the sociology of markets - uc berkeley sociology...

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The Sociology of MarketsNeil Fligstein and Luke DauterDepartment of Sociology, University of California, Berkeley, California 94720;email: [email protected], [email protected]

Annu. Rev. Sociol. 2007. 33:6.1–6.24

The Annual Review of Sociology is online athttp://soc.annualreviews.org

This article’s doi:10.1146/annurev.soc.33.040406.131736

Copyright c© 2007 by Annual Reviews.All rights reserved

0360-0572/07/0811-0001$20.00

Key Words

fields, networks, institutions, performativity, culture, politics

AbstractThe sociology of markets has been one of the most vibrant fields insociology in the past 25 years. There is a great deal of agreementthat markets are social structures characterized by extensive socialrelationships between firms, workers, suppliers, customers, and gov-ernments. But, like in many sociological literatures, the theory campsthat have formed often seem to speak by each other. We show thatsome of the disagreement between theory camps is due to differ-ences in conceptual language, and other disagreements stem fromthe fact that theory camps ignore the concepts in other theory camps,thereby making their theories less complete. We end by consideringdeeper controversies in the literature that seem open both to newconceptualization and further empirical research.

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O how they cling and wrangle, some who claimFor preacher and monk the honored name!For, quarreling, each to his view they cling.

Such folk see only one side of a thing.

(from the text of Jain and Buddhist origin,Udana 68–69, “Parable of the Blind Men andthe Elephant”)

INTRODUCTION

The sociology of markets has been one of themost vibrant fields in sociology in the past25 years.1 Starting with a trickle of empiri-cal and theoretical papers, it has grown to ariver. One of the seminal pieces in the field,Granovetter’s (1985) “Economic Action andSocial Structure: The Problem of Embedded-ness” has been cited over 2500 times since itspublication, making it the most cited paper insociology in the postwar era.2 Although so-ciologists have made significant progress in

1We want to distinguish the sociology of markets fromthe broader project of economic sociology (Fligstein 2001).Following Polanyi (1957), economic sociology is the gen-eral study of the conditions of the production and repro-duction of social life. Such a study would include studiesof consumption, the family, and the links between statesand households, schooling, and economic life more broadly(Smelser & Swedberg 2005, p. 3). The sociology of marketsrefers more narrowly to the study of one kind of social ex-change, that of markets, and to the structuring of that kindof social exchange, under the conditions we call capitalist.This focus includes the study of firms, product markets, andlabor markets as well as their broader linkages to suppliers,workers, and states and the role of local cultures (i.e., localin the sense of belonging to a particular market), systems ofmeanings insofar as they influence what products are, andthe role of morality in the generation of particular kinds ofmarkets.2Recently Jerry Jacobs (2005) calculated the most citedpapers in the American Sociological Review in the postwarera. The paper with the most citations was DiMaggio &Powell’s (1983) “Institutional Isomorphism” paper, with1700 citations. Granovetter’s paper appeared in the Amer-ican Journal of Sociology and, as far as we know, no onehas created a similar list for that journal. But, with almost2500 citations, it is hard to believe that many papers outdidGranovetter’s. It should also be noted that the DiMaggio &Powell paper has greatly influenced the sociology of mar-kets as well. We argue that this paper has greatly influencedat least one strain of thought in the sociology of markets(i.e., institutional theory). If one takes both of these pa-pers as part of the foundation of the field, arguably the twomost cited papers in the postwar era are at the core of thesociology of markets.

their attempts to understand the origins, op-erations, and dynamics of markets as socialstructures, the primary perspectives that haveemerged tend to remain separate and distinctat the theoretical level. Much like the blindmonks and preachers who fail to see the wholeof the elephant in Buddha’s famous parable,scholars have often focused on a particular so-cial aspect of markets and acted as if it was amore general understanding.

This theoretical separateness producestwo problems. First, because many scholarsuse similar concepts but identify them bydifferent terms, confusion results about thedegree to which people are saying differentthings. For example, most scholars, regardlessof their approach, believe that culture (sharedmeanings, normative understandings, identi-ties, local practices) plays an important rolein market projects. Much of this conceptualoverlap is hidden by the use of jargon (for ex-ample, the use of terms like frames, logics, per-formativity, scripts, conceptions of control, orlocal knowledge). Thus, scholars who purportto approach their subject matter from a partic-ular perspective actually share concepts witha wide variety of other scholars.

