Blau’s Social ExchangeTheorySinem BulkanOrganisational Behaviour
PETER MICHAEL BLAU(1918 Vienna, Austria - 2002)• Son of secular Jews.• Hitler marched into Vienna in 1938,Peter‘s family was elected to stay,his sister was sent to England on theKindertransport.• Escape from the Anschluss,miraculous chance to go to college,a successfull career and mobility inthe USA.• His family had been killed inAuschwitz in 1942.
PETER MICHAEL BLAU(1918 Vienna, Austria - 2002)A founder of Organizational Sociology(with Coleman, Gouldner, Lipset, andSelznick)• The Dynamics of Bureacracy(dissertation, University ofColumbia,1955)• The Comparative Organization ResearchProject(Research Program, University ofChicago,1970) Findings:o The Structure of Organizations (1971)o The Organization of Academic Work (1973)• Exchange and Power in Social Life (Fieldresearch to develop a theory, 1964)
Exchange and Power in Social Life• Homans was an important influence on Blau‘s work.• Blau was interested in examining the processes that guide face-to-face interaction(like Homans).• Blau argued that such interaction is shaped by a reciprocal exchange of rewards,both tangible and intangible (like Homans).• Blau maintained Simmel‘s assertation that every interaction (a performance, aconversation, or even a romantic affair) can be understood as a form of exchange inwhich the participant gives the other “more than he had himself possessed‖).
Exchange and Power in Social Life• Blau was interested in building a theoretical bridge that would linksociological studies of everyday interactions between individuals andstudies that examined the collectivist or structural dimensions of society,such as economic systems, political institutions, or belief systems.• While the work of Homans and Simmel informed the ―interactionist‖elements of his approach, his analysis of society‘s structural properties wasmost influenced by Max Weber and Talcott Parsons.
Exchange and Power in Social Life• It rests on several assumptions about social actors and activities:(1) social actors engage in activities as a means of obtaining desired goals;(2) all social activities entail some cost to the actor, such as time, energy, orresources expended;(3) social actors seek to economize their activities as much as possible, bykeeping costs below rewards; and
Interactions• Blau wants to link theories of everyday life to theories of wider socialstructure, to bridge the micro-macro divide.• Blau points out that a person for whom another has done a favour isexpected to express gratitude & return a service when the occasionarises.
Interactions• Exchange is conceived of as a social process of central significance in sociallife, derived from simpler processes (of attraction, for example), then leads tomore complex processes (among groups, for example).• Social exchange may reflect any behaviour oriented to socially mediatedgoals. People act rationally, and often employ exchange in pursuit ofrational ends.For example, among members of a political organization, they may exchangesupport to build solidarity, or, lovers may do things for each other to gaincommitment in the relationship.
Microstructures and Macrostructures• Microstructures• Blau calls face-to-face interactions ‘microstructures’.• They are structures in the sense that regulatory rules, dominance, power,legitimate control, and task divisions are all supported by the rewardingnature of the interactions based on them.
Microstructures and Macrostructures• Macrostructures• Sooner or later the size will increase (Blau, 1964).• Macrostructures are viewed as ‗formal organisations, committees,bureaucracies, and the like‘• These larger collectivities are composed of microstructures.• Blau‘s view of the social organisation of society is one of the interconnectionsamong these larger macrostructures.
The Structure of Social Associations• He recognizes that associations between individuals tend to becomeorganized into complex structures, often institutionalized to perpetuate thefor of organization beyond the life span of human beings.“To speak of social life is to speak of the associationbetween people – their associating in work and inplay, in love and in war, to trade or to worship, to helpor to hinder. It is in the social relations men establishthat their interests find expression and their desiresbecome realized.”Peter M. BlauExchange and Power in Social Life, 1964
Rewards• Rewards: Sources of positive reinforcement including pleasures, satisfactions,gratifications. They occur on a continuum from concrete to symbolic.Blau (1964) suggested six types of social rewards:o personal attraction,o social acceptance,o social approval,o instrumental services,o respect/prestige,o compliance/power.
Rewards• intrinsic rewards – are those things we find pleasurable in and ofthemselves, not because they provide the means for obtaining otherbenefits.• Examples of intrinsic rewards are celebrating a holiday with one‘s family,going on a walk with a friend, or love—the purest type of intrinsic reward.
