Matheus Albergaria de Magalhães - Apresentação para a Disciplina "Economia das Organizações II" (Professora Maria Sylvia Saes). Programa de Pós-Graduação em Administração da Universidade de São Paulo (PPGA-USP), São Paulo, 27 de Maio de 2015.

1. Motivation Argument Conclusions References
Discussion
Economic Action and Social Structure
The Problem of Embeddedness
by Mark Granovetter
American Journal of Sociology, v.91, n.3, Nov.1985, p.481-510
Matheus Albergaria de Magalhães
Economia das Organizações II
Fundamentos Econômicos da Estratégia (20151)
Universidade de São Paulo (USP)
May 27th, 2015
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

2. Motivation Argument Conclusions References
SECTIONS
Motivation
Argument
Conclusions
References
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

3. Motivation Argument Conclusions References
MOTIVATION
Once upon a time, there was a node..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

4. Motivation Argument Conclusions References
MOTIVATION
..but this node had a name..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

5. Motivation Argument Conclusions References
MOTIVATION
..and this name was not just anybody..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

6. Motivation Argument Conclusions References
MOTIVATION
She had a friend!!
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

7. Motivation Argument Conclusions References
MOTIVATION
And another friend..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

8. Motivation Argument Conclusions References
MOTIVATION
..and friends..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

9. Motivation Argument Conclusions References
MOTIVATION
..and friends..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

10. Motivation Argument Conclusions References
MOTIVATION
..and friends..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

11. Motivation Argument Conclusions References
MOTIVATION
..and friends!!
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

12. Motivation Argument Conclusions References
MOTIVATION
There was another node with a name..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

13. Motivation Argument Conclusions References
MOTIVATION
But he was more like everybody (an "average" type of guy)..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

14. Motivation Argument Conclusions References
MOTIVATION
..although he also had a few friends..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

15. Motivation Argument Conclusions References
MOTIVATION
..and his friends had friends..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

16. Motivation Argument Conclusions References
MOTIVATION
..and their friends had friends..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

17. Motivation Argument Conclusions References
MOTIVATION
..and more friends!
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

18. Motivation Argument Conclusions References
MOTIVATION
When everybody was together, the world seemed extremely
small to them..
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

19. Motivation Argument Conclusions References
MOTIVATION
WTH, even Kevin Bacon has a lot of friends!!
Source: Google Images.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

20. Motivation Argument Conclusions References
MOTIVATION
Figure 1
Examples of Networks
Source: Christakis and Fowler (2009).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

21. Motivation Argument Conclusions References
MOTIVATION
Figure 2
Examples of Networks
Source: Christakis and Fowler (2009).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

22. Motivation Argument Conclusions References
MOTIVATION
Figure 3
Examples of Networks: High School Friendships
Source: Jackson (2008).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

23. Motivation Argument Conclusions References
MOTIVATION
Figure 4
Examples of Networks: 15th Century Florentine Marriages
Source: Jackson (2008).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

24. Motivation Argument Conclusions References
MOTIVATION
What is the Main Question?
Granovetter (1985) tries to answer a long-standing question
in social theory:
How behavior and institutions are affected by social relations?
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

25. Motivation Argument Conclusions References
MOTIVATION
Why are these questions important?
Embeddedness: economic actions and social relationships are
deeply intertwined (Karl Polanyi).
"...the behavior and institutions to be analyzed are so constrained by
ongoing social relations that to construe them as independent is a grievous
misunderstanding” (Granovetter, 1985, p.482).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

26. Motivation Argument Conclusions References
ARGUMENT
How does the author plan to go about providing an answer?
Roadmap:
1. Criticizes over- and under conceptions of human action in
Sociology and Economics.
2. Relates concepts such as embeddedness, trust and
malfeasance.
3. Revisits and criticizes some of Oliver Williamson’s
contributions ("Markets and Hierarquies").
4. Ends with discussions and new proposals.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

27. Motivation Argument Conclusions References
ARGUMENT
Two main views:
1. Oversocialized: economic behavior was heavily embedded
in social relations in premarket societies.
2. Undersocialized: embeddedness was not substantially
greater than the low level found in modern markets.
Author’s own view: embeddedness of economic behavior is
lower in nonmarket societies than previously claimed; but this
level has been and continues to be more substantial than is
allowed by economists.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

28. Motivation Argument Conclusions References
ARGUMENT
The views:
1. Oversocialized: people seen as overwhelmingly sensitive
to the opinions of others and obedient to the dictates of
consensually developed systems of norms and values
(Modern Sociology).
2. Undersocialized: atomized conception of human action;
disallowing any impact of social structure and social relations
on production, distribution and consumption (Economics).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

