becoming a stable network. The goal of the member organizations is also creating awareness for both food waste and their solutions for it, which they do by creating new products from wasted food products and by giving lectures on circularity and food waste. The network ViV does not produce products on its own or by its name. The organizations’s products are very diverse. Some organizations use vegetables or fruit that would be denied for sale, and make soups, sauces, chutney or cider from it (De Fruitmotor 2019; De Verspillingsfabriek 2019; Potverdorie 2019). Other business use residual waste for new products, such as soaps from coffee residu and orange peels (SOOP 2019), or oyster mushrooms produced on coffee residu (GRO 2019). Another variation is that the business uses a product that was never meant for food production at all, such as processing male goat meat or bull meat (Bokkenbunker 2019; De Lekkere Man 2019). These initiatives are piece by piece original, and aim to change the view of the consumer about ‘wasted’ food products. Naturally, for these businesses, much of their time is invested in producing their products and delivering it to the client. Verspilling is Verrukkelijk demands of the entrepreneurs, simultaneously, that they invest time in awareness campaigns and events where they discuss food waste and strategies to battle it, and to invest time in contracts with supermarkets to sell their products. This causes a dilemma. The organizations involved with ViV are young, small businesses - mostly consisting of 1-5 people. As the businesses tell, it is not easy to start and maintain a business based on waste-food. The involvement with ViV does give them more exposure and chances to sell more products, but it takes time away from their production process and the maintenance of contact with their own clientele. ViV is designed to be a platform to create collective awareness and exposure for the organizations, but has the tendency to take away necessary production time to reach these results. The effectiveness of this network, despite this tension, is researched.
1.3 Structure
To properly research the effectiveness of a network with small scale sustainable businesses, a strong theoretical basis is provided, in which three topics are discussed: sustainable businesses, network effectiveness, and networks of sustainable businesses. After, information on the network Verspilling is Verrukkelijk is given, in which the network and the member organizations are discussed further. Then, the methodology of this study will be explained. Fifthly, an analysis of the effectiveness of ViV will be presented, at the hand of website information and informants interviews. Concluding, the effectiveness of ViV will be elaborated on in the last section. An answer to the research question, together with policy recommendations are provided.
1.4 Relevance
1.4.1 Societal relevance
As discussed before, enthusiasm for sustainable production is growing. Within fifteen years, the sustainable development goals of the UN and the circular goals of the European Commission should be achieved (UN 2020), in which sustainable food production plays a large role. Circular production is not only idealistic, it has become necessary. By joining forces in a network, the participating organizations hope to create a larger sphere of influence for their products. Effectiveness is indispensable for a network if it desires to grow and keep producing. By researching this network of sustainable organizations, examples of how to reach effectiveness, and how to increase it can be given to ViV, and perhaps more organizations can benefit. Additionally, suggestions on how government policy on sustainable business networks can be improved, are provided.
1.4.2 Scientific relevance
Networks are increasing in popularity, and more and more networks arise. Networks are a great solution for solving big problems and for ensuring easy cooperation - so it seems. Networks, however, do urge for a non-hierarchical cooperation, which can make effective structural production difficult. “In collaborative bodies, decisions and agreements are necessarily based on consensus, inasmuch as participating administrators and professionals are partners, not superior– subordinates. As such, they are conveners, strategists, co–action formulators, co-programmers, and so on,” Agranoff (2006) claims. However, often, the actual effectiveness and potential failure of networks are overshadowed by these advantages. Especially in the sustainability sector, there are more necessary factors that account for success tan in corporate organizations. The effectiveness of this network is complicated by the information that this network consists of small, young organizations, in a sector that required a lot of effort, resources, and commitment. It is thus essential to research how networks in the sustainability sector can be effective. Although the hypotheses of this thesis remain unsupported, by researching how this network of small scale sustainable businesses can be effective, it can be used as an example, or as a start for further research of sustainability in networks, and thus contribute to the literature on network effectiveness.
2. Theoretical framework
This chapter has the aim of building a theoretical framework on effectiveness of networks of sustainable businesses (NOSB’s). This will be reached by combining literature on sustainable businesses and on network effectiveness. The outcomes of the two sections will be compared with case studies of sustainability networks. Concluding, based on the three sections of literature, hypotheses are formed and a conceptual framework is presented.
This chapter is divided in three parts. First, literature on sustainable businesses will be discussed. The main goal of this section is to identify the objectives of sustainable businesses, and their challenges in pursuing these objectives. When later discussing network effectiveness, the characteristics and goals of sustainable businesses must be taken into account. Second, theory around the effectiveness of networks is discussed. Effectiveness itself is defined by four components: cost containment, predictability of outcomes, even power relations and commitment. In the third section, the information from 2.1 and 2.2 is bundled, and is put to the test by evaluating best and worst practices of networks in de sustainability sector at the hand of effectiveness measures as presented by Provan and Milward (1995). At the hand of the tested theory and the evaluations of the best practices, hypotheses will be formed about the effectiveness of an NOSB. Appendix 1 contains a visualized theoretical framework, to see how the various sections of theory relates to each other and to the research objective.