Rewards• extrinsic rewards – are ―detachable‖ from the association in which theyare acquired. In other words, extrinsic benefits are derived not fromanother‘s company itself, but from the external rewards his company willprovide. Here, associating with others serves as a means to a further end.• Thus, a salesperson is considerate because she wants to make acommission, not because she values the relationship she initiates with anyparticular customer.
The Exchange of Social Rewards• Most human pleasures have their roots in social life. Thus, a good meal isreally in the company, not the flavours (consider eating a great meal alone).• Similarly, much of human suffering also has its source in interaction withothers (heartbreak at the loss of a lover, being cheated by someone, etc.)Social rewards to one person tend to entail a cost to another person. This does notmean that society is a zero sum game (that every person must loose in equalproportion to someone elses gain), but it does imply that people do not share socialprofits equally.
The Exchange of Social Rewards• Social action can be intrinsically rewarding, but often social action dependson other considerations. E.g. Social aproval, social bond, benefits from thesociety• A person who does not reciprocate is considered rude, a cad, aningrate. The social sanctions evident in the face of such action demonstratethat reciprocity is expected.
The Exchange of Social Rewards• Blau says that there is an "apparent altruism" in social life. People areanxious to help others and to reciprocate the help they receive. Underneaththis altruism, however, is an egoism - a selfishness!!***A basic reward that people seek is social approval, & selfish disregard forothers makes it impossible to obtain this important reward.***• Social approval is of great significance, but its significance depends on itbeing genuine. (coerced praise is worthless!!)
Costs and Resources• Costs: punishments or lost rewards.Blau suggested three types:o Investment: time and effort devoted to developing skills which will beused to reward others.o Direct costs: resource given to another in exchange for something else.o Opportunity: loss of rewards which would have been available elsewhere.• Resources: anything that can be transmitted through interpersonal behavior,including commodities, material, or symbolic matter.
Power• ―the probability that one actor within a social relationship will be in aposition to carry out his own will despite resistance‖ (Weber)• For Blau, an individual is able to exercise power over others when he aloneis able to supply needed rewards to them.• If the others are unable to receive the benefits from another source, and ifthey are unable to offer rewards to the individual, they become dependenton the individual.• In short, power results from an unequal exchange stemming from anindividuals or groups monopoly over a desired resource.
Exchange and Power in Social Life• Principle 1. The more services supplied in return for receipt of some valuedservice, the more power held by those providing valued services.• Translation: In terms of teen lust, the more flowers, declarations of love,affection and promises supplied by the boy in return for precious few sexualfavors supplied by the girl, the more power held by the girl. This makescomplete sense to teenage boys.
Exchange and Power in Social Life• Principle 2. The more alternative sources for reward possessed, the less thoseproviding reward can extract compliance.• Translation: In terms of teen lust, the more alternative sources of sexualfavours at the disposal of the boy, the less the girl can extract compliance(i.e., She: "Why didnt you call me like you said?" He: "I was busy!
Exchange and Power in Social Life• Principle 3. The more those receivers can apply force and coercion, the lessthose providing can extract compliance.• Translation: In the case of the housewife and mother who expends countlesshours of personal time in the service of her husband and children, she mayhave very few options to exercise. She continues to provide valued service tounappreciative family members because she has no other place to market herservices.
Exchange and Power in Social Life• Principle 4. The more receivers can do without, the less providers can extractcompliance.• Translation: This works for nations, states, corporations, economies andFAMILIES - The one who has the resources is the one with the power.Conflict is inevitable, as each persons selfish interests cannot simultaneouslybe met.
Indifference Curves, Supply and Demand Curves• Blau uses economics as the primary theoretical base. He uses indifference curves, supply anddemand curves.• He says that "the only assumption made is that human beings choose between alternative potentialassociates or courses of action by evaluating the experiences or expected experiences with each interms of a preference ranking and then selecting the best alternative".He sees three types of expectations -- general, particular, and comparative.General expectations are associate with ones role, occupation, formed by social norms of what personought to receive.Particular expectations are associated with rewards received from a particular person.Comparative expectations are the rewards of a relationship minus the cost of maintaining therelationship
Supply and DemandEconomy• Demand, the quantity of a good thatis desired by buyers.• Supply, total quantity of a product orservice that the marketplace canoffer.• If a good‘s price is higher, fewerpeople will demand it.• As the price rises, suppliers arewilling to supply more.Social Exchange Theory• Blau gives the example of adviceand compliance.• Quantity of advice horizontal, itsprice in respect and compliancevertical.• The competition among experts forsuperior status, which furnishesincentives to supply advice, and thecompetition among others for advicefurnishes incentives to supplyrespect and compliance.
