From Contracts to Networks: New Directions in the Study of Governance of Agro‐Food‐Energy Networks

The debate about the governance of complex systems of production represents a rich branch of the literature of applied organization theory. The particular application to agro‐related networks is a relevant example since agriculture plays new roles in modern society. The core of the analysis is centered in the rationale for allocation of residual decision rights and distribution of the rights regarding the value created. Contributions based in transaction cost economics, resource‐based view, dynamic competences, and incomplete contract theory explore different dimensions related to the allocation of property rights. The question of how joint strategies are defined, and how value added (or subtracted) is shared among network players is still relevant. Indeed, the questions of how residual decision rights are defined and how residual rewards of resources applied in production are shared are relevant for the modern theory of organizations in general. Most of the traditional literature considers the transaction as the unit of analysis, following the tradition of the alignment hypothesis proposed by Williamson (1996). Hence the literature as developed so far deals with two limitations. First, the dyadic perspective, which narrows a complex and multidimensional task down to two actors, one transaction, and a choice of internal or contractual mechanisms of coordination. Second, the traditional perspective places its attention on the existing value, whether real or potential, that can be revealed by choosing the efficient mechanism of allocation of authority. This is only part of a larger and more complex frame, where value generation becomes a central question.