Building of a Network and the Construction of Controls

Purpose – To describe the social process of building of an inter-organizational network and analyse the control practices implemented by its members. Methodology/approach – The paper offers a holistic approach considering the institutional dynamics and management control practices in the network as a whole. This makes it possible to trace the development of practice variation, which is one of the most recent but up to now poorly studied problems in the field of institutional theory (Lounsbury, 2008). The paper draws on a case study of a newly established network of supply companies related to a petroleum project in North-West Russia. Findings – Organizational arrangements in the network as well as corresponding controls are constructed as a result of interplay between several institutional logics such as Western network experience, international rules related to petroleum projects, the Soviet industrial background of the members, and their local community values. The controls demarcate organizationally members’ behaviour, and thereby define the conditions for practice variations. On the other hand, use of such controls over time leads to unintended consequences and control dilemmas. Facing these dilemmas, the network members address them differently, and therefore more practice variations are being created continually. Originality/value of paper – The paper gives insight into an emerging business network, a setting normally neglected in the inter-organizational control literature, and establishes a dyadic view of management control, arguing that it both defines and creates conditions for practice variation. Practical implications – Local supply chains play an important role in global petroleum projects. Decision-makers involved in petroleum projects will benefit from better understanding the cooperation processes prevalent in local industries.