A dynamic view of network structure and governance mechanisms : the case of a coffee sector sustainable sourcing network

Abstract

In the context of sustainable supply networks, this research analyzes the evolution of governance mechanisms and network structure, including the interplay between network conditions, context factors, positional power and managerial actions. The study reports on a longitudinal empirical research on a multi-stakeholder sustainable sourcing network established by Nespresso, Nestlé’s specialty coffee subsidiary. The research analyzes both dyadic and multi-actor network dynamics and proposes a framework to study network evolution. Social network analysis techniques are also used to measure evolution of the network’s structure and complexity as well as positional power opportunities. The research shows that in the initial start-up phase, in a context marked by uncertainty, pre-existing commercial and personal relationships were favoured in the choice of partners. These pre-existing relationships were also influential in defining the initial network structure and supporting an initial phase of exploration. Governance mechanisms initially relied mostly on informal mechanisms, while formal mechanisms were incorporated over time to enable the supply chain network to grow and to provide clarity to all actors. As the sustainability programme network expanded in size and complexity, Nespresso, the lead organization, also acted on the network’s structure by introducing regional offices, thus increasing network centralization and reducing complexity. Power derived by actors occupying central or brokerage positions in multiplex networks also influenced power relationships in the sustainability network by moderating or expanding the power opportunities available to central actors. The research has implications for both the Inter-organizational Relationship and the Social Network Theory literatures. In contrast with prior literature, the research proposes that in conditions of uncertainty, the use of informal governance mechanisms can facilitate a search and experimentation process. Formalization of governance mechanisms can be used, not as a repair mechanism, but rather as an enabler for further growth and efficiency. The research also extends the concept of network complexity and proposes that network managers can reduce this complexity by introducing or managing nodes that in turn contribute to the re-centralization of relationships towards specific nodes. Lastly, the research has implications for managers and proposes mapping of existing commercial and personal relationships as a potentially valuable tool in the creation and management of networks, adapting coordination mechanisms to the objectives of the relationship and actively managing the network’s structure as a mechanism to enable network growth and efficiency.