Economic ExchangeEconomy• It is an economic transaction wheregoods or services are transferredfrom the provider for a return ofrelative value (compensation) fromthe receiver in a manner thatadvances the economic interests ofboth parties.• Clear identification on the value ofthe exchange item.Social• Social interactions are based on therewards and the costs.• Ambigious meaning and value.• Uncertainty about our debts toothers and meanings our actionstake.
Reciprocity• The social norm of reciprocity isthe expectation that people willrespond to each other in similarways—responding to gifts andkindnesses from others with similarbenevolence of their own, andresponding to harmful, hurtful actsfrom others with either indifferenceor some form of retaliation.• Frequently, two people who meetare not equally attracted to eachother. Thus, one person will try toimpress the other -- this leads to animbalance of power in therelationship.
Unbalanced Reciprocity• Love• Blau notes, ―Love appears to make human beings unselfish, since theythemselves enjoy giving pleasure to those they love, but this selfless devotiongenerally rests on an interest in maintaining the other’s love‖• Yet, it is often the case that in intimate relations one individual is more in love than theother. As a result, the ―interests‖ in maintaining the relationship are not equal.• It is this dynamic that underlies ―playing hard to get,‖ where ―the lover who does notexpress unconditional affection early gains advantages in the established interpersonalrelationship. Indeed, the more restrained lover also seems to have a better chance ofinspiring another‘s love for himself or herself‖• Like other benefits offered, affections that are given too freely decrease in value.Moreover, the more freely one gives his affection, the more he signals that he has fewoptions, thus reducing his value on the “market.”
Comparison Level• Comparison Level is a standard representing what people feel they shouldreceive in the way of rewards and costs from a particular relationship.(Thiabaut and Kelly)• The CL is the lowest level of reward acceptable for the person.• The comparison level refers to the standard by which the individualevaluates group membership.• The CL is the main factor determining satisfaction with groupmembership.• The CL is determined by assessing all the known costs and rewardsincurred with the membership.• Comparison levels can be based on previous experiences.
Comparison Level for Alternative• The Comparison Level for Alternative (CLat) refers to ―the lowest level of relationalrewards a person is willing to accept given available rewards from alternative relationships orbeing alone‖• In other words, when using this evaluation tool an individual will consider other alternativepayoffs or rewards outside of the current relationship or exchange.• The alternative comparison level (AC) refers to the comparison of one specific group toother available groups.• The AC is really the best rewards available to someone given the available alternatives.• The AC is the main factor determining group membership.
Comparison Level for Alternative‘I had a friend in high school that was very unsatisfied with her boyfriends. She hadone boyfriend that she didn’t really like, but kept dating him. One day we had a longconversation about it. She said the reason she kept dating this boy was because shedidn’t think she could find anyone better at the time. She didn’t really like him shejust didn’t have anyone better at the moment. However, she believed that she couldget a better relationships and could drop him whenever she wanted.’This is an example of comparison level for alternatives because she based hersatisfaction for her relationship/friendship on her perceived ability to find a betterrelationship.
Marginal UtilityEconomy• The marginal utility of a good orservice is the gain or loss from anincrease or decrease in theconsumption of that good andservice.• Example, consumption on theincrease in eating baklavaSocial• The more the expected rewardsentity obtains from a particular act,the less valuable this action is andthe less likely it will be.• Example, professor helping hisstudent
The Law of Collective DiminishingMarginal Utility• A person who has much of a benefit tends to value a further increment less than he didwhen he had only a little (Blau, 1964).• In a group, where a benefit, exists in abundance those who possess it value it less andthose who do not value it more than they would were they in a group where it is scarce.• E.g. From the perspective of the organisation as a whole, the more benefits in the formsof promotions that have been received by a collectivity, the less impact anotherincrement of promotion makers (Blau, 1964).• The marginal utility of increasing rewards eventually declines for the entire collectivistsas well as for individuals, though the mechanisms are different; the effect forcollectivities is produced by processes of social comparison, while that for individuals isproduced by psychological reactions to meet needs and expectations.
