Copyright @ IFAC Automated Systems Based on Human Skill, Aachen, Germany, 2000 TOWARDS ORGANIZATIONAL CONTROL OF NETWORK ENTERPRISE Diane Poulin(1), Lucien Vincent(2), Patrick Burlat(2) (1) Universite Laval/ CENTOR, Quebec, Canada. (2) Ecole des Mines de Saint EtiennelSIMMO, France. Abstract: We are interested here in the « network of firms », i.e. in industrial structures linked with horizontal agreements (unlike the « fmn network» managed by a mainspring firm). According to our studies, co-ordination is an accurate problem for SME'S networks, where each partner preserves its independence and runs its own decision-making processes among the network. For that reason, SME'S networks needs co-ordination tools to unable organizational control of relations. We understand here "organizational control" as any form of influence (direct or indirect) that direct actors' behaviour inside the network. Copyright © 2000 IFAC. Keywords: Networks, Control, Value added chain, Evaluation, Benchmarking, Activity based costing, Modelling. 1. INTRODUCTION For several years, while reorganizing their internal activities, firms have launched vertical disintegration strategies in order to go beyond the single objective of reactivity, and to base their competitiveness on their processes of innovation. In this context of deep transformation of the relations between firms, a new organizational form emerged : the network. We are interested here in the «network of firms », i.e. in industrial structures linked with horizontal agreements (unlike the « fIrm network» managed by a'mainspring fInn). Inside networks, co-ordinations of actIVItIes are required. But this co-ordination is not carried out through a hierarchical organization (as in the fmn) or through price mechanism (as on the market), but through co-operation and interaction between firms within the network. According to our studies, co-ordination is an accurate problem for business networks of SMEs where each partner preserves its independence and runs its own decision-making processes among the network. 155 2. OPPORTUNISM Opportunism is described by Williamson as a "realistic" picture of individual behaviour in economic relations. Inside a network, it means that a partner could act so as to satisfy its own interest, even if this action is harmful for the other partners. In that way, opportunism also includes guile or trickery. Different kinds of opportunism may appear among business networks of SMEs : • Only apparent co-operation (limited effort, lower quality goods, service below standard, ... ), • Catch of an excessive share of joint profits (overvalued switching costs, overvaluation of the added value brought), • Excessive exploitation of a joint resource, or personal appropriation of the resources created in common or by others. The two first kinds are referred to in economic literature as "moral hazard". The third one is referred to as a "hold up". In addition, aggravating factors such as uncertainty, asymmetry of information, limited rationality and dependence (in the way of assets specifIcity) often exist within networks.