How behavior and institutions are affected by social relations is one of the classic questions of social theory. This paper concerns the extent to which economic action is embedded in structures of social relations, in modern industrial society. Although the usual neoclasical accounts provide an "undersocialized" or atomized-actor explanation of such action, reformist economists who attempt to bring social structure back in do so in the "oversocialized" way criticized by Dennis Wrong. Under-and oversocialized accounts are paradoxically similar in their neglect of ongoing structures of social relations, and a sophisticated account of economic action must consider its embeddedness in such structures. The argument in illustrated by a critique of Oliver Williamson's "markets and hierarchies" research program.

Economic Action and Social Structure: The Problem of Embeddedness

Scholars of the theory of the firm have begun to emphasize the sources and conditions of what has been described as “the organizational advantage,” rather than focus on the causes and consequences of market failure. Typically, researchers see such organizational advantage as accruing from the particular capabilities organizations have for creating and sharing knowledge. In this article we seek to contribute to this body of work by developing the following arguments: (1) social capital facilitates the creation of new intellectual capital; (2) organizations, as institutional settings, are conducive to the development of high levels of social capital; and (3) it is because of their more dense social capital that firms, within certain limits, have an advantage over markets in creating and sharing intellectual capital. We present a model that incorporates this overall argument in the form of a series of hypothesized relationships between different dimensions of social capital and the main mechanisms and proces...

https://www.jstor.org/stable/pdfplus/259373.pdf

Social Capital, Intellectual Capital, and the Organizational Advantage

In this article we offer a view that suggests that a firm's critical resources may span firm boundaries and may be embedded in interfirm resources and routines. We argue that an increasingly important unit of analysis for understanding competitive advantage is the relationship between firms and identify four potential sources of interorganizational competitive advantage: (1) relation-specific assets, (2) knowledge-sharing routines, (3) complementary resources/capabilities, and (4) effective governance. We examine each of these potential sources of rent in detail, identifying key subprocesses, and also discuss the isolating mechanisms that serve to preserve relational rents. Finally, we discuss how the relational view may offer normative prescriptions for firm-level strategies that contradict the prescriptions offered by those with a resource-based view or industry structure view.

https://www.jstor.org/stable/pdfplus/259056.pdf

The Relational View: Cooperative Strategy and Sources of Interorganizational Competitive Advantage

Output per worker varies enormously across countries. Why? On an accounting basis, our analysis shows that differences in physical capital and educational attainment can only partially explain the variation in output per worker--we find a large amount of variation in the level of the Solow residual across countries. At a deeper level, we document that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which we call social infrastructure. We treat social infrastructure as endogenous, determined historically by location and other factors captured in part by language.

/pdf/why-do-some-countries-produce-so-much-more-output-per-worker-r25pge75qn.pdf

Why Do Some Countries Produce so Much More Output Per Worker than Others

This paper analyzes a newly assembled data set consisting of subjective indices of corruption, the amount of red tape, the efficiency of the judicial system, and various categories of political stability for a cross section of countries. Corruption is found to lower investment, thereby lowering economic growth. The results are robust to controlling for endogeneity by using an index of ethnolinguistic fractionalization as an instrument.

/pdf/corruption-and-growth-2z9d0x0u16.pdf

Corruption and Growth

Markets and Other Allocation Systems in History: The Challenge of Karl Polanyi.

Institutions and the way they evolve shape economic performance. Institutions affect economic performance by determining (together with the technology employed) the cost of transacting and producing. They are composed of formal rules, of informal constraints and of their enforcement characteristics; while formal rules can be changed overnight by the polity, informal constraints change very slowly. Both are ultimately shaped by the subjective perceptions people possess to explain the world around them which in turn determine explicit choices of formal rules and evolving informal constraints. Institutions differ from organizations. The former are the rules of the game; the latter are groups of individuals bound together by a common objective function (economic organizations are firms, trade unions, cooperatives; political organizations are political parties, legislative bodies, etc.).

The contribution of the new institutional economics to an understanding of the transition problem

In this article, we provide a broad overview of the interplay among cognition, belief systems, and institutions, and how they affect economic performance. We argue that a deeper understanding of institutions' emergence, their working properties, and their effect on economic and political outcomes should begin from an analysis of cognitive processes. We explore the nature of individual and collective learning, stressing that the issue is not whether agents are perfectly or boundedly rational, but rather how human beings actually reason and choose, individually and in collective settings. We then tie the processes of learning to institutional analysis, providing arguments in favor of what can be characterized as “cognitive institutionalism.” Besides, we show that a full treatment of the phenomenon of path dependence should start at the cognitive level, proceed at the institutional level, and culminate at the economic level.

/pdf/learning-institutions-and-economic-performance-emka0iwdxq.pdf

Learning, Institutions, and Economic Performance

Institutions provide the incentive structure of an economy and therefore 
the way they evolve shapes long-run economic performance.Institutions, composed of rules, norms of behaviour, and the way they 
are enforced, provide the opportunity set in an economy which determines the kinds of purposive activity embodied in organizations (firms, 
trade unions, political bodies, and so forth) that will come into existence. 
If the institutions reward productive activity then the resultant organizations will find it worthwhile engaging in activities that induce economic 
growth. If, on the other hand, the institutional framework rewards 
redistributive and non-productive activities then organizations will 
maximize at those margins and the economy will not grow.

/pdf/institutions-and-economic-performance-593czveeho.pdf

Institutions and economic performance

North outlines five propositions about institutional change and explains its meanings. He lays out a specific agenda for the study of institutions that is different from game theoretic or spatial political modeling of institutions. The focus is a transaction cost approach to institutions and a cognitive science approach to "rational" choice. While the former--the transaction cost approach--is at least partly complementary to game theoretic approaches, the latter suggests a distinct departure from much of the current rational choice theory.

https://ecsocman.hse.ru/data/874/750/1216/9309001.pdf

Douglass C. North

Papers

Markets and Other Allocation Systems in History: The Challenge of Karl Polanyi.

The contribution of the new institutional economics to an understanding of the transition problem

Learning, Institutions, and Economic Performance

Institutions and economic performance

Five Propositions about Institutional Change