Unlike contractual governance where transactions
between private and public institutions are short-term
oriented and solely based on competitive market dynamics,
production networks are more long-term oriented in
the approaches to businesses and are highly interdependent. Participants in public good production networks
used to be public institutions since the state favored a
direct production of public goods and service during the
early stages of economic development. This meant that
state-owned enterprises (SOEs) and Quagos were heavily
used to produce goods and services. However, the
state, due to inefficiencies associated with the state ownership
of SOEs and other forms of hybrid organizations,
gradually abandoned the direct production modes and
instead sought to motivate private actors to participate in
the production process.