2.1 Literature on sustainable businesses
A sustainable business is a business that has divided attention between sustainability and profitability. Because of this definition, sustainable businesses are also named as a part of the circular economy. Sustainability is defined as: “preserving and enhancing natural capital, optimizing yields from resources in use, and fostering system effectiveness (minimizing negative externalities)” (Ellen MacArthur Foundation et al. 2015). It thus engages in multiple feeds: careful use of resources, complete use of resources, and striving for efficiency. Sustainability can be reached through waste management, production with green energy, or production from waste products, among others (Bocken et al. 2014).
The literature focuses on sustainable business models. By reviewing literature on business models, insights are gathered on how sustainable businesses face their challenges, deliver products and how revenues are created (Baumgartner & Raumer 2017). It is quite a new field of research., as Piscicelli et al. (2018) claim that sustainable business models are not researched well yet. However, sustainable business models are necessary because of the large tension that arises between being
profitable and being sustainable, and the importance of the environment and society as important stakeholders (Bocken et al. 2014).
Businesses pursue sustainable goals for two reasons. First, because of external pressure through legislation, stakeholders, or markets. This is usually the case with organizations that are already profitable and attempt to become more sustainable due to pressure. Second, because of internal motivation, either ethically or economically (Baumgartner & Rauter 2017). An example of the first form is a brewery that makes animal feed from their waste products (Heineken 2015). In this example, the sustainable outcome of making animal feed from the waste product ‘bostel’ is a secondary activity for the brewery, probably pursued out of external pressure. It is a separate activity from therein primary production process. The primary activity is brewing beer and selling it. On the contrary, a company that makes animal feed from the waste product, is an example of the second form. Their primary activity is the making of the animal feed, and their primary resource is a waste product. The difference between these two forms of sustainable businesses is mainly found in the importance of sustainability for the business: a business whose primary goal is to produce sustainable is more engaged in sustainability, as opposed to a business whose secondary activity it is. Both a sustainable business and a corporate business that wants to become sustainable need to ensure that production stays profitable (or at least not unprofitable), and that it, in broad terms, does not prevent future generations from fulfilling their goals (Baumgartner & Rauter 2017).
2.1.1 Goals for sustainable businesses
Goals for sustainable organizations can be grouped in three, often diverging, values: economic, environmental and social values. These issues all need to be addressed in order for a business to keep fulfilling its goals. Economic sustainability entails the general aspects of the businesses need to be accounted for to remain competitive. Aspects of this are financial stability, profitability and financial benefits. In order for a business to stay profitable, issues like innovation and technology management, collaboration, and knowledge management are crucial aspects of economic values of corporate sustainability (Baumgartner & Rauter 2017). Environmental stability concerns the stability of the process of input (materials necessary for production), throughput (production), and output (products, co-products, waste and emissions), followed by the value chain. Social values of business activities are internal social issues (work environment, employee satisfaction), and external social issues (contribution to societal development, publishing information) to ensure satisfaction internally and externally (Baumgartner & Rauter 2017). The social, economic and environmental values are often divergent in sustainable businesses. It is not always clear how social and environmental value converges into economic value, and can thus create profit. In attempts to align these values, corporate sustainability often entails managerial risk, brand image, public relations, and the reputation of the business (Van der Byl & Slawinski 2015; Van Bommel 2018; Bocken et al. 2014). The alignment of these three values is not only beneficial for the business itself, it is also critical for stakeholder value and scalability. Effectiveness for sustainable businesses can be found in the capture of social, economic and environmental value
obtain. A second challenge for sustainable businesses is to increase in scale while committing to the three values.
2.1.2 Challenge: Stakeholder value
Sustainable businesses have a wide set of stakeholders, so stakeholder satisfaction is an important factor for effectiveness. However, there is a conflict between the long horizon that is necessary for sustainable goals to be reached, and the necessity of presenting managerial quarterly numbers to stakeholders. This tension can diminish stakeholder value and needs to be managed properly. In sustainable businesses there are often unclear goals with timelines, horizons and growth. This needs to be clearly communicated to stakeholders (Van Bommel 2018). Stakeholders can encourage or hinder the development of sustainable businesses and their success. A sustainable business can only expand without incurring stakeholders (Baumgartner & Raumer 2017). It is thus essential to create positive stakeholder value for sustainable businesses.
