Social structure and competition in interfirm networks: The paradox of embeddedness

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5475 Scopus citations

Abstract

The purpose of this work is to develop a systematic understanding of embeddedness and organization networks. Drawing on ethnographic fieldwork conducted at 23 entrepreneurial firms, I identify the components of embedded relationships and explicate the devices by which embeddedness shapes organizational and economic outcomes. The findings suggest that embeddedness is a logic of exchange that promotes economies of time, integrative agreements, Pareto improvements in allocative efficiency, and complex adaptation. These positive effects rise up to a threshold, however, after which embeddedness can derail economic performance by making firms vulnerable to exogenous shocks or insulating them from information that exists beyond their network. A framework is proposed that explains how these properties vary with the quality of social ties, the structure of the organization network, and an organization's structural position in the network.

Original languageEnglish (US)
Pages (from-to)35-67
Number of pages33
JournalAdministrative Science Quarterly
Volume42
Issue number1
DOIs
StatePublished - Jan 1 1997

ASJC Scopus subject areas

  • Arts and Humanities (miscellaneous)
  • Sociology and Political Science
  • Public Administration

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