Second, to the degree that scholars arereally saying different things, assessing howmuch their theoretical views are complemen-tary or contradictory is difficult. When oneviewpoint complements another, theory is ad-vanced. Taking into account other possible el-ements in the social structuring of marketsyields a more complete view of market pro-cesses. But when theories contradict, scholarsneed to understand why their perspectives dif-fer and how those differences can be usefullyexplored to further both theory and research.The primary purpose of this review is to be-gin to untangle the theoretical and empiricalwork on the sociology of markets, clarifyingwhat we know and where scholars really dis-agree.

The literature (and the way that peo-ple teach their graduate courses) has of-ten been divided into three theory groups(Fourcade-Gourinchas 2007) according to

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whether scholars use (a) networks (Burt 1992;Granovetter 1974, 2005; White 1981, 2002),(b) institutions (Dobbin 1994; Fligstein 1990,2001; Powell & DiMaggio 1991), or (c) perfor-mativity (Beunza & Stark 2004, Callon 1998,Callon & Muniesa 2005, MacKenzie & Milo2003, MacKenzie 2005) as explanatory mech-anisms in the emergence and ongoing dynam-ics of markets. Scholars in the network tradi-tion have focused on relational ties betweenactors as the material of social structure. Insti-tutionalists focus on how cognition and actionare contextualized by market rules, power, andnorms. The performative school of thoughtviews economic action as a result of calculativeprocesses involving the specific technologiesand artifacts that actors employ.

This division of the field overemphasizesthe extent to which these perspectives arein fact separate theory groups. All three ap-proaches rely on viewing markets as social are-nas where firms, their suppliers, customers,workers, and government interact, and allthree approaches emphasize how the connect-edness of social actors affects their behavior.Network analysis is a technique for findingsocial structures in relational data. It is not atheory of the underlying relationships in thedata and the mechanisms that they represent.Scholars who use network techniques invoketheoretical constructs like power, resource de-pendence, cooptation, information, and trustto explain the social structures that emergefrom their analyses. These mechanisms arecommon to institutional theory and to othertheories relevant to the sociology of markets.Institutional theorists are interested in howfield-level phenomena diffuse to make fieldsisomorphic, often through social networks(Davis 1991). Performativists have explicitlyconnected their approach to network theoryin what Callon (1998) calls the actor-networkapproach. The actor-network approach viewsnot only humans, but also objects and artifacts,techniques, and ideas as agents embedded innetworks of calculative relations. In addition,performative approaches overlap with institu-tional theory in their interest in how products

come to be created and sold, and in how thelocal cultures of particular markets form whatinstitutionalists call the institutionalization ofparticular markets.

Although these three approaches encom-pass a large portion of the work done in thesociology of markets, they are by no meansexhaustive. Along with considering these par-ticular perspectives with the goal of extractingwhat sociologist have learned about marketsand what remains to be resolved, we considerin this review the degree to which the differ-ent theory groups offer incomplete represen-tations of the social structuring of markets.The division of the field into networks, in-stitutions, and performativity excludes othertheoretical perspectives that should also be atthe core of thinking about markets as socialstructures. We focus on two important ap-proaches that have been underplayed in theliterature: political economy and populationecology.

Political economy has pioneered thinkingabout the linkages between states, law, andmarkets and the historical emergence of sys-tems of governance. The literature on thecomparative study of capitalist arrangementsand their effects on various outcomes, includ-ing economic development, is part and par-cel of the sociology of markets. Institutionaltheory is the approach that most frequentlyadds political economy into its analyses. Itfocuses on the role of governments and lawin the creation of particular features of mar-kets, for example the types of alliances andforms of cooperation that are legal or forms ofproperty rights (Campbell & Lindberg 1990,Carrutherst & Ariovich 2004). But networktheorists and scholars interested in perfor-mativity have generally ignored the possibleeffects of government and law and the roleof preexisting relationships between the own-ers of firms, managers, workers, and govern-ments on market processes. This makes theiraccounts of particular markets incomplete.

Population ecology is the branch of or-ganizational theory that deals most directlywith the effects of competition on the

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production of markets. Scholars who use thisapproach have drawn on network or institu-tional analyses (Baron et al. 1999, Haveman& Rao 1997). But population ecology hasnot figured into the core of the sociology ofmarkets, primarily because it has developeda vocabulary and set of methods that do noteasily translate into many of the current ap-proaches to social structure. This is unfortu-nate because several developments in popula-tion ecology have paralleled those in the otherapproaches. We show how many ideas in pop-ulation ecology have been expressed in a dif-ferent language in the other points of viewand argue that the insights of population ecol-ogy should be added more explicitly to schol-arly thinking about the social structuring ofmarkets.

