Economic Action and Social Structure: The Problem of Embeddedness

doi:10.1086/228311

Home
/
Papers
/
Economic Action and Social Structure: The Problem of Embeddedness

Journal Article•DOI•

Economic Action and Social Structure: The Problem of Embeddedness

Mark Granovetter¹•Institutions (1)

Stony Brook University¹

01 Nov 1985-American Journal of Sociology (University of Chicago Press)-Vol. 91, Iss: 3, pp 481-510

TL;DR: In this article, the extent to which economic action is embedded in structures of social relations, in modern industrial society, is examined, and it is argued that reformist economists who attempt to bring social structure back in do so in the "oversocialized" way criticized by Dennis Wrong.

read less

Abstract: 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.

...read moreread less

Citations

PDF

Open Access

More filters

Journal Article•DOI•

An Integrative Model Of Organizational Trust

[...]

Roger C. Mayer¹, James H. Davis¹, F. David Schoorman²•Institutions (2)

University of Notre Dame¹, Purdue University²

01 Jul 1995-Academy of Management Review

TL;DR: In this paper, a definition of trust and a model of its antecedents and outcomes are presented, which integrate research from multiple disciplines and differentiate trust from similar constructs, and several research propositions based on the model are presented.

...read moreread less

Abstract: Scholars in various disciplines have considered the causes, nature, and effects of trust. Prior approaches to studying trust are considered, including characteristics of the trustor, the trustee, and the role of risk. A definition of trust and a model of its antecedents and outcomes are presented, which integrate research from multiple disciplines and differentiate trust from similar constructs. Several research propositions based on the model are presented.

...read moreread less

16,559 citations

Cites background from "Economic Action and Social Structur..."

...Legalistic remedies have been described as weak, impersonal substitutes for trust (Sitkin & Roth, 1993), which may bring organizational legitimacy, yet often are ineffective (Argyris, 1994; Donaldson & Davis, 1991; Granovetter, 1985; Sitkin & Roth, 1993)....
[...]

Journal Article•DOI•

Social Capital, Intellectual Capital, and the Organizational Advantage

[...]

Janine Nahapiet¹, Sumantra Ghoshal²•Institutions (2)

University of Oxford¹, London Business School²

01 Apr 1998-Academy of Management Review

TL;DR: In this article, the authors 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.

...read moreread less

Abstract: 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...

...read moreread less

15,365 citations

Cites background from "Economic Action and Social Structur..."

...…_ _ _ _ _ _ Norms Obligations d 8 capability Identification |_ _sL ticular structural configurations, such as those displaying strong symmetrical ties, have consistently been shown to be associated with such relational facets as interpersonal affect and trust (Granovetter, 1985; Krackhardt, 1992)....
[...]
...…in this cluster are trust and trustworthiness (Fukuyama, 1995; Putnam, 1993), norms and sanctions (Coleman, 1990; Putnam, 1995), obligations and expectations (Burt, 1992; Coleman, 1990; Granovetter, 1985; Mauss, 1954), and identity and identification (Hakansson & Snehota, 1995; Merton, 1968)....
[...]
...and trustworthiness (Fukuyama, 1995; Putnam, 1993), norms and sanctions (Coleman, 1990; Putnam, 1995), obligations and expectations (Burt, 1992; Coleman, 1990; Granovetter, 1985; Mauss, 1954), and identity and identification (Hakansson & Snehota, 1995; Merton, 1968)....
[...]
...For example, since it takes time to build trust, relationship stability and durability are key network features associated with high levels of trust and norms of cooperation (Axelrod, 1984; Granovetter, 1985; Putnam, 1993; Ring & Van de Ven, 1992)....
[...]
...ticular structural configurations, such as those displaying strong symmetrical ties, have consistently been shown to be associated with such relational facets as interpersonal affect and trust (Granovetter, 1985; Krackhardt, 1992)....
[...]

Journal Article•DOI•

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

[...]

Jeffrey H. Dyer¹, Harbir Singh¹•Institutions (1)

University of Pennsylvania¹

01 Oct 1998-Academy of Management Review

TL;DR: In this paper, the authors 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: relation-specific assets, knowledge-sharing routines, complementary resources/capabilities, and effective governance.

...read moreread less

Abstract: 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.

...read moreread less

11,355 citations

Cites background from "Economic Action and Social Structur..."