2.1.3 Challenge: Scalability
The main problem for sustainable businesses is to increase in scale, according to Bocken et
al. (2014) and Palomares-Aguirre et al. (2018). Many sustainable businesses have successfully
reached their local markets, but struggle to enter the larger market due to the inability to expand. “Scalability can be conceptualized along at least two dimensions: width, which is the number of people reached by the initiative; and depth, which addresses the substantiveness of the social impacts on each beneficiary” (Palomares-Aguirre et al. 2018). However, in order to increase scale, there must be enough economic value to create this. Due to the long-term vision of the sustainable business, short-term economic value to expand is less present. Increase in scale can be pursued in different manners, among others: staffing, communication towards stakeholders, alliance building with other organizations, and replication of services in another location (Palomares-Aguirre et al. 2018). Gallo et al. (2017) emphasize the importance for sustainable businesses to build alliances with other organizations, in order to tackle the inability to expand with more resources: “Although the actions of individual entrepreneurs are useful and necessary, some scholars have warned that sustainability challenges are so vast that a real transition towards sustainable development demands joint efforts and collective entrepreneurship.” The authors see cooperation between organizations as beneficial to mitigate the challenges that sustainable organizations face. Thus, the gathering of sustainable businesses in a network battles the challenge of scalability.
Sustainable products are attractive to a distinct group of consumers, with which the sustainable business gains a competitive advantage. Offering sustainable products is good for market differentiation (Baumgartner & Raumer 2017), and it is thus promising for organizations to upscale, because there are ample potential markets.
2.1.4 Concluding on sustainable businesses
Concluding, the goal of sustainable businesses is to achieve three values: economic, environmental and social values. These, in short, entail profitability, stability within the
organization, and internal and external satisfaction. Sustainable businesses face two large challenges in achieving this goal: stakeholder satisfaction (because of the tension between long-term horizons and the need for short-long-term results) and scalability (because of lacking economic value, due to the long-term horizon). The challenge of scalability, and thus stakeholder satisfaction, names inter-company cooperation as a solution (Gallo et al. 2017). Additionally, cooperation enlarges the opportunities for innovation and development, which ensure economic sustainability. Sustainable organizations that combine their forces can thus be more effective than individual businesses, because they carry the risks and resources together, and enlarge the changes for economic growth. A common form of inter-company cooperation is via networks. The next section discusses effectiveness of organizations in networks.
2.2 Theory on network effectiveness
Sustainable organizations gather in cooperative networks to increase their stakeholder value and scale, as last section has concluded. Reaching effectiveness is the goal of the network. This section will discuss how these networks reach effectiveness based on the literature.
Effectiveness is defined as achieving one’s goals (Cambridge 2019). In networks, it is no different. The focus for this theoretical framework lies on effectiveness and not on output. Output regards the products an organization has produced. However, because the challenges that sustainable businesses face are not solely economic, another measure of success is taken. Effectiveness is a more precise measure to know when an organization actually reaches its goals, and to know whether the network structure is advantageous in this instance to reach one’s goals. This thesis researches networks consisting of sustainable businesses (NOSB’s). For NOSB's, output is not the primary driver, since their goals are divided between profitability and sustainability (see chapter 2.1).
According to Provan et al. (2007), effectiveness is not discussed much in the literature, because there has been more attention for efficiency than effectiveness. Provan and Milward have written their article of 1995 on effectiveness because they felt that effectiveness was being ignored, and created factors of effectiveness in networks. For this framework, these articles are gathered. Provan and Milward (1995) write that network effectiveness is about the success of the whole network, not whether individual agents perform well. However, if an agent performs poorly, this can reflect on the success of the network (Provan & Milward 2001). Also, even if everyone performs well, overall success can be low when clients can only access part of the services that the network provides. This shows that network effectiveness is more than the (lack of) effectiveness of the individual member organizations, it is the effectiveness of the cooperation and functioning of the member organizations within the network and the network results thereof. Thus, it is essential to discuss network effectiveness in detail, in order to get a clear view what is discussed, and what factors are important for this debate.
After discussing the effectiveness of a network, the costs for networks are discussed. When discussing effectiveness, the focus is mostly on the achievement of network goals, regardless
of being involved in the network may outweigh the benefits that the network generates for the organizations. This may negatively influence the effectiveness of the network, and may cause a reduction of the number of organizations connected to the network (Provan & Milward 1995). It is essential to evaluate the effectiveness of a network to determine whether the network is successful for all the participating organizations. By solely focusing on network goals, the organizations might get demotivated, and the benefits will not outweigh the costs anymore.
2.2.1 Effectiveness
In the literature, there are four aspects of effectiveness found, which will be used in this study: cost containment and predictability of outcomes by Alter and Hage (1993), even power relations between member organizations by Agranoff (2006), and member commitment by Human and Provan (2000).
