Search results

This chapter addresses social embeddedness effects on ex ante management of economic transactions. We focus on dyadic embeddedness, that is the history of prior transactions between business partners and the anticipation of future transactions. Ex ante management through, for example, contractual arrangements is costly but mitigates risks associated with the transaction, such as risks from strategic and opportunistic behavior. Dyadic embeddedness can reduce such risks and, hence, the need for ex ante management by, for instance, making reciprocity and conditional cooperation feasible. The chapter presents a novel theoretical model generating dyadic embeddedness effects, together with effects of transaction characteristics and management costs. We stress the interaction of the history of prior transactions and expectations of future business. Hypotheses are tested using new and primary data from an extensive survey of more than 900 purchases of information technology (IT) products (hard- and software) by almost 800 small- and medium-sized enterprises (SMEs). Results support, in particular, the hypotheses on effects of dyadic embeddedness.

This conceptual paper examines and evaluates patronage and clientage as a system of interrelated dyadic exchanges between unequals through which goods and services circulate, flowing both up and down through stratified societies. The parties involved may be in different places socially and geographically.

Data are presented for Brazil from the period of the Old Republic beginning in the 1890s, through the end of the Military Dictatorship in mid-1980s, and finally to the present, ending with today’s conditional cash transfer programs. The data are examined against the background of a 15th century book, O Livro da Virtuosa Bemfeituria (The Book of the Virtuous Benefits), written by a Portuguese Prince influential in the expansion and discoveries as a guide for princes and great lords that is used in the paper very much in the way that Adam Smith’s writings are used for most economic behavior today.

There are striking parallels over this long historical period in the behaviors referred to as patronage and clientage that may be conceptualized as an older (traditional) way of ordering the flow of goods and services (distributing them), alternative and parallel to market mechanisms that have, and continue to operate in Brazilian society.

Patronage and clientage are often-misunderstood behaviors, sometimes referred to as corrupt, that alternatively may be explained and understood as part of a still viable and operational socio-cultural system that goes back to a period before the colonization of Brazil.

The second decade of the twenty-first century finds Brazil racked by a series of scandals that are extreme even by world standards. This chapter presents an explanation for one of the behaviors that have produced these scandals. Specifically, it is the offering of bribes to public officials by individuals or companies that stand to benefit from contracts to perform public services and, furthermore, the paying of kickbacks to the officials if the contract is awarded. I liken this behavior to the making of vows to the saints in the “popular” or “folk” form of Catholicism – and other popular religions that accept its basic premises – and the fulfillment of the promise if and when the otherworldly being provides what the petitioner requested. Part 1 of the chapter examines an election for mayor of the city of Fortaleza in 2012 in which the office was “bought” for what seemed to be an exorbitant amount of money. I hypothesize that this is to be explained by the anticipation of the city receiving government contracts to build a soccer stadium, a rail system, and other projects related to the 2014 World Cup. In Part 2, I examine Brazil’s religions beginning with popular Catholicism, to show that the normative way of gaining something desired from a supernatural – be it the restoration of health or the recovery of a lost item – is to offer it something it values and then fulfilling the promise if and when the petitioner receives what was requested. I contend that this important religious pattern continues to provide the template for the secular behavior that is being judged to be corrupt by standards other than those found in the religiously based worldview of many Brazilians.

The paper is the story of the marginalization of the concept of networks of dyadic exchanges or patronage and clientage by Brazilian intellectuals and Brazilianist academics. I contend that though it is a pervasive pattern in the culture of the nation, Brazilian intellectuals wrote about patronage/clientage as an aspect of politics that is responsible for the country's backwardness and underdevelopment. Anthropologists, for the most part, judged it to be exploitative of the people involved and believed that it should be eliminated. The Workers Party (Partido dos Trabalhadores or PT), as it implemented a highly commended conditional cash transfer program to help the poor, attempted to replace it with an alternative way they believed electoral politics ought to be conducted. I suggest that the pattern continues to be more than exchanges between political office seekers and voters in Brazil as it transcends the political, economic, and religious categories of modernity and may provide the most needy with what the labor market does not.

