Major Themes in Industrialised Societies: Networks
We shall discuss the nature and the types of networks in a market society. Then, we discuss how economic sociologists have instrumentalised the concept ‘networks’, subordinating its moral significance to economic rationality.
- Bruce Carruthers & Sarah Babb and Darin Barney
a) Examples of networks include board interlocks, joint-venture agreements, research and development partnerships, collaborative manufacturing arrangements, ‘keiretsu’ (Japanese multi-organisational groups and networks), minority ethnic business communities, professional ties and informal acquaintances. Networks of relationships structure markets. Market transactions involve reciprocities, obligations, trust and mutual understandings, and social relations facilitate market operations. How institutions and agents act depends on the kinds of networks in which they are embedded. We cannot understand economic behaviour without understanding social context.
b) Social relationships in networks act as channels of information, enabling institutions and agents to gather all kinds of information about vacancies, market opportunities, innovations, and so on. Such relationships also are clusters of reciprocal obligations and responsibilities, securing favours, gifts and assistance.
c) Networks, in abstract terms, consist of relationships, ties or links between institutions and agents. There are different types of relationships, and they can vary:
· in their strength - e.g., weak ties (e.g., acquaintances and colleagues), and strong ties (e.g., family and kinship);
· in their formalisation (explicit contractual agreements or tacit and unwritten understandings);
· duration (short- or long-term relationships).
In addition, networks can be distinguished between direct ties (say, a network of friends) and indirect ties (say, a network of friends of friends). Furthermore, networks can be highly centralised or decentralised, hierarchical or ‘flat’, and consist of many cliques (or sub-groups). An institution or an agent can be at the centre of the network, or on the periphery, as well as a bridge (intermediary) between cliques.
d) Networks matter because they can affect economic performance. Firms can enjoy higher profits and people can have better careers by virtue of the types of networks in which they are embedded. In addition, relationships can induce greater flexibility in economic and social practices, as actors develop a sense of trust, reciprocity and cooperation.
- Mark Granovetter and Manuel Castells
a) Institutions and agents can relate to each other in two key ways: ‘arm’s-length’ or ‘embedded’ ties. Arm’s-length relationships are akin to self-interested, contractually specified, highly formalised, short-term relationships. In contrast, embedded ties involve much closer relationships, are often repeated transactions, and are negotiated on the basis of implicit understandings.
b) Compared to arm’s-length relationships, embedded ties provide three benefits:
· trust: trust-embedded ties reduce opportunism (e.g., cheating and dishonesty);
· information: trusted ties facilitate the communication of rich, informal, credible, detailed knowledge;
· problem-solving: given the uncertain and unknown future, trusted individuals must cooperate to solve problems when surprises, accidents and unforeseen contingencies inevitably occur.
c) While embedded ties can improve economic performance and introduce greater flexibility, too much embeddedness can become a problem.
· an actor that depends on a single customer or client may become vulnerable to the customer’s financial difficulties, or client’s social and political problems;
· a relationship may be uneven and asymmetrical, and need not be democratic;
· an actor may become entrapped in a closed network, so that it is cut off from new sources of information and new opportunities.
Instrumentalising ‘networks’ – a critique of economic sociology
- Ralph Fevre
a) When economic sociologists (such as Granovetter) attempt to explain how markets operate to allocate resources efficiently, they deploy various non-economic values as a means to economic ends. Economic sociology has introduced morality into its analysis in an instrumental manner, subordinated morality in the service of economic goals.
b) According to Granovetter, if behaviour is not embedded, then markets cannot function. Networks allow us to re-establish the embedded nature of action. People use social networks to get jobs, and weak ties are more effective for getting people into work. Embedded networks are a corrective to the theories of atomised actors commonly found in over-socialised and under-socialised accounts of economic behaviour.
Networks are effective and functional for the smooth operation of markets. Economic rationality dictates that an exchange would be more efficient if it costs could be reduced. One of the biggest costs of a market transaction is the provision of information. Social networks (formal and informal) reduce the costs of providing information to their participants, and make them more competitive and effective.
Yet moral relationships (such as friendship, obligations, reciprocity and trust) are entirely devoted to the service of economic rationality, namely to get markets to function. A critique of economic rationality suggests that other values predominate economic life, and friendship, obligation and trust are valued for their own sake. This critique also investigates how social and moral ties (such as friendship and family) change (and resist) as they become viewed in an instrumental frame for economic ends. To (mis-)use friends in a calculating way, changes our relationship with them, and their value of us.
The idea that social capital in the form of social networks and their associated norms can make a vital contribution to economic growth and prosperity has been central to the social capital literature. Yet we hardly ever encounter the idea that economic growth has an affect (good or bad) on networks or norms. Only on a few cases (e.g., Adam Smith) is there a recognition that development has an affect on social capital and sensibilities, though here spontaneous sociability is guaranteed, and social order assumed.
What is called for instead is how to problematise morality with economic rationality, to recognise the conflict between morality and market relations (e.g., Amartya Sen). And to identify how good work is defined outside the economic rational context. For example, there are conflicts between professional duty and sales revenue, or between family care and work career.
c) Economic sociologists increasingly turn to economic rationality to explain non-economic phenomena such as networks, trust and morality. Economic sociology brings morality, and more general norms like trust and reciprocity, into its argument in the category of means rather than ends.
Max Weber and Ronald Dore identify norms that hinder and enable capitalist development; particular values, commitments and goodwill of workers help to explain high productivity and the success of employers. Amitai Etzioni argues how community and its associated morality function as the secret of business success. Giving workers dignity would make them work harder, and reduce turnover and absenteeism. Trust and friendship are deployed in similar ways, casting morality on an instrumental role.
In social capital, human capital and cultural capital theories, the help and encouragement children receive from their parents, siblings and wider communities are understood as developing their social, human or cultural capital, a resource of norms and networks which individuals can draw upon to make a real difference to their life chances. The theories also suggest that a community with a strong commitment to an education route to success, combined with vibrant social networks to help people access opportunities in the education system and the labour market, would produce children who behave in the way that is necessary for a meritocratic society.
Culture and morality are used to explain social inequality in terms of high and low social, human and cultural capital. In social capital theory, networks, obligations and commitments become instrumental morality. Beliefs about right and wrong, cultural values and social rules are valuable, not in themselves, but for their affect on economic behaviour. For example, comparison is made of morality of different ethnic groups in terms of their work ethic; the intrinsic value of morality is reduced by the expansion of its instrumental function.