Economic Networks

Micro Processes and Macro Outcomes

Concepts such as EN and BN continue to be used as metaphors, referring to a wide range of connectivity between firms, banks, credit institutions, suppliers, distributors, logistics and service agents, intermediaries, interconnected transactions, or any other production/resource exchange and credit relationship. EN are driven and facilitated by information and communication network structures connecting a wealth of heterogeneous agents. Complex patterns of interactions emerge among these agents, leading to two distinctive levels of outcomes: the microbehavioral level of agents' selection choices, which leads to the emergence of a macroeconomic level of statistical regularities that occurs through a self-organized process.

The main thrust in EN research has been at these two analytical levels of micro processes and macro outcomes. While the microlevel has focused on the incentives and information that govern agents' behavior, the macrolevel has encompassed research on the complex interaction patterns and structural outcomes. Investigations also address the mutual causality between micro and macro events.

The interplay between the two levels has been shown to produce emergent structural properties that inflict metastabilities as well as system instabilities and crashes in ways that are yet only poorly understood. To meet this scientific challenge, authors have proposed the use of multitheoretical approaches, interdisciplinary research designs, and a variety of methodologies. Among the suggested theories underpinning the multitheoretical approach are game theory, behavioral theory of the firm, strategic management and organization theories, complexity theory, graph and matrix theory, simulation, and a variety of additional analytical approaches. Among the suggested interdisciplinary methodologies and analytical techniques are time-series analysis, agent-based simulation, or other analytical tools developed by graph and matrix theories.

The traditional paradigm in economic theory with its emphasis on agents' information, incentives, and factors underlying agents' behavior is proposed to be extended by abstractions from the field of complex systems theory, stressing the complexity of causal influences. Although economists have not expressed strong interest in studying structural properties that influence economic behavior, there are significant potential benefits of applying a network approach and a systemic view for research on a complex economic system. Integrating the two strands of research and merging economic theory with complex systems research are recognized as overdue.

Economic Behavior in a Complex Environment

The nature and behavior of firms has been elaborated in a large number of economic, strategy, and management theories. Economic theories treat firms as autonomous actors engaged in value-creation activities, utilizing various resource inputs and factors of production. It is also recognized that behind each firm stands a management team, composed of professionals who are empowered to make decisions and strategic choices, allocate resources, and direct activities—all of which subsequently can frame behavior and intra- or interorganizational relationships. Behavioral theory of the firm and in particular game theory and the resource-based view of the firm (RBV) have gone beyond the conception of firms as autonomous agents and have looked at decisions and choices made under the constraint of interdependencies and resource dependencies. In addition, firm behavior in networks can be attributed to a heterogeneous set of interdependent actors: human (managers, entrepreneurs) and nonhuman (technologies, legal requirements, texts, or critical resources).

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