In this paper we provide a set of stability conditions for linear
time-invariant networked control systems with arbitrary topology, using a
Lyapunov direct approach. We then use these stability conditions to provide a
novel low-complexity algorithm for the design of a sparse observer-based
control network. We employ distributed observers by employing the output of
other nodes to improve the stability of each observer dynamics. To avoid
unbounded growth of controller and observer gains, we impose bounds on their
norms. The effects of relaxation of these bounds is discussed when trying to
find the complete decentralization conditions