Effectiveness of networks is defined by Alter and Hage (1993) as cost containment and predictability of outcomes. It is achieved by coordination of decision-making or integration of tasks. Cost containment entails the efficient spending of resources, and predictability of outcomes entails stability in the process, so that there can be made predictions on the status of the organization. Effectiveness is reached by achieving outcomes that could not have been achieved with individual efforts alone (Provan & Kenis 2007).
For Agranoff (2006), effectiveness is connected to the power the organizations have. A network is effective when the organizations have even power relations. In some policy networks, partners have equal, interdependent, patterned relationships through a centralized structure, while others can occupy different, unequal functions - for example as structural holes. It can also occur that some partners are not that willing or able to cooperate. Those are considered weaker partners, which make cooperation difficult. In his research, Agranoff has identified that networks often have a ‘champion’: a powerful and prestigious partner. The development of vertical, unequal relations is visible, and could become undesired. This is contrary to the ideal of Provan and Kenis (2007), that networks should be governed without a form of hierarchy. Although this is the ideal, Agranoff shows that it is not always realizable in reality.
A different approach comes from Human and Provan (2000). These authors discuss that network organizations need to feel connected to the network and to each other to succeed and be effective. “[T]here must be a sense of collective ‘networkness,’ by which member firms see themselves as part of the network and are committed to network-level goals.” (Human & Provan 2000). The authors do not consider the economic advantage that partners may have as the starting point of effectiveness, but the commitment that the partners show.
There is not a superior measure chosen for effectiveness. For the analysis in chapter 5, all four measures will be used as measures for effectiveness, because the effectiveness can occur in all forms. Thus, to ensure the most complete possibility of measuring effectiveness, all four are included.
2.2.2 Structure of the network
For networks, centralized integration, as discussed by Provan and Milward (1995) might be the best structure. Wang (2016) and Agranoff (2006) discuss that previous studies (Provan & Milward 1995; Raab et al. 2013) focus mainly on networks that aim to provide certain services, so that for other networks other structures might be a better fit. Willem and Lucidarme (2014) hypothesize flexibility as a good structure for effectiveness. Flexibility is necessary to ensure that all organizations can still get advantages from the network. However, as also Provan and Kenis (2007) have identified, there is a tension between flexibility and stability for the success of a network. Stability makes that the organizations can rely on the network and that outcomes become predictable, while flexibility makes that the network can still battle complex problems. The complex institutional context with relations of hierarchy makes effectiveness harder to achieve.
Despite the difference in goals, networks share four of the same normative characteristics (Alter & Hage 1993): First, the organizations have their own ideas and strategies and develop ideas and strategies on the other organizations. Second, networks are non-hierarchical. Third, networks have a division of labour. Every organization present has a specific skill or competency, and the inability to show it may result in the termination of the cooperation. Fourth, networks are self-regulating, and are thus not steered from above. However, these normative characteristics cannot always be reached, and should be seen as characteristics of an ideal network.
The tradeoff between flexibility and stability differs per network. Networks can serve different goals, which makes for a different structure. First, in informative networks, partners gather to share policies and programs, and technologies. In this setting, changes are advised, but not mandatory. A structure can thus be more flexible. Second, in developmental networks, information and technology are combined to implement solutions in all the organizations. Here, there must be a clear centralized structure to guarantee implementation. Third, in outreach networks, activities of the organizations are included, together with an exchange or coordination of resources. Here the structure can differ, dependent on the frequency and severity of the activities. And fourth, in action networks, the goal is to create community capacity where partners collaborate to make inter-organizational adjustments, make decisions, deliver services and exchange information. Centralization is most favorable, because a clear structure is beneficial to the collaboration (Wang 2016; Agranoff 2006; Willem & Lucidarme 2014). The goal a network has, is of immense influence on how to determine its effectiveness.
In the literature, the most discussed network goals are cost containment and the ability to adapt quickly to changing technology and the market, as defined by Alter and Hage (1993). Network effectiveness can be hindered by costs and conflict. These four aspects around network effectiveness will be discussed further in the next sections.
2.2.3 Network goal: Cost efficiency
by comparing the costs of maintaining the network relationship with the advantages of the agreement. As discussed by Provan and Kenis (2007), the advantage of a network is an increase in cost efficiency. This efficiency is conceptualized as enhanced learning, more efficient use of resources, increased capacity to plan for and address complex problems, greater competitiveness, and better services for clients and customers. However, the benefits must outweigh the costs, which can be the loss of decision-making or operations (Provan & Milward 1995).
