The Paradox Of Embeddedness Analysis

Uzzis "the Paradox of Embeddedness"
===================================

Brian Uzzi's paper is an empirical paper that, in many ways, can be seen as providing empirical support for and refining the essential embeddedness thesis made by Granovetter (1985) in Economic action and social structure: The Problem of embeddedness.
Uzzi argues thats attempts to explain cooperative social arrangement within markets (e.g., Japanese manufacturing or knitwear) using agency theory, prisoners dilemmas, and transaction costs, still rely on opportunism that seems a poor and undersocialized explanation.
To answer these, Uzzi provides ethnographic evidence from a series of New york City women's better-dress firms (essentially a midscale market of dresswear).

Zukin and DiMaggio (1990) classified embeddedness into four forms:

1. structural,
2. cognitive,
3. political,
4. and cultural.

Structural embeddedness is principally concerned with how the quality and network architecture of material exchange relationships influence economic activity.
Powell's (1990) analysis of the sociological and economic literatures on exchange suggests that transactions can take place through loose collections of individuals who maintain impersonal and constantly shifting exchange lies, as in markets, or through stable networks of exchange partners who maintain close social relationships.
The key distinction between these systems is the structure and quality of exchange ties, because these factors shape expectations and opportunities.

Brain Uzzi found that most ties between firms were arms-length (i.e., they were greater in frequency) but they were of much lesser significant than the closer, "special", embedded ties.
Uzzi argued that embedded ties were shown to have three main components:

1. Trust: Which gave firms more flexibility (i.e., someone could pay later), access to resources, and enriched

Joint problem-solving arrangements: Which included routines associated with adjustment and coordination that, despite economists predictions, were more efficient than market-based mechanisms of coordination.

The notion that economic action is embedded in social structure has revived debates about the positive and negative effects of social relations on economic behavior.
While most organization theorists hold that social structure plays a significant role in economic behavior, many economic theorists maintain that social relations minimally affect economic transacting or create inefficiencies by shielding the transaction from the market (Peterson and Rajan, 1994).
In this regard, Granovetter's (1985) embeddedness argument has emerged as a potential theory for joining economic and sociological approaches to organization theory.
As presently developed, however, Granovetter's argument lacks its own concrete account of how social relations affect economic exchange.
Thus, although embeddedness purports to explain some forms of economic action better than do pure economic accounts, its implications are indeterminate because of the imbalance between the relatively specific propositions of economic theories and the broad statements about how social ties shape economic and collective