This article examines the evolution of a community-based network of mostly nonprofit health and human service agencies providing services to people with mental illness. The network was formed in response to a major shift in the state’s funding mechanism from fee-for-service to managed care. When confronted with conflicting institutional pressures from the state and the profession, the response was one of strategic balancing and compromise through development of an interorganizational network rather than by the passive conformity of individual agencies. How this network evolved and how compromise was achieved was examined. Data were collected shortly after the new system was first introduced and then 4 years later to allow longitudinal analysis of network evolution.
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