After one notes the similar ideas that runthrough the literature, including the less rec-ognized areas of contribution, there remaina number of interesting problems that stemfrom theoretical differences. Scholars in theperformative tradition have presented theirperspective as a critique of the predominantsociological modes of understanding markets.Their basic idea is that economic action isabout calculation, and that how the qualitiesof goods are calculated (i.e., the amenability ofgoods to calculation, the calculative capacitiesof actors, and the interaction between themin the act of exchange) is crucial to under-standing market structure. These scholars ar-gue that the tools actors have at their disposalto interpret and define their economic worldsand how they organize interaction over ex-change are created by and enact ideas abouthow economic activity should and does oper-ate. We interpret the performative argumentas an attempt to insert cultural understandingsof actors into the core of the social construc-tion of markets.

A second disagreement focuses on link-ages between producers and consumers. Manyanalyses of markets focus exclusively on pro-ducers and their competitive relationships.Here, attention is given to how social struc-tures resolve the myriad forms of resource de-

pendence or mediate competition. But otherscholars who view the links between produc-ers and consumers as pivotal to the produc-tion of markets emphasize the role of trust andculture (i.e., commonly held meanings aboutthe product, its morality, and its usefulness)in those relationships as key to understand-ing market processes. Granovetter (1985) ar-gued early on that the main purpose of em-beddedness in markets was that it increasedthe trust between buyers and sellers. Zelizerhas taken the relationship between produc-ers and consumers in a different direction.Her argument is that consumers must be con-vinced not just of the utility of the productsthey buy and the trustworthiness of those whosell them, but also of the morality of the prod-uct (Zelizer 1983, 1994, 1997). Her more cul-tural approach alerts scholars to the problemof framing products so that consumers findthem not just useful, but in concert with theirvalues.

A third source of disagreement is thatsome scholars view market structures as eitheremergent or in equilibrium, whereas othersargue that markets are always changing. Thepossibility for a sociological definition of mar-ket equilibrium is intriguing. White (1981),for example, has defined a market as a “repro-ducible role structure.” This idea implies thatthe social processes that occur when a marketis formed are different from the social pro-cesses that occur once a more stable set of so-cial relationships appear. Population ecologyhas an implied theory of what could be calledpunctuated equilibrium. At the beginning ofmarkets, there is often a period of turmoiland change followed by some stasis and per-haps a second period of turmoil. The alterna-tive view is that markets are always fluid, withproducts, processes, and advantage constantlyshifting. Here, equilibrium solutions to theproblem of what other market actors will donever form (Nelson & Winter 1982). Thesedifferent views of market dynamics are impor-tant because they imply very different ways oflooking at the social structuring of a market.On the one hand, if actors trying to find a place


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in a market can collectively produce equilib-rium, then the goal of actors in this marketbecomes the preservation of that order. Thisimplies relationships of power and domina-tion in markets. On the other hand, if firms areresigned to live in a world where reproducingone’s position is not possible, then social re-lationships become temporary arrangementsthat allow one to get information or securecutting edge technology. Because change isubiquitous, one chooses one’s friends for theirusefulness, and when that usefulness ends, onemoves on.

Finally, sociologists generally have a com-plicated relationship to the problem ofwhether a given set of social arrangements isefficient. The fact that so many kinds of so-cial relationships exist in markets has led tothe argument that social relationships exist be-tween market actors to solve market problemssuch as agency costs (Fama & Jensen 1983)and transaction costs (Williamson 1985) andto promote trust between buyers and sell-ers. Some sociologists seem prepared to ac-cept that social structures could be efficient(Baker 1984, Uzzi 1996). From this point ofview, social structures in markets operate toreduce information costs, give firms access toknowledge about what the competition is do-ing, allow market actors to trust one another,and reduce resource dependencies. These so-cial structures provide firms with informationthat allows them to learn and adapt and, in do-ing so, compete effectively. But other scholarsare agnostic on this question (Fligstein 1990,Podolny 1993). For them, social structurescan operate to mitigate the effects of competi-tion. In this view, firms try to control marketsby using their size, technology, and access togovernments to promote a status hierarchy ofincumbents and challengers. Incumbent firmsuse their advantages to signal to their princi-pal competitors what they will do to defendthe existing market order. For these scholars,the social structure of markets exists to pro-duce this order. One way to make progress onthis issue is to problematize efficiency. Thesociology of markets gives us tools to decide

whether a particular set of social structuresprotects incumbents or, rather, fosters eco-nomic growth and competition.

