Economic Action in Social Collectivities

By Nygaard, Claus | Journal of Economics and Economic Education Research, September 1, 2006 | Go to article overview

Economic Action in Social Collectivities


Nygaard, Claus, Journal of Economics and Economic Education Research


ABSTRACT

This paper argues that economic action is affected by the embeddedness of economic actors in social collectivities in which collective practice is institutionalised. Supporting this argument are two micro-sociological qualitative field studies of economic action of Danish subcontractors in two regions of Denmark. Based on the data-analysis a framework is constructed to explain how and why these subcontractors learn from collective practice. The explanation draws on the practice-approach of symbolic inter actionism in particular. The ongoing academic debate on governance structures has focused on national and sectoral governance structures. While this paper acknowledges its important contribution to our understanding of contextual economics, its explicit micro level analysis of the role of institutionalised practice for economic action offers a set of additional and alternative explanations of economic action to recent research on governance structures. The paper has potential interest to all scholars and practitioners interested in the link between economic- and social action and to those interested in explaining issues of strategic management from a sociological point of view.

INTRODUCTION

Empirical studies pinpointing regional and national differences in industrial organisation show a demise of the idea that a certain mode of economic action can lead to competitive advantage across industries and markets (Kristensen, 1997; Kristensen&Zeitlin2001; Lane, 1997; Morgan, 1997; Lilja, 1997; Whitley, 1994, 2001). Economic action is affected by a large variety of institutions (DiMaggio & Powell, 1983; North, 1991; Scott, 1994, 1995), which call for contextually bounded analysis of economic action. Standard neo-classical microeconornic theory, which argues that economic action is co-ordinated by the market mechanism, neglects institutions and fails to explain the empirical differences observed in economic action across different contexts. With reference to Richardson (1972: 884), who writes: ". . .by looking at industrial reality in terms of a sharp dichotomy between firm and market we obtain a distorted view of how the system works", I argue that in order to understand what drives economic action in different contexts we need to do research on the embeddedness of economic actors, particularly paying attention to micro-level aspects of social regulation of economic action. This paper analyses such micro-level aspects and shows that economic action is guided and constrained by collective practice institutionalised in social collectivities in which economic actors are embedded.

The paper has four sections. Section 1 serves as a general introduction to the key terminology, and it positions the study in relation to the ongoing research on national and sectoral governance structures. Section 2 describes the methodology and the characteristics of the empirical fields. Second 3 presents empirical data, which supports the argument of the existence of social collectivities in which a collective practice is institutionalised which affects economic action. Section 4 gives possible theoretical explanations of the observed characteristics of economic action of subcontractors by modelling social dimensions of economic action.

SECTION 1: RESEARCH ON GOVERNANCE STRUCTURES

This paper studies subcontractors' embeddedness (Granovetter, 1 985, 1 990, 1992) in social collectivities (Greenwood, 1994) and its consequences for their economic action. According to the view of embeddedness, economic action is affected by the social context in which actors occupy a social position. Three different types of economic action are analysed:

* Subcontractors' constitution of cooperative relations with other firms (subcontractors or outsourcers).

* Subcontractors' recruitment of workers for the shop-floor.

* Subcontractors ' engagement in research and development with other firms (subcontractors or outsourcers). …

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