Walking a Tightrope: Balancing Centralization and Decentralization in Enterprise Blockchain Networks

Blockchain technologies represent a promising opportunity to manage complex intra- and interorganizational networks. A critical decision for founders of blockchains is whether blockchain activities should be governed in a fully decentralized, consensus-based way, or in a more centralized and controlled way, supported by mechanisms of hierarchical control. While a decentralized, consensus-based approach may result in lower upfront administrative costs for managing a blockchain network, it may also complicate the subsequent coordination, control, and adaptability of the network that can be achieved by introducing a consortium as a centralized governance structure in an otherwise decentralized system. Based on extant governance research, we hypothesize that founders of enterprise blockchains will evaluate this strategic tradeoff more in favor of adopting a consortium as the number of founders, rivalry of founders, and dynamism of founder industries increase. We test our theorizing on a unique sample of 127 blockchain initiatives and find support for the two former but not for the latter hypotheses. Our study advances theories on network governance and the emerging literature on blockchains.