Uzzi (1994) argues for the same goals of networks as Provan and Milward (1995). Organizations work together because of two factors: resource dependence and transaction costs. He equalized the costs of the network with the enhanced survival capacity: “Individual organizations make strategic choices to form or become part of a cooperative network of other organizations when it appears that the advantages to such an arrangement [are high], especially enhanced survival capacity” (Uzzi 1994). The gains of participating in the network must outweigh the costs of maintaining the relationship, including any potential loss of operating and decision autonomy (Provan & Milward 1995). Additionally, an observation from Agranoff (2006), who writes from the perspective of the manager, is that the network must offer enough advantages, or busy managers will not waste their time on participation and make unnecessary costs.
2.2.4 Network goal: Fast adaptations
According to Alter and Hage (1993), the big advantage of networks is that they adapt fast to the changing technology and the market, are able to develop more products more rapidly, and are more creative along the process. Organizations joint together can achieve more than individual organizations. Aside from the transaction costs theory to explain the emergence of networks, Alter and Hage (1993) discuss the population-ecology theory of organizations. In this theory, the natural emergence and dissolution of organizations and their survival or extinction rates are explained. As new variations occur, some organizations will take advantage of these, and have larger survival rates. Other organizations will disappear. An organization has a larger chance of survival if it adapts fasts, which is possible within a network. Sydow (2007) disagrees with population-ecology theory, because it lacks agency for the organization itself and thus the role the organization itself has in its survival. He claims that networks are not inherently fast adapted. It is dependent on the action that the network takes.
2.2.5 Costs
This section argues that in order to assess effectiveness correctly, there are many costs to account for. The assumption will be taken that a network is effective when the benefits outweigh the costs, as discussed in chapter 2.2.3. Costs are thus a risk for reaching network goals, and need to be discussed.
Agranoff (2006) focuses on the costs that come into being when an organization gives up its authority and resources. Koppenjan (2008) takes a slightly different perspective, and focuses on the immeasurability of the costs that individual organizations within the network make for their own stakeholders. These costs are diverse, and differ per organization. According to Agranoff
(2006), the effectiveness of a network depends on a constant reevaluation of the involved organization whether the costs are still worth the gains. Networks have their membership costs and their benefits. To most organizations, the costs are found in giving up organizational authority and organizational resources. These are costs, because autonomy reduces uncertainty (Agranoff 2006). Koppenjan (2008) also approaches network effectiveness from the costs. He takes the perspective of the organizations when he assesses effectiveness in networks. He finds that the normal measures for assessing public policy costs are inadequate for assessing networks. This has several reasons. First, the members of the network all have own stakeholders to satisfy. All ties of the individual organizations are stakeholders and play a part in the network evaluation. Second, involvement in the network brings along costs and investments of resources. It should be assessed whether these costs are worth it. Naturally, the costs should be settled with the benefits. Third, the network requires the development of new ways of working and thinking, which may lead to different sorts of results. The current criteria of costs might not fit this new way of working. His alternative is to switch from effectiveness to performance measures. However, also here is the risk that it is not adequate because networks remain complex, interdependent and dynamic structures. Thus, the performance measures must reflect the complexity of the network and its outcomes. It should not be assessed hierarchically but based on interdependencies, and it should not fixate on previously agreed-upon outcomes but remain flexible. Network characteristics should be taken into account.
Alter and Hage (1993) discuss the gap between the current situation and idealized situation to measure effectiveness. Effectiveness is relative to resources, and thus costs, “prevailing conditions, and managers, for example, are not fired when their businesses are doing poorly if all businesses are doing poorly,” they claim.
2.2.6 Conflict
Conflict is often negatively associated with network effectiveness in the literature. Conflict is defined as “disagreement, disharmony, and strife about objectives, methods, and policies between individuals and organizations in an inter-organizational network” (Alter & Hage 1993). It reduces the ability to make fast adaptations to the environment, because decision-making is impaired. The authors see different solutions for conflict. Alter and Hage (1993) use boundary spanners to negotiate and resolve issues between organizations. Sydow (2007) stabilizes the network by monitoring and evaluating the organizations. Human and Provan (2000) identify the lack of network legitimacy as the source of conflict, and then discuss how legitimacy can exist in networks.
Next the three solutions are elaborated on. Alter and Hage (1993) describe four different forms of network development. They make a difference between competitive or symbiotic organizations in the network, and networks with few or many members. Symbiotic organizations are organizations that follow the chain of production. They are not each other’s competitors, because they do not produce the same sort product. Competitive organizations, naturally, do. Symbiotic relationships grow ‘because they must’ to survive or keep steady flow of resources. The development of these networks can cause problems, because the agencies need to discuss each next
spanners are the people in between the organizations to negotiate transactions and resolve problems in these situations. This solution and definition for conflict is used in this thesis, because it offers an explanation for the occurrence, in line with the previous focus of the literature on networks.