In this review, we discuss the intellectualroots of the sociology of markets and how thefield evolved from problems posed in nearbyfields. We then examine the crystallization ofthe major ideas in the sociology of markets andin doing so discuss what we know. Finally, weconsider what the real differences of opinionare and suggest avenues for future research.

CONTEMPORARY ROOTS OFTHE SOCIOLOGY OF MARKETS

Many good reviews have been written aboutthe intellectual history of the sociology ofmarkets as a field (Biggart & Beamish 2003,Fourcade-Gourinchas 2007, Krippner 2001,Lie 1997, Smelser & Swedberg 1994, Trigilia2002). Our goal in this section is to put thisliterature together in a different way. Ratherthan focusing on the roots of the sociology ofmarkets in classical theory, we focus on thecontemporary fields of study that contributedto the intellectual ferment around the soci-ology of markets. In particular, we trace theinfluence of nearby fields on the different per-spectives in the sociology of markets.

New fields of social inquiry are built in re-lation to other fields of social inquiry. Whenscholars working within one field find them-selves in a dialogue with scholars workingon similar problems in other fields, some-times a new field of inquiry is created. Atthe outset, new fields involve scholars bor-rowing one another’s perspectives and look-ing for mechanisms and models that mighthelp explain new objects of inquiry. In thiscase, political economy, the sociology of la-bor markets, and organizational theory pio-neered thinking about the sociology of mar-kets, and the cross-pollination of ideas in thesefields formed the basic insights leading tothe establishment of the sociology of mar-kets as a field in its own right. Scholars inall these fields doubted that economics couldsufficiently make sense of what happens in


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markets. In essence, they discovered that theatomized, price-taking actors, with perfectand symmetrical information assumed by neo-classical theory, did not seem to exist empiri-cally. Social relations seemed to be crucial tothe functioning of markets and market actorsin a myriad of ways. Although all these sub-fields began to criticize economics, they didso from different perspectives and for differ-ent reasons, and the critiques internal to thelogics of these fields were the first moves to-ward the creation of a contemporary sociologyof markets. It is useful to understand these de-bates in order to make sense of the differenttheoretical voices in the sociology of markets.

Political economy in the 1960s was domi-nated by modernization theory. This perspec-tive sought to explain how economically un-derdeveloped countries might develop alongthe lines of industrialized nations. Generally,studies in this vein focused on how similarcultural and structural features in develop-ing nations, characterized as traditional, couldbe overcome with the emulation of institu-tional models extant in developed countries topromote economic growth (Eisenstadt 1973,Kerr 1960, Lerner & Riesman 1963, Rostow1961). Critiques of modernization theory inpolitical economy led researchers to new per-spectives on development and comparativecapitalisms.

Scholars in this field looked back toPolanyi’s (1957) The Great Transformation forinspiration (see Block & Evans 2005 for a re-view of the literature on the links betweenstates and markets). Polanyi argued not onlythat the creation of markets required states,but also that the formation of capitalist mar-kets would produce social chaos. In response,he suggested that governments would haveto intervene in markets to stabilize themand to provide social protection for work-ers and rules to guide the interactions be-tween groups of capitalists. The ways theydid this would necessarily be contingent andimplied that historical institutional variationcould help explain cross-national variation inmarket structures. The rejection of the tele-

ological convergence of institutions towardWestern models implied by the economic un-derpinnings in much of modernization theoryled scholars to look into how the evolving in-stitutions of capitalism (laws, regulations, andinstitutionalized practices) came to regulatethe relationships between firms, owners, gov-ernments, and workers in ways that producedfundamental differences in the market struc-tures of these societies.

As development projects took off, first inJapan and then later in Taiwan and Korea,scholars delved into how local arrangementsbetween governments, economic elites, andworkers provided the conditions of economicgrowth in both developed and less developedsocieties (Amsden 1991; Aoki 1990; Dore1973, 1987, 1997; Evans 1995; Johnson 1982;Wade 1990). Meanwhile, the study of com-parative capitalisms revealed that the rela-tionships between these groups showed re-markable diversity and reflected very mucha historical, cultural, and national trajectory(Campbell et al. 1991, Campbell & Lindberg1990, Fligstein & Choo 2005). This perspec-tive suggested that governments, workers, andcapitalists produced market structures thatwere different across countries (Albert 1993,Berger & Dore 1996, Boyer & Drache 1996,Hall & Soskice 2001, Hollingsworth et al.1994). Markets were not given by outsiders,but instead reflected the social and politi-cal construction of each society, where thehistory and culture surrounding class rela-tions and the various kinds of interventions bygovernments produced unique institutionalorders.

