**Section 2**

**Networks and Logistics as the Link to Success** 

154 Business Dynamics in the 21st Century

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**8** 

Dangis Gudelis

*Lithuania* 

*Mykolas Romeris University, Vilnius* 

**Managing Networks in Business Organizations** 

Business organizations are embedded in many different network relationships (Granovetter 1983). Companies establish enduring relationships with their clients and suppliers, they collaborate with other companies in order to increase their market power, save costs, improve effectiveness, serve problems specific to customers, develop new technologies and for many other reasons (De Man 2004, 20). Business organizations are also involved in relationships with government institutions and non-governmental organizations for various purposes, such as lobbying, public-private partnerships, sharing of information or charity. There are certain characteristics common to all types of the network relationships. First, they are oriented to some common goal which is beneficial to the partners who are not able to achieve the goal by acting alone. Thus the partners are supposed to comply to a formal or informal agreement on the importance of this goal. Second, the network relationships imply commitments and responsibilities of the partners involved to act according to the agreement. Thus companies taking part in various networks act not only for the sake of

The article will discuss theoretical implications of the network management approach based on two behavioral assumptions: bounded rationality and bounded morality. Herbert's Simon's theory of administrative behavior (Simon 1997) will be extended in order to explain principles, modes and mechanisms of network organization. Recommendations and prescriptions for network managers of business organizations, including identification of various types of business networks, network analysis, development of network management strategies, integrating them with general organizational processes, will be

The network management approach is based on two assumptions: the assumption of limits of human rationality and the assumption of bounded human morality. The assumption of bounded rationality means that individuals in their decision making are not able to evaluate all possible alternatives for those decisions, foresee their consequences, and choose the most optimal alternative promising the best results. Bounded rationality is conditioned by limitations of human mental abilities to process information, to focus attention, to

**1. Introduction** 

developed.

**2.1 Theoretical assumptions** 

profit but they undertake certain responsibilities.

**2. Theoretical basis for the network management** 
