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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 8 / 52





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This argument is essentially a shopping model in which socially proximate potential partners

are examined first – although they are not necessarily “bought.” The second argument

focuses on the influence effects of social embedding and holds that socially embedding

economic transactions within a system of social relationships facilitates contract enforcement

within an exchange relationship. Social embedding, according to this view, creates a network

advantage. The exchange partners are not necessarily smarter or more qualified than others

but, because there is a common continuing community that provides benefits, they are less

likely to “shirk” in their duties. The third argument highlights the insurance effects of social

embedding against the risks of continuing and episodic environmental contingencies. Social

embedding in this broad view (Polanyi 1968) guards against risks that can accumulate over a

lifetime, such as market uncertainties, political expropriation, and physical disability.

To facilitate discussion, we will refer to the standpoint of the focal business owner

who was our respondent. We will not differentiate strongly between internal and external

partners (employees and suppliers, respectively) because the principles are the same in both

cases and incorporating particular transactions and relationships within a business is itself a

choice (Williamson 1975). Because we assume all relationships are voluntary and do not

depend upon special sympathy or exploitation, we will also consider the viewpoints of the

(potential) partners. This will help us avoid unrealistic conclusions about the working of

social capital. We will also assume that social embedding has not only benefits but costs.

The primary cost may be the time investment entailed. To be sure, some of the interactions

and activities undertaken in building social capital may be pleasurable in their own right,

reducing the implied costs, but they are undertaken in the company of some individuals

rather than others. Perhaps the most telling evidence for the time, effort, and skill required to

cultivate social relationships stems from Putnam (2000, ch. 12) who claims that television (a


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