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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 9 / 52





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barely rewarding but effortless use of time) has resulted in the decline of social capital in the

United States. We will focus on two central aspects of social embedding: partner selection

and the nature of the relationship between the business owner and the partner.

The accessibility and information effects of proximity

Perhaps the most basic social embedding argument is that proximity and prior

experience allow access to needed resources – whether they be credit, materials, or labor.

This is an argument about partner choice. Locating and obtaining resources has been shown

to be quite problematic and privileged access to information could be helpful to businesses

(Stigler 1961; Granovetter 1974). In the process of living – growing up, interacting with

family and neighbors – one learns of their existence, activities, and the capabilities of those

who later become potential partners in economic exchange. Such information may increase

economic activities by providing knowledge of opportunities (Casson 1982) and by allowing

potential partners (employees, suppliers, and others) to be pre-sorted. Social capital,

according to this argument, improves economic performance by economizing on search and

selection costs.

The simplest version of this argument assumes that the chief productive asset of the

business lies in the owner him or herself (or at least outside the circle of social capital). This

might be a special skill, such as an ability to perform skilled work (almost all of the sampled

business owners cite a special technical, business, or social skill as the chief factor in their

success) or a spatial monopoly on a particular product. The business owner, however, needs

unskilled help (24 percent of household members and 33 percent of others working in the

sampled businesses are identified simply as “workers” or “assistants”) or generic materials or

other supplies. The argument also assumes that the flow of information has costs and that the


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