Network forms of organization

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Citation: Joel M. Podolny, Karen L. Page (1998) Network forms of organization. Annual Review of Sociology (RSS)




Tagged: Sociology (RSS) social networks (RSS), economic sociology (RSS), organization theory (RSS), competition (RSS), embeddedness (RSS)


Summary:

Podolny and Page offer a very short annual review of sociology piece of "network forms of organization" that is also rather short on citations (for an annual review piece) but points in future directions for work on embeddedness. Podolny and Page argue that work on networks in markets and organizations, work strongly associated with the work of Granovetter (1973 and 1985) and define the "network form of organization as unique alternatives to a market and hierarchy dichotomy like that offered in economics and transaction cost economics in particular. Specifically, they argue that a network form of organization is, "any collection of actors that pursues repeated, enduring exchange relations with one another and, at the same time, lack a legitimate organizational authority to arbitrtate and resolve dispute that may arise during the exchange." They are very similar to the types of relationships described by Granovetter in 1985 and by Brian Uzzi (1997) in Social structure and competition in inter-firm networks: The paradox of embeddedness. Indeed, the review quotes an anecdote from Uzzi's article at length.

Podolny and Page argue that firms offer a series of benefits of network forms (i.e., embeddedness) include learning benefits, increased legitimation and status from associations (drawing on Podolny's work), through more direct economic benefits such as lowered costs, as well as (although there is less literature to support the claims) facilitate the management of resource dependencies, and provide considerable autonomy for employees.

Podolny and Page also flip their core argument on its head. They move past asking why networks would and ask why, if network forms are so effective, why firms or markets would exist. Indeed, they suggest that as sociologists move past simply critiquing undersocialized economics accounts of market behavior using network-based stories of inter-firm relations, they should turn their attention to problems associated with network forms as well through a study of dysfunctionality, constraint and suggest they suggest is a "balanced" approach to networks.

Theoretical and practical relevance:

Podolny and Page's literature review has been cited almost 600 times since it's publication 12 years ago and is a core citation in the embeddedness literature and an important and frequent citation in the literature on economic sociology.