1 Network Capital and the Self-organizing Provision of Public Goods

Decentralized governance activities outside formal government institutions are expanding throughout the Western democracies, and informal relationships in these policy arenas become critical to government performance. We analyze relationships among stakeholders that provide political, technical, financial, and regulatory resources to water projects in one such governance arena. The risk hypothesis argues that bridging network capital increases productivity for low-risk coordination problems whereas bonding capital increases productivity for higher-risk cooperation dilemmas. We find that stakeholders who establish more relationships in networks of political support and financial assistance improve the performance of projects they support. In addition, greater bridging capital leads to greater productivity among participants in the financial assistance network, but productivity in the political support network is facilitated by bonding capital. Furthermore, self-interested organizations appear to seek the more productive type of relationship in each network, since bridging relationships are more prevalent among financial providers and bonding relationships among political providers. 2 To the extent that policymaking decisions migrate from formal institutions to informa