Social embedding as a solution to a control problem? Evidence from Vietnamese small business
Social capital has been widely discussed as an aid to economic exchange. On the basis of an analysis of systematic data on 447 small and medium-sized businesses located in urban and rural areas in the North and South of Vietnam, we compare the predictions of three, sometimes contradictory, network theories of social embedding to our detailed data on the potential resources and actual practices of firms. We find partial support for the search and selection hypothesis and for the insurance hypothesis but not confirmation for the enforceable trust hypothesis – for many, the central benefit of social capital. Moreover, social capital is sometimes left unused while other avenues are found to deal with the problems embeddedness is said to address. In an environment where social capital should be of most use, it appears to be neither necessary nor sufficient to conducting a small business bu rather one of several mechanisms for solving a control problem.