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Economic networks consist of individuals, groups, organizations, communities, or entire nations who work together to increase production capacity and economic growth. Networks can have fixed, rotating, or changing memberships and focus on recruiting, sharing knowledge and resources, and scouting markets. Information is central to economic networks, and they have become increasingly important in response to the globalized economy. However, economic networks can be vulnerable to distrust, lack of transparency, and opportunistic actions, making research on optimizing their structure essential for economic sustainability and system stability.
Simply defined, an economic network consists of individuals, groups, organizations, communities, or entire nations who work with each other for the benefit of all network members. By leveraging all the competitive advantages, assets and resources of the members, the economic network aims to collectively increase the production capacity and economic growth of its members. Such networks may have a fixed membership, a rotating membership, or a constantly changing membership, depending on the specific goals of the network. The idea is to increase members’ position in the market. Participants in such networks will focus on recruiting, sharing knowledge and resources, and scouting markets to uncover economic opportunities.
Many industries rely on an economic network, especially since the Industrial Revolution and the emphasis on national economies around the world. These networks have arisen in direct response to efficiency problems stemming from economies that grow larger and less personal. As networks could collectively deliver products and services, this trend has continued throughout the 21st century in order to mitigate the effects of a large economic structure, including industries and networks of all sizes from individuals to nations in response to the globalized economy. Information has become the central and most valuable element within the economy, and economic networks usually form to gather, share, and respond to that information.
While a collective economic network such as the Association of Southeast Asian Nations (ASEAN) can benefit greatly, individuals can benefit as well. The benefits to individuals, however, depend very much on the network of connections between those individuals. Network structure often determines the outcome of potential economic relationships, usually by determining how much information is exchanged and for what purposes. Other effects of network structure include exchanges of goods and services and exchanges of financial resources. Despite the importance of structure in an economic network, the development of the theory and methods to analyze such structures is often lacking, being fundamental at best.
However, modern economic systems consistently tend towards economic networks. Creating a global system, these networks continuously interact with each other through interdependencies of knowledge and actions. Through such interdependencies, however, these networks can interlock when exposed to distrust, lack of transparency, and the coupling of banking and investment stocks. Economic networks amplify the impact of such exposures and risks, including both economic failures and opportunistic actions intended to take advantage of, rather than benefit, the network. Due to these factors, research focused on optimizing the structure of economic networks is believed to be essential to achieve the goals of establishing economic sustainability and ensuring system stability.
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