Blau’s Propositions• The desire for social rewards leads men to enter into exchange relationshipswith one another.• Reciprocal social exchanges create trust and social bonds between men.• Unilateral services create power and status differences.• Power differences make organizations possible.• The fair exercise of power evokes social approval and the unfair exercise of• power evokes social disapproval.• If subordinates collectively agree that their superior exercises power• generously, they will legitimate his power.• Legitimate power is required for stable organization.• If subordinates collectively experience unfair exercise of power, anopposition movement will develop.
Conditions of Exchange – 1 –• Some social rewards can not be bartered in exchange (intrinsicattraction to a person, approval of his opinions, and respect for hisabilities).Because they are spontenaus reactions rather thancalculated means of pleasing him)• Rewarding actions, can be bartered in social exchange. Socialacceptance in a group to which a person is attracted, instrumentalservices of various kinds, and compliance with his wishes constituterewards for him even if he knows that they are furnished inexchange for benefits expected of him.
Conditions of Exchange – 2 –• Rewards that are instrinsic to the association between individuals,can be distinguished from extrinsic ones.• Rewards that individuals may mutually supply for eachother can bedistinguished from those that are necessarily unilateral, which aremanifest in the general respect for a person that bestows superiorprestige on him and in the prevailing compliance with his requeststhat bestows superior power on him.
Blau’s Fair Rate of Social Exchange (Fairness,Justice)• The relationship between the fair rate and the going rate of social exchangeis somewhat parallel to that between the normal price and the average pricein economic markets.• But the fair and going rates both rest on social expectations.• ‗Fair exchange‘ is fundamentally similar to Homans‘ rule of ‗distributivejustice‘. ‗A man in an exchange relation with another will expect that therewards of each man be proportional to his costs – the greater the rewards,the greater the costs – and that the net rewards, or profits, of each man beproportional to his investments – the greater the investments, the greater theprofit.‘• For Blau, any item obliges the other to a fair return, and value in excess ofwhat can be returned must be compensated by compliance. Control overscarcity translates to power.•
Blau’s Going Rate of Social Exchange(Expectations)• The going rate of exchange in a group gives rise toexpectations that certain returns will be received for certainservices.• These standards of expectation are not moral norms but merelyanticipations that influence conduct, the normativeexpectations that a service that required a certain investmentdeserves a certain return are moral standards, the violation ofwhich evoke social disapproval.
Indifference CurvesAny point on an indifference curve indicatesthat the individual is indifferent to whetherhe possesses the specified amount of thefirst or the specified amount of the secondcommodity, that is, that the two have thesame value for him.10 dollar going to the theatre=having dinnerat a restaurant2 times theatre, not dinner2 dinner, not theatreBUT the more often he has dined outalready, the lower becomes the value of thedining out relative to going to theatre, inaccordance with the marginal principle.
Indifference CurvesImagine someone has 1 dollar. Does hewant 3 magazines or 10 candy bars?• Ten candy bars gives equal value with 3magazines (if he is indifferent)• Perhaps the person would be equallyattracted to other combinations. (sevencandy bars-1 magazine)With these approaches we can draw up anindifference map (all the choices betweenthe two alternatives that the person isindifferent about).CD – Opportunity line – outer limit of anindividual’s resources.Point P – Maximum satisfactionobtainable
Indifference Curves – Bilateral ExchangeBlau uses indifference curves to describe theinteractions between two persons in extrinsicexchange.For example, between two workmates, one ofsuperior knowledge and the other of less. Herehelp is exchanged with compliance.• The exchange is two-sided (bilateral).• Help is exchanged for compliance.• Supplies of help and compliance areentirely controlled by the people givingthem.• Each person will try to maximize utility bygetting on highest indifference line he can.CC Line- Contract Line – Blau concludesthat the optimum conditions for exchange arethe points at which the two sets of indifferencecurves are tangent to eachother.