Organizational theory, much of which wascentered in business schools, was concernedwith understanding how the managers offirms read the demands of their environ-ments and adjust their organizational struc-tures in line with those contingencies (Miles1980). Although managerial theory rejectedsome of the tenets of economics (March et al.1958, Simon 1957), such as perfect informa-tion and perfect rationality, the purpose ofthe firm was still to adjust to the world of


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competition, as economics implied. The cri-tique of management theory’s focus on in-ternal organizational processes led organiza-tional theorists in two directions.

Hannan & Freeman (1977) argued thatscholars had paid too much attention toadaptive processes in organizations. Instead,they studied the emergence of organizationalforms at the level of populations. They im-plied that market opportunity brought for-ward the birth of firms. But the character ofthe market, i.e., the resources that could beexploited by firms, would determine whichforms of organization would survive. Themain problem that competition created forfirms, from Hannan & Freeman’s perspective,was resource dependence (Pfeffer & Salancik1978). Many firms could not get the resourcesthey needed to survive, and this led to highrates of failure at the beginning of marketopening projects. Despite population ecol-ogy’s focus on competition, scholars in thisfield realized that the formation of marketboundaries was a social process and that theformation of niches often reflected the abilityof firms to segregate their markets (Carroll1985, Hannan & Freeman 1988). Firms de-pend on legitimacy, and external shocks to aniche, such as the introduction of a law, canhave a profound effect on the dynamics of aniche (Ranger-Moore et al. 1991, Ingram &Rao 2004, Haveman & Rao 1997). Recently,ecologists have begun to focus on how firmsform identities and how these identities formmarkets (Carroll & Swaminathan 2000).

While population ecology viewed the en-vironment of the firm as “hard,” and thus themain mechanism of selection was the avail-ability of the scarcest resource, institutionaltheory posited that the environment was atleast partially a social construction. Scott &Meyer (1982) called such environments “sec-tors” and described the socially constructedenvironment of firms as a function of all theother organizations that might impinge on aparticular organization. They included gov-ernments, suppliers, workers, and customersas part of such a social construction. We note

that sectors that join all interested parties lookquite similar to the set of actors that po-litical economy focuses on, i.e., firms, gov-ernments, and workers. DiMaggio & Powell(1983) extended these arguments and calledsuch environments “organizational fields,” aterm that has caught on. The field metaphorimplies that firms watch one another, engagein strategic behavior vis-a-vis one another,and look to one another for clues as to whatconstitutes successful behavior. DiMaggio &Powell’s main focus was how firms in organi-zational fields came to resemble one anotherthrough processes of mimetic, coercive, andnormative isomorphism.

In 1981, White produced a sociologicalview of what he thought firms do in markets.His central argument was that firms in pro-duction markets position their organizationsvis-a-vis one another. Using the price and rel-ative quality of their product, they signal toeach other what kind of producer they want tobe. This signaling produces what White calleda market that he defined as a reproduciblerole structure. White’s view combines someinsights from economics about how price canbe used as a signal (Spence 1974) with the or-ganizational sociology focus on the construc-tion of fields or niches.

While organizational scholars examinedsocial processes structuring the relationshipsbetween organizations, scholars in stratifica-tion and labor markets looked anew at the roleof firms in resource distribution. During the1960s and 1970s, the main approach sociol-ogists used to examine labor markets was thestatus attainment model. This view focused onhow individuals were sorted into a relativelyfixed set of positions according to their per-sonal characteristics, such as family origins,education, gender, and race (Blau & Duncan1967, Hauser & Featherman 1977). Becausethe status attainment model views the linkagesbetween individuals and their socioeconomicoutcomes as mainly a function of their per-sonal characteristics, the problem of the de-mand for labor, and thus the role of the firm,was outside its purview.


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During the 1970s, scholars became in-terested in two other questions: How doesthe structure of jobs affect individual mo-bility patterns and what is the actual pro-cess through which people are matched tojobs? Sociologists answered these questionsby considering the role of firms in the hir-ing process and social relationships in thematching process. The new structuralismmodeled how firms affect the distribution ofrewards (Baron & Bielby 1980, Hodson 1983,Kalleberg & Griffin 1980). White’s (1970)Chains of Opportunity elaborated how vacancychains of jobs helped produce the distribu-tion of workers and rewards. Granovetter’s(1974) Getting a Job took on the question ofhow people got matched to jobs. He intro-duced the idea that social networks mediatethe links between employers and employees.Both White and Granovetter championednetwork analysis as a way to understandthe social structure linking employers andemployees.

