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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 11 / 52





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allows one the ability to predict which people would make suitable exchange partners and

which not. The people one knows through family, locality, or other social arena are not

necessarily good or even adequate partners. (On average, they will be average.) The

argument does not depend upon a special sympathy or ability to exploit. Social embedding,

according to this view, will not necessarily result in more skilled or cheaper partners but it

will facilitate efficient partnering. “Attractive” firms will have “attractive” partners and

unattractive firms will have unattractive partners – and that they will be found sooner than

they would be in the absence of prior extensive information.

Network influence and enforceable trust

The second social capital argument maintains that social relationships may be a direct

economic benefit because they reduce monitoring costs. For some researchers, this is the

critical benefit of social capital. Social embedding has a treatment effect in that, if such an

experiment could be imagined, the same set of people would behave differently and therefore

the economic outcomes would be different in the absence of embedding. Social relationships

are a resource that individuals can draw upon. At least two distinct routes of social influence

can be envisioned: one which relies on a set of current common activities and another which

relies on common histories. By engaging in common activities, currently or in the past,

relationships can be created and solidified, and positive sentiments can be evoked (Homans

1951). Moreover, each type of embedding creates social areans in which third parties can

enforce task performance (Burt and Knez 1995)

The argument about the effect of embedding economic relationships in a set of

common activities can be tied to economic agency theory. In this case, social embedding has

its effect via a heightened level of contact and surveillance. An agency relation is defined by


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