Indifference Curves – Exchange in BilateralMonopolyOa – ConsultantOh – Colleague who consultsK – problem-solving abilityX – Total problem-solving ability availableOaKa – greater the ability of the expertH – the compliance each is willing toexpress to raise the other‘s status** Expert applies some of his time andability to the problems of the colleague, andtoward the right, showing that the expert‘sstatus is raised by the compliance withwhich of the colleague reciprocates for theadvice.Solid indifference curves – expertDotted indifference curves - colleague
Price Elasticity• Proportional change in supply and demand resulting from a change in theprice.This change in turn being affected by changes in demand and supply.• According to Blau, if a change in supply (or demand) affects the volume oftransactions more than it affects the price of commodity, supply (ordemand) is elastic. If price is more affected than volume, supply (ordemand) is inelastic.• A sector with high status may have little demand for additional statusbecause the marginal utility of status is low for that sector. Demand isprice-inelastic• At the same time, a low-status sector may have increasing or constantmarginal utility for status increments. Demand is price elastic.
Criticisms• Not just economic but social exchange is induced by pursuit of materialresources (wealth) and/or hedonistic motives (pleasure). As someexchange theorists (Homans, Emerson) suggest, the economic postulateof utility maximization is a special case of the general hedonistic ‗law‘of pleasure optimization, as is loss minimization relative to painavoidance.• Extending exchange theory to societal level is beyond recognition.Exchange theory is primarily concerned with face-to-face relations.(Ritzer,1983)
Referances• Blau, P., (1964), Exchange and Power in Social Life, John Wiley&Sons• Scott, R.&Calhoun, C. (2004), Peter Michael Blau 1918-2002, BiographicalMemories, Volume 85, The National Academies Press• Skidmore, W., (1979), Theoretical Thinking in Sociology, CambridgeUniversity Press• Spread, P., (1984), Blaus Exchange Theory, Support and the Macrostructure,The British Journal of Sociology, Vol.35, No.2, pp157-173• Zafirovski M., (2005), Social Exchange Theory under Scrutiny: A PositiveCritique of its Economic-Behaviourist Formulations, Electronic Journal ofSocialogy• Wikipedia and other internet sources
Unpacking Employee Responses toOrganizational Exchange Mechanisms: TheRole of Social and Economic ExchangePerceptionsLinda Jiwen Song, Anne S. Tsui, Kenneth S.Law, Journal of Management, Vol. 35,No.1, February 2009, 56-93
Introduction - Exchange Theory• Specifies that employees respond to their employer differently depending on thetreatment they receive.• Treatments can createo Social exchange relationship (long term orientation, trust, socio-emotionalresources)o Economic exchange relationship (short term exchange, economic ormaterialistic resources)(Blau,1964; Lynch&Barksdale,2006)
Aim• To unpack the exchange process by examining whether specificorganisational-level mechanism relate to employees‘ perceptions of socialand economic exchange relationships• And how this perception relates to employees‘ responses in terms ofcommitment to the organisation and in-role or extra-role performance.• To examine multiple exchange mechanism and related exchangeperceptions between organisations an.d employees
Social and Economic Exchange inEmployee-Organisation Linkage• Blau (1964) identified two kinds of exchange relationships.o Social exchange: The focus is on socio-emotional resources over a lengthy period.o Economic exchange: The focus is on short-term exchanges of material or economicgoods.• Organisation can define the nature of the exchange relationship throughformal employement contracts.• Or can also create this relationship indirectly through organisational cultureor leadership behavious.
Social and Economic Exchange inEmployee-Organisation Linkage
Organisational Exchange Mechanisms asAntecedents• LeadershipThe ability to inspire followers to achieve collective goals (Yukl, 2002).Transformational Relationship, inspires followers to focus on an extended relationshipwith the organisation.Transactional Leadership, focuses on immediate rewards or punishments for jobperformance.• Organisational CultureA pattern of beliefs and expectations shared by organisation members (Schwartz andDavis, 1981).A firms reliance on- either values to influence employees (the reasons for doing certain things)- or rules and procedures to direct employees‘ actions ( the ways to do certainthings) (Cameron&Freeman, 1991)
Organisational Exchange Mechanisms asAntecedents• Employment ApproachesFormal and informal, economic, social, and psychological connectionsbetween employees and employers (Tsui&Wang,2002)Mutual investment approach, a long-term and extensive engagementbetween the employer and the employee.Quasi-spot contract approach, a short term and narrow exchange betweenthe two parties.