This chapter addresses how firms buying information technology (IT) products select their suppliers. We argue that social embeddedness, in the sense of own experiences with suppliers and information about experiences of third parties, influences these types of selection decisions. More specifically, we claim that social embeddedness is more important if: (1) the potential damage for the buyer from receiving an inferior product is larger and (2) if it is more difficult for the buyer to monitor the quality of the product. We use large-scale surveys of IT transactions in the Netherlands and Germany to test these hypotheses. In general, our hypotheses about the effects of social embeddedness on partner selection are supported. We find that buyers tend to assign greater weight to product quality if the potential damage for the buyer is larger. Negative third-party information is particularly important if the buyer has large problems to monitor the quality of a product.

Assuming that information about the participants in the network circulates over the ties comprising it, firms’ structural positions – defined in this chapter by their location in the network of past strategic collaborations – should affect their general reputations as collaborators and the knowledge that structurally proximate organizations possess about their past behavior. In turn, the information benefits associated with different network positions should influence the types of governance structures and contractual features that appear in new alliances. This chapter examines how the positions of biotechnology firms in the established network of strategic alliances influences one of the important contractual terms of new partnerships: whether or not one partner finances the activities of its counterparty as part of the deal.

The argument that applications of social network research tools and theories to stakeholder research will advance our understanding of how organizations should and do interact with their stakeholders and how stakeholders influence organizations has been well known for over 15 years. However, the integration of social network analysis and stakeholder research has been limited to date. To motivate stakeholder network research, I illustrate the similarities and complementarities between these research streams, arguing that the social network perspective tackles weaknesses in stakeholder models supporting the creation of more fruitful models of organization–stakeholder environments. I illustrate how stakeholder power and legitimacy, and focal organization obligations can be better modeled theoretically and measured empirically using social network concepts and techniques.

This chapter examines the factors that may influence the total value created in a joint venture (JV) and also the relative value appropriated by each partner in the venture. We look at the effects of both partners’ embeddedness in prior networks of relationships and the asymmetry of business relatedness of two partners with the JV on these two important outcomes. Results of an event study of stock market reaction to JV announcements by the largest U.S. firms during 1987–1996 suggest that both network embeddedness of partners and the asymmetry of business relatedness of two firms with the JV affect the total value creation of all partners but not the relative value appropriation between the partners.

Income and wealth in Brazil is distributed as unequally and unjustly as in any other nation or region of the world. This chapter examines how wealth and income has been, is, or might be made available to the population. Using the conceptual framework of the substantive economics developed by Karl Polanyi, Conrad Arensberg, and their colleagues, the distribution of goods and services is analyzed as a socially “instituted process,” separate from production and other factors generally included in studies of economics. Four approaches are presented as they were elaborated in the thinking of authors who wrote at different times in history: The Infante Dom Pedro of Portugal in the early 15th century, Adam Smith in the late 18th century, Karl Marx in the 19th century, and Louis Kelso in the mid-20th century. Each approach, three of which have been, and one which might be instituted, is explored in terms of its potential for reducing poverty and correcting distributive injustice.

This study stresses the importance of considering a “joint” governance of interfirm relations as an alternative to external governance (by the State) and self-governance (by the business community) of these relations. We argue that a broadly-conceived structural and organizational approach to economic institutions provides insights into this joint governance because it shows how such a system spreads the costs of control among several kinds of stakeholders. We look at how transactions between any two firms are regulated through jurisdiction by “consular” judges (i.e. judges elected through the local Chamber of Commerce) who indirectly represent other firms and industries in that market, and are therefore considered to be at the same time third parties and potential levers of influence acting on behalf of corporate interests. We study an empirical case of such joint governance: The Tribunal of Commerce of Paris (TCP). Following previous work on lateral control and leverage, we hypothesize that industries and/or companies that have a strong stake in the conflict resolution process will be more represented among the judges of this court than other industries and/or companies, and that judges who are socially active in the court that enforces this joint governance will be sought out for advice more than other judges, and thus gain influence on their peers by suggesting specific outcomes. The analyses of the composition of the bench and of the advice network data collected in this court display an influence structure that confirms these hypotheses and that is likely to affect conflict resolution between businesses. It thus characterizes joint governance of markets as a complex set of social processes worthy of economic sociologists’ attention.