Sydow’s article (2007) discusses the development of a single network. In his analysis, four phases of development are identifiable. When analyzing his case study, Sydow found monitoring essential for his network to grow and develop. The members were confronted with their own actions and consequences thereof, and he found that this knowledge helped stabilize the network, routinize activity, and expand the membership of the network.
Human and Provan (2000) identified network legitimacy as essential for an effective network. Network legitimacy is found in three dimensions, and all three should be achieved for a network to be successful. The first dimension is network as form. This entails building legitimacy for the network as a form of organization that works. Then, network as entity, where it is important to create a viable looking network for the organizations, needs to be legitimized. Last, network as interaction, which revolves around creating ideas that cooperative interaction in the network will be beneficial for the organization, even though many will be competitors.
Networks can fail, although this is barely discussed. Human and Provan (2000) discuss that the sustainability of networks depends on legitimacy and support in the early stages of network development. Formally constructed networks more likely to fail, they claim, because there is little internal motivation to participate. A cause of failure is instability, the authors claim. Core organizations stabilize the entire network, whereas peripheral actors destabilize it. When the power becomes imbalanced, the network can fail. According to Alter and Hage (1995), network failure mostly occurs through conflict. Conflict has several sources: sharing profits, or difficulty around gathering the right competences, or short duration of the cooperation.
Agranoff (2006) is not convinced that networks are as successful as is often discussed in research. He believes that networks are advantageous, because they open up possibilities that are hard for one, two or even three organizations to achieve together, but also noticed in his own research that managers still spend time within the hierarchy. “Only 15 to 20 percent of their total work time was consumed by all forms of collaborative activity, including their participation in networks,” Agranoff (2006) states as an outcome of his research.
Thus, conflict is a real danger to network effectiveness. It often develops out of lack of commitment, or disagreement within the organization on how to evolve as a network. However, also solutions are identified, namely monitoring, through which the organizations could evaluate their actions, or the installment of boundary spanners.
2.3 Lessons from effectiveness in networks in the sustainability sector
In this section, the gathered information from the two previous sections is combined with best and worst practices of NOSB’s. The information on the functioning of sustainable businesses is combined with the literature on network effectiveness. In section 3.1 on sustainable businesses, the challenges of the businesses are discussed. In the previous section, chapter 3.2, on network
effectiveness, effectiveness itself was divided into four aspects: cost containment, predictability of outcomes, even power relations, and member commitment. Next, the goals (the ability to make fast adaptations and cost efficiency) and challenges (costs and conflict) of networks were discussed. The goals of sustainable businesses and the functioning of networks are combined in order to determine factors that can lead to effectiveness in NOSB’s. Those measures are based on theoretical literature of Provan and Milward (1995) in which they explain sets of measures of effectiveness, and combined it with case studies. This literature is often used by other prominent scholars to determine network effectiveness, and will thus be used for this thesis also.
This section offers empirical examples on the effectiveness of sustainable networks to determine whether general network effectiveness theory can be applied to sustainable networks. Additionally, measures for effectiveness will be discussed. Based on these similarities, hypotheses for the ViV case are made.
All discussed networks function in the sustainability sector. From every case, the relevant information is taken and grouped into three sets of measures for reaching effectiveness. The articles address different subfields of sustainable waste management. Based on the outcomes of the literature, the experiences from the networks are divided in three measures of effectiveness: network structure, network communication, and network resources. These three measures represent the conditions the authors identified as necessary for the effectiveness of their networks.
2.3.1 Sets of measures of effectiveness
The case studies from the literature are assessed at the hand of measures of effectiveness as defined by Provan and Milward (1995). The authors discuss network structure, stability, context and governance as measures for effectiveness. For this thesis, network structure, context and governance will be discussed.
Network structure is the degree of integration in the network. Integration is measured by density and centralization. Integration of the member organizations in the network is necessary to ensure that the organizations have access to all services, partners, and information. Limited access limits the possibilities of cooperation. According to Raab et al. (2013), access is a necessary condition for effective networks. Centralization concerns the degree to which the connections of the network organizations are organized around particular centers of organizations. Density concerns the total degree of connections between organizations in the network (Provan & Milward 1995).
Network governance is divided into three forms and decides how the governing party communicates with the network: shared governance, governance by a lead organization, governance by a network administrative organization (NAO) (Provan & Kenis 2007). The form can be determined by two factors: brokered/non-brokered and participant/non-participant. Shared governance implies that the participating organizations divide the governance between each other. Every organization is involved. There is no external party involved. Governance by a lead organization implies that one of the participating organizations has the lead and brokers between the others. Governance by NAO implies that the network is governed by an external
Network context concerns the resource munificence of the organization. This can be financial munificence, but concerns the total amount of costs an organization has (Provan & Kenis 2007).