...Sociologists, anthropologists, and law and society scholars long have argued that informal social controls supplement—and often supplant—formal controls (Black, 1976; EUickson, 1991; Granovetter, 1985; Macaulay, 1963)....
[...]
...When a firm is well positioned in networks, the firm has' access to more reliable information about potential partners because of trusted informants within the network who may have direct experience with the potential partner (Burt, 1992; Chung, Singh, & Lee, in press; Granovetter, 1985; Nohria, 1992)....
[...]
...Although informal safeguards have the greatest potential to generate relational rents, they are subject to two key liabilities: (1) they require substantial time to develop, because they require a history of interactions and personal ties, and (2) they are subject to the "paradox of trust," which means that although trust establishes norms and expectations about appropriate behavior, lowering the perception of risk in the exchange, it provides the opportunity for abuse through opportunism (Granovetter, 1985)....
[...]

Journal Article•DOI•

“Bowling Alone: America’s Declining Social Capital”

[...]

Robert D. Putnam¹•Institutions (1)

Johns Hopkins University¹

01 Jan 1995-Journal of Democracy

TL;DR: Putnam as discussed by the authors showed that crucial factors such as social trust are eroding rapidly in the United States and offered some possible explanations for this erosion and concluded that the work needed to consider these possibilities more fully.

...read moreread less

Abstract: After briefly explaining why social capital (civil society) is important to democracy, Putnam devotes the bulk of this chapter to demonstrating social capital’s decline in the United States across the last quarter century. (See Putnam 1995 for a similar but more detailed argument.) While he acknowledges that the significance of a few countertrends is difficult to assess without further study, Putnam concludes that crucial factors such as social trust are eroding rapidly in the United States. He offers some possible explanations for this erosion and concludes by outlining the work needed to consider these possibilities more fully.

...read moreread less

11,187 citations

Journal Article•DOI•

Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness

[...]

Brian Uzzi

01 Mar 1997-Administrative Science Quarterly

TL;DR: In this article, the authors develop one of perhaps multiple specifications of embeddedness, a concept that has been used to refer broadly to the contingent nature of economic action with respect to cognition, social structure, institutions, and culture.

...read moreread less

Abstract: This chapter aims to develop one of perhaps multiple specifications of embeddedness, a concept that has been used to refer broadly to the contingent nature of economic action with respect to cognition, social structure, institutions, and culture. Research on embeddedness is an exciting area in sociology and economics because it advances understanding of how social structure affects economic life. The chapter addresses propositions about the operation and outcomes of interfirm networks that are guided implicitly by ceteris paribus assumptions. While economies of time due to embeddedness have obvious benefits for the individual firm, they also have important implications for allocative efficiency and the determination of prices. Under the conditions, social processes that increase integration combine with resource dependency problems to increase the vulnerability of networked organizations. The level of investment in an economy promotes positive changes in productivity, standards of living, mobility, and wealth generation.

...read moreread less

9,137 citations

1
2
3
4
…
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200

Collapse

References

PDF

Open Access

More filters

Journal Article•DOI•

Transaction-Cost Economics: The Governance of Contractual Relations

[...]

Oliver E. Williamson

01 Oct 1979-The Journal of Law and Economics

TL;DR: For instance, the authors argues that if transaction costs are negligible, the organization of economic activity is irrelevant, since any advantages one mode of organization appears to hold over another will simply be eliminated by costless contracting.

...read moreread less

Abstract: THE new institutional economics is preoccupied with the origins, incidence, and ramifications of transaction costs. Indeed, if transaction costs are negligible, the organization of economic activity is irrelevant, since any advantages one mode of organization appears to hold over another will simply be eliminated by costless contracting. But despite the growing realization that transaction costs are central to the study of economics,' skeptics remain. Stanley Fischer's complaint is typical: "Transaction costs have a well-deserved bad name as a theoretical device ... [partly] because there is a suspicion that almost anything can be rationalized by invoking suitably specified transaction costs."2 Put differently, there are too many degrees of freedom; the concept wants for definition.

...read moreread less

9,217 citations

"Economic Action and Social Structur..." refers background in this paper

...(See, e.g., Furubotn and Pejovich 1972; Alchian and Demsetz 1973; Lazear 1979; Rosen 1982; Williamson 1975, 1979, 1981; Williamson and Ouchi 1981.)...
[...]
...As a concrete application of the embeddedness approach to economic life, I offer a critique of the influential argument of Oliver Williamson in Markets and Hierarchies (1975) and later articles (1979, 1981; Williamson and Ouchi 1981)....
[...]
...The argument is illustrated by a critique of Oliver Williamson's "markets and hierarchies" research program....
[...]
...I have also used the "market and hierarchies" argument of Oliver Williamson as an illustration of how the embeddedness perspective generates different understandings and predictions from that implemented by economists....
[...]
...…argued that behavior and institutions previously interpreted as embedded in earlier societies, as well as in our own, can be better understood as resulting from the pursuit of self-interest by rational, more or less atomized individuals (e.g., North and Thomas 1973; Williamson 1975; Popkin 1979)....
[...]

