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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 15 / 52





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owners need to plan for the possibility that their source of income will, at some point,

disappear and that they will need to find new income-generating opportunities.

In contrast to the previous arguments, the insurance argument suggests that family

and friends may not be the most cost-effective partners from the point of view of operational

transactions. Given their broader roles in securing the welfare of the business owner, friends

and family may make claims on a business owner that seem unjustified in terms of the

specific exchanges observed. The terms of exchange may differ between intimates and non-

intimates (Silver 1997; Zelizer 2002), making it more difficult to filter exchange partners

who have a family relationship for positive work attitudes and more costly to enforce task

performance among them. These considerations have implications for the choice of

exchange partners and the management of relationships. First, all other factors being equal,

as a means to reduce income risks, immediate family members should avoid a full

commitment to the family business. Independent incomes help families pool risks. A family

may benefit by having high-skill members work outside the business, even if they need to

sacrifice some income in order to do so. There might be some degree of adverse selection in

family employment with the more capable persons being employed outside the business.

However, the larger and more successful the business, the more likely risk will recede before

benefit and those socially tied to the owner would be more likely to participate. Second, to

the extent business owners want to insure against broader risks, rather than secure

transactions, it might be prudent for business owners to build or strengthen institutions that

can pool risks, such as the family or, more speculatively in the case of Vietnam, communities

or mutual aid societies. The “current” and “history” routes of social influence may therefore

complement, rather than substitute for, each other and in contrast to the predictions of the

behavioral argument, those with family ties, because they are part of the insuring web of


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