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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 5 / 52

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such as Vietnam’s (considered below), the state apparatus appears to be neither oriented

toward, nor capable of, the disinterested enforcement of exchange agreements, particularly

among the many small businesses that dominate the economy. Businesses and their potential

partners need to address such problems themselves.

Embedding economic exchanges in pre-existing social relationships formed through

long-term interaction, such as those implied by family, locality, or other common experience,

holds the promise of creating an informal institution that can effectively regulate exchange

(Granovetter 1985). Such relationships have been held to act as social capital. These

relationships are not necessarily friendships in the modern sense of the word but possibly

relationships of convenience (necessitude) built on the gravity of social and spatial proximity

(Hutcheson, quoted in Silver 1997). Perhaps the clearest example of the social capital

produced through the embedding of economic transactions in social relationships is among

the often-discussed Manhattan diamond merchants (Ben-Porath 1980). Dealers are

supposedly embedded in a commercial community that makes actions visible. That is, they

know each other, their separate capabilities, and their likely responses to particular

circumstances. Any malfeasance would be quickly known by a large set of relevant potential

partners and one’s business reputation would be swiftly ruined. Moreover, the consequences

could extend beyond the economic sphere because the business community itself

substantially overlaps a social and religious community.2 A business deviant could be

socially and religiously ostracized. In addition, because the economic transactions are

embedded within long-term social relationships that may stretch across an entire life span,

personal commitment can survive the coming and going of fictitious persons (firms) or of

2 Unfortunately, little is known about the patterns of sharing and trust within that community. Valuable merchandise will be given to some but presumably not all to all and the circle of trust is probably much smaller than the circle of commerce.

3

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