Journal Article•DOI•

The Economics of Organization: The Transaction Cost Approach

[...]

Oliver E. Williamson

01 Nov 1981-American Journal of Sociology

TL;DR: The transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the analysis of organizations as mentioned in this paper.

...read moreread less

Abstract: The transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations. Applications of this approach require that transactions be dimensionalized and that alternative governance structures be described. Economizing is accomplished by assigning transactions to governance structures in a discriminating way. The approach applies both to the determination of efficient boundaries, as between firms and markets, and to the organization of internal transactions, including the design of employment relations. The approach is compared and contrasted with selected parts of the organization theory literature.

...read moreread less

5,819 citations

"Economic Action and Social Structur..." refers background in this paper

...(See, e.g., Furubotn and Pejovich 1972; Alchian and Demsetz 1973; Lazear 1979; Rosen 1982; Williamson 1975, 1979, 1981; Williamson and Ouchi 1981.)...
[...]
...As a concrete application of the embeddedness approach to economic life, I offer a critique of the influential argument of Oliver Williamson in Markets and Hierarchies (1975) and later articles (1979, 1981; Williamson and Ouchi 1981)....
[...]
...…in history and political science have developed a new interest in the economic analysis of social institutions-much of which falls into what is called the "new institutional economics"-and have argued that behavior and institutions previously interpreted as embedded in earlier societies, as well…...
[...]
...The argument is illustrated by a critique of Oliver Williamson's "markets and hierarchies" research program....
[...]
...I have also used the "market and hierarchies" argument of Oliver Williamson as an illustration of how the embeddedness perspective generates different understandings and predictions from that implemented by economists....
[...]

Book•

Foundations of Economic Analysis

[...]

Paul A. Samuelson

01 Jan 1947

TL;DR: Recent statistical techniques, including nonlinear programming, have been added to a basic survey of equilibrium systems, comparative statistics, consumer behavior theory, and cost and production theory as discussed by the authors, and they have been used in a variety of applications.

...read moreread less

Abstract: Recent statistical techniques, including nonlinear programming, have been added to a basic survey of equilibrium systems, comparative statistics, consumer behavior theory, and cost and production theory.

...read moreread less

4,532 citations

Book•

Getting a Job: A Study of Contacts and Careers

[...]

Mark Granovetter

01 Jan 1974

TL;DR: In this article, the Second Edition, the authors present a survey of job search and economic theory in the context of information flow and the problem of embeddedness in the job search process.

...read moreread less

Abstract: Preface to the Second Edition Preface Acknowledgments Introduction Pt. 1: Toward Causal Models Ch. 1: "Job Search" and Economic Theory Ch. 2: Contacts and Their Information Ch. 3: The Dynamics of Information Flow Ch. 4: The Dynamics of Vacancy Structure Ch. 5: Contacts: Acquisition and Maintenance Ch. 6: Career Structure Ch. 7: Some Theoretical Implications Pt. 2: Mobility and Society Ch. 8: Mobility and Organizations Ch. 9: Comparative Perspectives Ch. 10: Applications Afterword 1994: Reconsiderations and a New Agenda Appendix A: Design and Conduct of the Study Appendix B: Coding Rules and Problems Appendix C: Letters and Interview Schedules Appendix D: Economic Action and Social Structure: The Problem of Embeddedness References Index

...read moreread less

3,814 citations

"Economic Action and Social Structur..." refers background in this paper

...…firms not only because personal relations exist between those in each firm who do business with each other but also, as I have shown in detail (Granovetter 1974), because the relatively high levels of interfirm mobility in the United States guarantee that many workers will be…...
[...]

Journal Article•DOI•

Internal Labor Markets and Manpower Analysis.

[...]

Judith Stoikov, Peter B. Doeringer, Michael J. Piore

01 Jan 1972-Industrial and Labor Relations Review

TL;DR: In what case do you like reading so much? What about the type of the internal labor markets and manpower analysis book? The needs to read? Well, everybody has their own reason why should read some books.

...read moreread less

Abstract: In what case do you like reading so much? What about the type of the internal labor markets and manpower analysis book? The needs to read? Well, everybody has their own reason why should read some books. Mostly, it will relate to their necessity to get knowledge from the book and want to read just to get entertainment. Novels, story book, and other entertaining books become so popular this day. Besides, the scientific books will also be the best reason to choose, especially for the students, teachers, doctors, businessman, and other professions who are fond of reading.

...read moreread less

3,301 citations