Management control in emerging network organizations: case of the petroleum supply industry in the Barents Region

The overall purpose of this research was to study how management control practices develop in the context of emerging industrial networks. Organizing businesses through networks has become a recognized tendency in the modern world. The networks are interesting because their operational spaces are beyond legal boundaries of the participating firms. Participants of the networks rely on each others resources be it information, workforce, technology, production facilities or other resources. At the same time the participants are legally independent companies with individual goals, interests, and worldviews. A challenging task for them is to find ways how to cooperate for a common goal. As follows from the previous research, management control and accounting mechanisms play an important role in business networks. However, the studies offer limited understanding of managerial and organizational challenges in networks under formation - emerging network structures. When it comes to the broader field of organization, it has a significant account of studies of emerging network structures while tends to underestimate the importance of management control tools and mechanisms. In this regard, my research project was devoted to management control in emerging network structures. The empirical evidence was obtained from Northern Norway and North-West Russia, the two regions which attracted huge interest of the international petroleum industry expanding to the High North and in particular the Barents Region. Although being quite different in terms of culture, politics and industrial structure, the two countries Russia and Norway experience the same technological challenges in the Barents Sea Region. Since the early 2000's regional companies in both countries, through association in networks, tried to address both opportunities and challenges brought by the petroleum industry. My research seeks to contribute to better understanding of formation of network relationships and role of management control and accounting in this process. Throughout the project I have implemented four major studies: 1.A theoretical study of relational control problems, namely interlink of trust and control in business relationships and networks. This study submits that the management control literature up to day has a controversial and limited understanding of how trust is built, especially in emerging relationships and networks. The study suggests that this issue should be addressed through debate between instrumental and social theory based research rather than through integration of the approaches in relativistic research design. 2.A longitudinal study of the role of calculative devices and problems of control in the network building process. The study draws upon the case of local companies in Northern-Norway, which engaged in a subsidised network project towards establishment of a joint venture. The study revealed that calculative devices play an important role in managing the network project as they mediate important spaces of the network development: symbolic, quasi-rational and interactive. At the same time, there are problems of control associated with limited rich of the interactive space and necessity to maintain the symbolic and quasi-rational ones. 3.A study of networking practices of the Norwegian oil majors Hydro and Statoil (and later StatoilHydro) in cooperation with the local companies in North-West Russia. This study contributes to a better understanding of the internationalization of the Norwegian oil industry. It is shown that the Norwegian oil industry can build its comparative advantage abroad through transferring its national specific experience (the cooperation experience acquired through the development of the Norwegian continental shelf). This transfer happens through networking activities involving business and political actors in a foreign context. This requires however a challenging managerial work. The mechanisms of managerial control enabling this work are socio-technical objects. Such objects are not predetermined but developed through network interactions. 4.A study of network building practices in the Russian industry which first received assistance from Norway (the Norwegian perspective was addressed in the aforementioned study 3), but then started to mobilize own experience in very different form the Norwegian practice. This study reveals fundamental differences between the Norwegian and Russian cooperation culture. Iintertwined personal and organizational ties, and mixed political and business agendas were important features of the Russian way to implement the Norwegian model in successful cooperation. The research has been presented to both practitioners and academicians at various arenas in Norway, Russia and internationally. The works 1) and 4) were published during the project period, and the works 2) and 3) are to be sent to international journals in the nearest future.

This project seeks to extend existing knowledge on managerial aspects in new organizational forms. The primary objective of the research is to better understand how management control practices develop in the context of emerging industrial networks. Exis ting research texts on business networks often address inter-organizational processes in already stabilized contexts or deal with established, functioning networks. Emerging inter-organizational settings being developed in relation to new markets or in th e context of transitional economy are still neglected in the literature. The project will focus on management control processes in industrial network organizations being established in North West Russia and in Northern Norway in relation to new petroleu m projects in the Barents Sea. Main research question of the project is HOW DO SOCIAL, INSTITUTIONAL AND ORGANIZATIONAL ASPECTS OF MANAGEMENT CONTROL INTERPLAY IN EMERGING INDUSTRY NETWORKS? The project will include a comparative element with regard to th e Norwegian and Russian networks, which is important for broader understanding of management control practices. The research will be developed in cooperation with both national and international research environments, and in close dialogue with the indu stry and policy makers dealing with the petroleum development in the Barents Region. On the practical side, the research will address issues of regional development and cross-border cooperation between Norway and Russia in the Barents Region. Today, this cooperation is inevitable for development of petroleum resources in the High North.