EMBEDDEDNESS
Maxim Sytch
Ross School of Business
University of Michigan
701 Tappan St.
Ann Arbor, MI 48109
Ph: 734.763.6822 Fax: 734.764.2555
msytch@umich.edu
Yong Hyun Kim
Ross School of Business
University of Michigan
701 Tappan St.
Ann Arbor, MI 48109
Ph: 734.709.2522 Fax: 734.764.2555
yonghyun@umich.edu
Traditionally, the concept of “embeddedness” is attributed to Hungarian scholar Karl Polanyi, who
suggested that economic actions and social relationships are deeply intertwined. He proposed that, on the
one hand, the economic system is embedded in the social system, stating “...whatever principle of
behavior predominated in the economy, the presence of the market pattern was found to be compatible
with it [the social system]” (Polanyi 1944: 68). On the other hand, he argued that in a contemporary
market economy “…social relations are embedded in the economic system” (Polanyi 1944: 57). An
implication of Polanyi’s embeddedness is that social actors were no longer viewed as autonomous, valuemaximizing actors focused exclusively on economic gains. Instead, they became actors that were also
concerned with their social standing and social assets (e.g., Polanyi, 1944: 46). As a result, the idea of
embeddedness was novel in that it constituted a sharp departure from the basic principles of classic
economics, which at the time dominated the analysis of markets and economic action.
Broadly defined, the idea of economic action being intertwined and interdependent with the broader
social context—and thus “embedded”—can be traced to the writings of numerous influential sociologists,
including Gouldner (1954), Selznick (1957), and Stinchcombe (1965). For example, Selznick documented
that the emergence of the social structure in an organization might help infuse the rational production
system with “value beyond the task at hand” (Selznick, 1957: 17). Similarly, Gouldner (1954)
documented that people placed a lot of value of friendship and kinship ties in a work setting and that
workers chose those jobs so that they could remain close to their families.
In large part due to its broad, encompassing nature and inherent ambiguity, the concept of embeddedness
remained dormant and underused in empirical research until Mark Granovetter published his seminal
work in 1985. Granovetter (1985) reframed the notion of embeddedness with a significantly greater
degree of precision, conceptualizing the idea as a patterning of economic actions by networks of social
relationships among actors. An inherent attraction of this argument is the delicate middle ground between
the “undersocialized” view of an atomized actor in classical and neoclassical economics and the
“oversocialized” view of an agency-free actor in structural-functional sociology. This delicate balance is
accomplished by strongly emphasizing the role of “concrete personal relations and structures (or
“networks”) of such relations” (Granovetter 1985: 490) in guiding economic action and outcomes. By
providing greater conceptual clarity for the term embeddedness itself and linking the concept to networks
of social relationships, Granovetter’s work created an actionable platform for subsequent empirical
investigations.
Beginning in the mid-1980s, a significant body of empirical research has investigated the notion of
embeddedness, leading some scholars to label the idea as “the basic unit of analysis” in new economic
sociology (Swedberg, 2001: 1990). One of the earliest and classic empirical investigations using the lens
of embeddedness (even preceding Granovetter’s [1985] seminal article) was conducted by Wayne Baker
(1984) who conceptualized the national stock options market as a network of relationships among traders.
Baker identified that the sociostructural patterns of trading, in turn, significantly affected the price
volatility of the traded financial instruments. Scholars have used the lens of embeddedness and have
carefully analyzed networks of relationships among individual and corporate actors to explain a range of
economic actions and outcomes, including company survival and financing decisions (e.g., Uzzi, 1996,
1999); the choice of interorganizational partners and governance choices (e.g., Gulati, 1995a,b); as well
as the diffusion of governance practices (e.g., Davis & Greve, 1997). Among some of the promising
developments in embeddedness research are (1) a deeper understanding of embeddedness at a dyadic
relational level (e.g., Uzzi, 1997; Gulati & Sytch, 2007); (2) understanding the role of exact structural
properties of ego-networks, network communities, and global network structures in shaping economic
outcomes (e.g., Burt, 1992; Rowley et al., 2004); and (3) recognizing the co-evolution and co-dependence
of the networks of collaboration and conflict in shaping actors’ behaviors and outcomes (e.g., Sytch &
Tatarynowicz, 2013).
REFERENCES
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