On the contrary to identifying factors that lead to effectiveness, Alter and Hage (1993) identify factors that make network cooperation difficult. Resource dependency and regulation are mentioned, because it constricts the organization in its actions. Also, the organization could be involuntarily connected to the network, which does not guarantee for internal motivation, which is an important prerequisite for successful cooperation. Lastly, the nature of the network tasks can make cooperation difficult, because organizations do not always prioritize the network tasks.
2.3.2 Network structure: Centralization and a champion
The arguments for establishing a network often lie in the necessity to fill a void. A network is established because there is no organization yet that fulfills the tasks or connects the stakeholders. The network can then oversee the tasks or facilitate the connections. In order to facilitate this, a good structure of the network is necessary to make the network effective. There are several factors identified in the literature for networks to be potentially successful through structure.
First, Henriksen and Seabrooke (2015) see a successful network as filling a structural hole in their case study. This position is great for gathering support. In their case study, the network came into being after a failed state intervention on environmental issues. The members of the network acted as brokers by populating the structural hole and connecting the otherwise unconnected governments, NGO’s and firms. Caniato et al. (2015) also address the importance of ties within a network. They advocate for strong ties between organizations, because it can “significantly enhance sustainable management of resources.” The network’s increased knowledge and motivation makes that it is easier to allocate resources, which makes for an efficient division. Additionally, the case study of Caniato et al. (2015) of a network of medical waste management, shows that a fragmented structure is least desirable. The organization with the most resources and political power had limited reach, because of the fragmented structure of the network and its uneven power relations. There was an unclear division of duties and responsibilities of stakeholders within the network, because it could not contain costs. It could not adequately exert its power, which had negative results for the effectiveness of the network. The fragmentation of the network is visible in interviews the authors did with the organization where the stakeholders were not able to identify the other participating parties. This shows unclarity within the organization, and a lack of communication or stakeholder satisfaction. This was coupled with the misbalance that the organizations also had other goals for the waste management, and there was conflict about what problem to tackle next. It was thus unable to make fast adaptations. Indeed, other authors also advocate for denser networks with more connections (Fransen et al. 2018). Henriksen (2015) identifies centralization as a beneficial factor through which organizations keep in close contact with each other. In his case study about a network in bio fuels, centralization is reached through board composition and regulatory content and scope. The board consists of different sorts of organizations, thus is part NGO, part firm and part public organization. Through the board, the different organizations are in closer contact with each other.
Additionally, in Henriksen’s (2015) case study, there is one member organization that can be described as the champion, a prestigious partner (Agranoff 2006). This organization has a central position in the network, is large, and played a key role in the foundation of some systems for biofuels (Henriksen 2015). Other authors also discussed the position of the champion. Xu et al. (2016) advocate for the presence of a champion in a network. The champion has the scope to reach all member organizations. In their case study on food waste recycling, there is a champion present in one of the three areas. The key players in the other areas were encouraged to take on the role of champion by incentive policies in the form of subsidies and mandatory utilization of compost, because the first area thrived because of the champion’s role. According to Xu et al. (2016), champions are an addition to centrality to promote the goal of the network to the other members, and to reach all the organizations, thus be able to adapt quickly. Seabrooke and Henriksen (2015) see a similar development in their network: the hub-like position that organizations can have in the center has more influence on the development on the network than when an organization simply has a mandate to be central. When an organization simply has a mandate to be a champion, there can be a lack of internal motivation of the other organizations to follow.
The case studies indicate that having a champion has a positive effect on centralization to reach network effectiveness. Theoretically, this is supported. Centralized integration can facilitate communication, integration and coordination, whereas decentralized networks need more steps to reach every organization. From another perspective, a centralized network is better equipped to monitor the other organizations and to prevent free-riding. According to Provan and Milward (1995), effectiveness is highest through integration when centralization takes place. Implementing both density and centrality can cause contradictory directions. It can make a system unnecessarily complex (Raab et al. 2013). Provan and Milward (1995) indeed prefer a higher degree of centrality for effectiveness. Centralization is beneficial in reaching effectiveness as defined in chapter 2.2, because it ensures that information is passed quickly to everyone, and that there is more communication, integration and coordination throughout the network. Due to the scope of this study, the focus will lie on centralization and not on density. A fragmented network cannot quickly adapt to changing circumstances and has uneven power relations, as seen in the section, because the members are not in contact with each other. A centralized structure can encourage this. In decentralized networks, clients are deprived “of the potential benefits of integration across the full range of agencies and services offered in a large community. As an alternative, centralized control of integration within larger networks allows the coordination of integration across many agencies as well as closer monitoring of services” (Provan & Milward 1995). Additionally, a champion can reach all member organizations to influence network development, possibly towards centralization. Based on the case studies and the theoretical definition on structure, the following two hypotheses are formed:
Hypothesis 1: Centralization positively affects network effectiveness.
