How the Network Neighborhood Influences Partnerships: from Handshakes to Formal Collaboration Among Us Fire Departments

Abstract: An extensive body of research investigates the conditions giving rise to informal agreements and formal contracts between two partnering organizations. A largely separate body of work has addressed the emergence of ties within organizational networks. In this paper, we contribute to the integration of insights from network theory and contract theory. Specifically, we explore how the level of formality in an agreement between two parties depends on the broader network of exchange relationships in which they are embedded. The analysis draws on the network literature to develop a theory of governance choice that emphasizes the network neighborhood. We argue that partners’ outside ties influence the coordination, control, and information exchange within the partnership. We test the validity of our claims by analyzing collaborative agreements among U.S. Fire Departments between 1999 and 2010. The results indicate that the network neighborhood significantly influences the way that partners work together.