With increasing emphasis on the informational aspects of the economy, there are calls for the reform of existing institutions and related policy changes to maximize economic efficiency and to foster equitable distribution of the benefits of "knowledge economies." Frequently those who propose new institutional solutions are fascinated by the pace of technological innovation, so much so that they fail to heed lessons that can be drawn from the various and rich strands of twentieth century institutional economics.
In this paper, the focus is on the lacunae in our understanding of the emergence of new institutions for governing the provision of Internet-based business services. The specific services of interest in this paper are those arising from initiatives that seek to develop large-scale distributed open source software applications for use by small and medium-sized enterprises (SME). Although considerable attention is being given to the micro-level practices of communities of software developers in the open source movement in the research literature, insufficient attention is being given to how these actors develop and maintain sustainable relationships with other actors with whom they must interact to introduce viable service innovations. As these relationships develop, new institutions or "working rules"--as John R. Commons might have designated them--begin to emerge to manage the governance requirements for such initiatives.
In this paper Commons' perspective on the origins of "working rules" is employed as a complement to more situated accounts of the emergent practices of actors involved in a European Commission--supported project aimed at creating a sustainable open source Internet-based platform for SME business services. The case is of particular interest because there are no "off-the-shelf" templates from which effective "working rules" can be taken to assist in building governance institutions.
Working Rules and Institutions
Commons' (1924, 1934) work oil collective action provides particularly helpful insights into the evolution of institutions of governance in part because his analysis does not rely on strong rationalist assumptions such as those underpinning the theory of collective action developed by Mancur Olson. (1) Commons defined institutions as "collective action in control, liberation and expansion of individual action" (1931, 1). He treated institutions as "negotiated orders" and observed that emerging institutions involve new forms of collective action because they link individuals together within new constellations of relationships.
If collective action is to occur and be sustained, Commons argued that the different actors involved must negotiate "working rules" to govern their actions. It is through these negotiations, he suggested, that any form of collective action is feasible at all. (2) He regarded scarcity and conflict as social phenomena that create a need for institutions. When scarce resources lead to conflict and competition, these can be mediated by institutions that foster cooperation. Cooperation was seen as arising, not from a convergence or harmony of individual interests or harmony within social groups as social capital theorists often suggest (Puttman 1993), but from the intentional decisions of the actors involved. Thus, cooperation "involves the gradual discovery that social co-operation rests, not upon a divinely appointed or 'natural' harmony of interests, but upon a state of order that men learn to establish among themselves" (Commons in Mitchell 1935, 651). Co-operation is best regarded therefore as learned behavior arising out of social interaction.
The establishment of "working rules" was seen as the result of learning. Transactions were understood as being rich and complex relationships involving intersubjective experience that shapes ideas and outcomes among individuals with different understandings, goals, preferences, and, importantly in the present context, access to various bodies of knowledge. "Working rules" define what "the individual can, cannot, must, must not, may or may not do" (Commons 1934, 17). Such rules constrain and facilitate actions, offering a framework within which individuals embedded in an institution acquire a sense of reciprocity and security of expectations. Out of deliberation about working rules comes the resolution of differences and the potential for sustained patterns of collective interaction. From an empirical standpoint, Commons' insights suggest that in order to understand a new context for interaction such as Internet-based open source business services, we need to examine the negotiations, expectations, conflicts, and interdependencies that are characteristic of that institutional environment.
Regional Dynamics and ICT Potential
A sizable body of work has been produced in an attempt to understand the growth and development of regional innovation systems, often designated as learning regions, in which firms of all sizes both cooperate and compete. (3) There have been numerous initiatives in Europe aimed at stimulating European leadership in the production of innovative technologies and at developing socially cohesive and equitable markets that are competitive on a world scale (Mansell and Steinmueller 2000). Many of these initiatives focus on specific regions within Europe. The potential of information and communication technologies (ICTs) has been examined as a means of providing new sources of regional competitive advantage, especially for smaller...