2.3.3 Network communication
Xu et al. (2016) have concluded from their case study that a difference in information flow among organizations has negative consequences for the effectiveness of the network. Their network was dysfunctional in getting the information from the scientists down to the stakeholders who are practicing food waste recycling. This makes that the outcomes are not stable nor predictable. Thus, communication between network members, and from the governance structure of the network is necessary. In the case of Caniato et al. (2015), the lack of information was a consequence of a lack of understanding of the involved public officials. They did not understand the need for knowledge that the other stakeholders had. Without this knowledge, the network functioned badly. The lack of information came forth from the lack of communication, in which the needs and expectations should have been discussed. Concluding, Caniato et al. (2015) claim that there was a high interest in the network, but a central discussion platform would have benefit the communication structure. Here, communication amplifies the positive effect of centralization.
Unclarity in communication about goals and plans resulted in conflict in the network researched by Henriksen and Seabrooke (2015). The network responded to a public concern on ‘wicked’ environmental issues such as deforestation and ground depletion. The network focused on giving out certifications and motivating businesses to source stakeholders. However, they had difficulties with identifying the network goal, and communicated badly about this, which led to diminished success. This made outcomes unpredictable and diminished effectiveness. The lack of communication caused conflict in the network. For the medical waste management network in Gaza (Caniato et al. 2015), unclear communication prevented the participating organizations to have a clear picture of the situation and to have all the necessary information. For none of the organizations was the network a priority, nor did they have sufficient knowledge about the topic. Contradictions of the organization’s goals and ideology, and the advantages for the niche of their business can hinder the development of thick ties. More communication between the network members would have strengthened the goal consensus and benefited the centralization process. The structuring force of communities when there is little communication or agreement on goals and plans is weak (Fransen et al. 2018). It thus hinders strong communication and coordination. In the case study of Fransen et al. (2018) on sustainable agriculture, ideas on how to promote sustainable agriculture are not widely shared in all communities due to a lack of communication. This makes that some of the problems of organizations in the community would go unaddressed. There is a need for a focal point for the activities of the participants in order to build legitimacy and thus effectiveness. Additionally, external support is important to keep the members in the network, otherwise they start searching for additional support from within and outside the membership (Human & Provan 2000). Communication is necessary to establish common goals, address problems in the network, build legitimacy, and to ensure an efficient knowledge flow.
Governance structure can ensure for a focal point and structuring force. Human and Provan (2000) claim that the establishment of a separate administrative entity is necessary for the success of a network. It can ensure a steady communication and information flow. They have also analyzed the option of a lead firm, as has been discussed by many other sources, but have denied it, because
the presence of a large firm dominant in the network will discourage the other members to put in the same effort and time (2000). In contrast, a separate administrative entity will act as a broker, and in its role will help build the network, communicate for coordination and management throughout the network, and keep an eye on network goals. This role of the administrative entity as broker, is described as NAO (Provan & Kenis 2007). Governance mainly concerns the monitoring and control behavior of managers. Some form of management is necessary for “goal-directed organizational networks with a distinct identity” to ensure that participants still “engage in collective and mutually supportive action, that conflict is addressed, and that network resources are acquired an utilized efficiently and effectively” (Provan & Kenis 2007). The governance structure thus explains how information is spread through the network. Thus, based on the experiences from the case studies and the theoretical support, the following hypothesis can be formed:
Hypothesis 3: communication positively attenuates the relationship between centralization and network effectiveness.
2.3.4 Network resources and costs
The importance of network resources as a factor for network effectiveness is addressed by few sources. However, resources and power create influence and are thus rendered important for this study. Especially in a network with a champion, resources are necessary in order to establish a position of power and legitimacy. Caniato et al. (2015) conclude that the shortage of financial resources was the key limiting factor for the functioning of their medical waste management network. Although networks can create efficiency for all parties, it can also increase costs (Van Noort et al. 2018). Costs are not only financial, they include anything that the organizations experience as burdening by taking part in the network, such as a lack of motivation. Different levels of motivation and power cause disunity in effort. Xu et al. (2016) discuss the different level of interest in food waste from the organizations in the network, and the difference in power to make changes in the system: “more than half of the stakeholders lacks motivation for food waste recycling and composting, and the stakeholders with maximum interest do not have sufficient power to make any changes of the current system. This imbalance of the power and interest among the stakeholders resulted in the fact that only a few governmental departments promoted the food waste recycling program alone, without the cooperation with other powerful departments” (Xu et
al. 2016). In a researched network by Human and Provan (2000), not all members were evenly
invested in the network, and did not try to save it once it came into financial jeopardy. The network eventually imploded. This can be attributed to both interest and information: the network members did not take enough interest in the network’s survival, or the organizations were so dispersed that they lacked information on the critical situation of the network. These can go hand in hand.