Perceptions of Exchange Relationships asMediators• Social ExchangeEntails a high level of trust, provides extensive investment in the employee,focuses on a long-term relationship, and emphasizes the socio-emotionalaspects of the relationship (Shore et al., 2006).• Economic ExchangeEntails a low level of trust, short-term, close-ended, well-definedobligarions.Emphasis is on narrow financial obligations (e.g. Pay and benefits)without any long-term investments (e.g., employment security or careerplanning)
Affective Commitment, Performance, and OrganisationalCitizenship Behaviour as Employee Responses• Affective CommitmentRegarded as a reflection of the psychological bonds of employees with theorganisation (Meyer&Allen, 1997).Support and fairness from the organisation can contribute to employee‘s affectivecommitment.• Job PerformanceFulfilling task requirements (task performance), making contributions that gobeyond specified task accomplishments.Rewards leads to higher employee task performance.• Organisational Citizenship BehaviorPerceptions of organisational fairness and leader support elicit OCB fromemployees.
Hypotheses Linking CEO Leadership Styles to ExchangeRelationship Perceptions and Responses by Employees
Hypotheses Linking Organisational Culture to ExchangeRelationship Perceptions and Employee Responses
Hypotheses Linking Employment Approaches to ExchangeRelationship Perceptions and Employee Responses
Study Context• Tested in China.• Conducted two studieso Study 1 had the goal of validating the measures of the employementapproaches, leadership behaviour, organisational culture, exchangeperceptions, and affective commitment constructs.o Study 2 included the measures of employee performance andcitizenship behaviour and tested the hypotheses.
Study 1 – Scale Validation• Sample and Procedures• Two samplesSample 1, to validate the employemnt approach, leadership style, exchangerelationship, and affective commitment scales, 1,128 MBA students in 11Chinese universities, response rate 90%Sample 2, to validate organisational culture scale, 906 executives. Responserate 95%
Study 1 – Scale Validation• Measures• Waldman (2001) transformational and transactional leadership items fromMultifactor Leadership Questionnaire• Combination of O‘Relly and colleagues‘ (1991) organisational culture scale andTsui, Wang&Xin scale• Employment approach scale (Wang et al., 2003)• Scales by Shore et al. (2006) to measure social and economic exchangeperceptions• Affective commitment scale by Meyer and Allen (1997)• Confirmatory Factor Analyses carried out. The scale validation studyprovided supportive evidence for the factor structure of all the measures.
Study 2 – Hypothesis Testing• Sample and Procedures• 441 middle managers and 141 top managers in 31 companies in China.• Top management team members described their CEO‘s leadership style.• Middle managers described the organisational culture and reported theirperceptions of their exchange relationships with and commitment to, thefirm.
Study 2 – Hypothesis Testing• Measures• Task Performance Scale of Tsui (1997)• Organisational Citizenship behaviour by Lam, Hui, and Law (1999)• Control variables firm size, CEO‘s age and gender, also middle managers‘age, gender, and educational level.
Results on Hypotheses 1a to 1 d• H1a is fully supported.• H1b is not supported.• H1c is partially supported. A perception of social exchange mediates therelationship between transformational leadershio and affective commitment(full mediation) and task performance (partial mediation) but not OCB.• H1d not supported.
Results on Hypotheses 2a to 2d• H2a is fully supported.• H2b is supported.• H2c is partially supported with social exchange mediating the influence ofintegrative culure on affective commitment and task performance but noton OCB.• H2d is partially supported.
Results on Hypotheses 3a to 3d• H3a is supported.• H3b is fully supported.• H3c is partially supported on commitment and task performance but not onOCB.• H3d is partially supported on affective commitment and OCB not on taskperformance.
Discussion• Social or economic exchange perceptions may not fully capture thepsychological experience of employees influenced by various forms oforganisational exchange mechanisms.• Some other mediators may include person-organisation fit, organisationalidentification, or identification with the leadership.