Small firms and the governance of interorganizational exchange

This article explores some new concepts concerned with the coordination of environmental exchange in small firms. The management of communicative networks is presented as a method supplementary to market steering and administrative coordination of exchange relations. The article is based on the results of in-depth studies of 20 sets of inter-organizational relations in five small firms. The results suggest that the building, maintainance and decoupling of the personal relations in a communicative network affects the costs associated with environmental exchange. Communicative networks make it possible to operate at a higher level of system complexity without increasing the transactions costs or losing any of the small-scale advantages of small firms. In this study the difference between discrete instrumental action and communicative action occupies a central place. Communicative action in networks is based on rationality norms that differ from the pure instrumental action patterns of the marketplace. The manager has to act in accordance with the different personal life spheres of the actors involved. The implications for leader competence managing this kind of relations are discussed.