29. Motivation Argument Conclusions References
ARGUMENT
An Irony..
Under- and Oversocialized views have in common a
conception of action and decision carried out by atomized
actors.
Undersocialized: atomization results from narrow
utilitarian pursuit of self-interest.
Oversocialized: atomization is the result of behavioral
patterns being internalized; ongoing social relations have
only peripheral effects on behavior.
Fruitful analysis of human action requires avoidance of
atomization: actors’ purposive actions are embedded in
concrete, ongoing systems of social relations.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

30. Motivation Argument Conclusions References
ARGUMENT
Granovetter (1985) criticizes Williamson’s problem of "Markets
and Hierarquies" (Williamson, 1975).
Problem: under which circunstances economic functions are
performed within the boundaries of hierarchical firms rather
than by market processes outside the firm?
According to Williamson (1975), there are two reasons for that:
1. Bounded Rationality (Simon, 1955): inability of economic
actors to properly anticipate the complex chain of
contingencies relevant to long-term contracts.
2. Oportunism: rational pursuit by actors of their own
advantage, with all means at their command (including
guile and deceit).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

31. Motivation Argument Conclusions References
ARGUMENT
A few problems related to Williamson’s (1975) analysis:
1. The efficacy of hierarchical power within the firm is
overplayed.
2. Williamson fails to deeply explore the influence of social
relations on market behavior.
3. He also fails to explore the network of social relations
within the firm.
4. Power issues are left aside.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

32. Motivation Argument Conclusions References
ARGUMENT
Explanation:
Even with complex transactions, a high level of order can
often be found in the "market".
Whether these occur, depends on the nature of personal
relations and networks of relations between and within
firms.
Predictions:
1. Pressures toward vertical integration in markets where
transaction firms lack a network of personal relations.
2. On the other hand, where a stable network of relations
mediates complex transactions and generates standards of
behavior between firms, such pressures should be absent.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

33. Motivation Argument Conclusions References
CONCLUSIONS
Main goal of the paper: argue that most behavior is closely
embedded in networks of interpersonal relations and that such
an argument avoids the extremes of under- and oversocialized
views of human action.
Proposal: all market processes are amenable to sociological
analysis and that such analysis reveals central, not peripheral,
features of these processes (focus on trust and malfeasance).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

34. Motivation Argument Conclusions References
CONCLUSIONS
My Impressions:
Aggressive, but inovative attempt to highlight the
importance of social relations in economic transactions.
When considered with other contributions (Coleman, 1990;
Granovetter, 1973, 2005), this can lead to several interesting
insights related to the areas of Economics and Strategy.
Good news: economists have been taking social networks
seriously over the past decades (Jackson, 2014; Munshi, 2014),
but this is not the whole picture..
..since we still need to find convincing and better
explanations for certain economic and social observed
behaviors (e.g., trust, identity and power).
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

35. Motivation Argument Conclusions References
REFERENCES
Christakis, N.A.; Fowler, J.W. O poder das conexões. Rio de Janeiro: Campus.
Coleman, J.S. (1990). Foundations of social theory. Cambridge: Harvard
University.
Granovetter, M. (1973). The strenght of weak ties. American Journal of
Sociology, (6), 1360–1380.
Granovetter, M. (1985). Economic action and social structure: the problem of
embeddedness. American Journal of Sociology, 91(3), 481.
http://doi.org/10.1086/228311.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

36. Motivation Argument Conclusions References
REFERENCES
Granovetter, M. (2005). The impact of social structure on economic outcomes.
Journal of Economic Perspectives, 19(1), 33–50.
http://doi.org/10.1257/0895330053147958.
Jackson, M. O. (2008). Social and economic networks. Princeton: Princeton
University.
Jackson, M. O. (2014). Networks in the understanding of economic behaviors.
Journal of Economic Perspectives, 28(4), 3–22.
http://doi.org/10.1257/jep.28.4.3.
Munshi, K. (2014). Community networks and the process of development.
Journal of Economic Perspectives, 28(4), 49–76.
http://doi.org/10.1257/jep.28.4.49.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

37. Motivation Argument Conclusions References
REFERENCES
Simon, H. A. (1955). A behavioral model of rational choice. Quarterly Journal
of Economics, LXIX(1), 99–118.
http://doi.org/10.2307/1884852.
Williamson, O.E. (1975). Markets and hierarchies. New York: Free.
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)

38. Motivation Argument Conclusions References
Thank You
Matheus Albergaria de Magalhães
matheus.albergaria.magalhaes@gmail.com
http://www.sites.google.com/site/malbergariademagalhaes
Matheus Albergaria de Magalhães
Economic Action and Social Structure (Granovetter, 1985)