AGREEMENTS IN THESOCIOLOGY OF MARKETS

At the core of the sociology of markets is theattempt to insert sociologists into the studyof the economic realm by bringing social the-ory and the way social life works in generalinto firms, markets, and industries. As our re-view suggests, the theoretical pieces for theconstruction of the sociology of markets werein place by 1983. Firms, the social structuresthat defined their relationships to competi-tors, and the social structures that linked themto suppliers, customers, workers, and govern-ments were already theorized to exist and tovary across markets, historical time periods,and countries. Granovetter’s declaration thateconomic life was always embedded in sociallife has proven to be the intellectual frame thatjustified opening a floodgate of research andbrought a massive set of scholars armed withsociological ideas into studying market activ-ity and, even more importantly, engaging oneanother in discourse.

What began next was an exploration ofproduct and labor markets. Scholars studiedconcrete cases and attempted to apply thesetools to account for what had emerged. Thesociology of markets has been used to ex-plain many aspects of markets. Some schol-ars have demonstrated how the social re-lationships in markets produce more stableprices (Baker 1984; Uzzi 1997, 2004). Oth-ers have focused on how the social structur-ing of markets has affected the birth and deathof small firms (Stuart et al. 1999, Stuart &Sorenson 2003). Still others have observed theinnovation and spread of new market strate-gies such as new products, financial inno-vations, or changes in organizations such asthe diversification of products, geographic ex-pansion, and vertical integration, as well aschanges in which subunit controls the firm(Ahmadjian & Robinson 2001; Beckman et al.2002; Davis 1991; Davis et al. 1994; Fiss& Zajac 2004; Fligstein 1985, 1991; Gulati& Westphal 1999; Haunschild 1993; Hirsch1986; Ocasio & Kim 1999; Westphal & Zajac1998; Zorn 2004; Zuckerman 1999, 2000).

The exploration of all possible link-ages between firms, suppliers, customers,governments, and workers pushed scholarsto postulate a plethora of mechanisms forembeddedness. The literature groped withtrying to generalize these cases and began toelaborate different ways of thinking about theproblem of the social embeddedness of mar-kets. Krippner (2001) has argued that the termembeddedness has become vaguely defined.We argue that this was the case from the verybeginning. Scholars who were coming at theproblem from very different points of viewexamined different ways in which economictransactions were socially structured.

The variety of approaches has made pro-viding a sociological definition for marketsdifficult. For neoclassical theory, marketssimply imply exchange between actors forgoods or services. These exchanges are usu-ally thought to be fleeting, with price (i.e.,the amount of a commodity that is exchangedfor another using a generalized medium of


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exchange, i.e., money) determined by the sup-ply and demand for the commodity. From thepoint of view of the sociology of markets, theproblem is that this type of exchange alreadyshows a great deal of social structure. Mar-ket actors have to find one another. Moneyhas to exist to allow market actors to get be-yond bartering nonequivalent goods. Actorshave to know what the price is. Underlyingall exchange is that both buyers and sellershave faith that they will not be cheated. Suchfaith often implies informal (i.e., personalknowledge of the buyer or seller) and formalmechanisms (i.e., law) that govern exchange.Furthermore, market actors are often organi-zations, implying that organizational dynam-ics influence market structures. For sociolo-gists, market exchange implies a whole back-drop of social arrangements that economicsdoes not even begin to hint at.

But the sociology of markets goes furtherthan just questioning the institutional embed-dedness of an anonymous market. It is pre-pared to unpack the black boxes of exchange,competition, and production. Sociologists be-gin by realizing that market actors are in-volved in day-to-day social relationships withone another, relationships based on trust,friendship, power, and dependence. For themodern sociology of markets (Durkheim1964)3, unstructured, haphazard, one-shot,anonymous social exchange is not a market.Instead, markets imply social spaces where

3Ironically, scholars of the sociology of markets almostnever cite Durkheim. But a good case can be made thatalmost all of the important ideas in the sociology of mar-kets have Durkheimian roots. Durkheim recognized thepivotal role of the state and law in capitalist exchange, pre-figuring the political economy concern with these issues.He also recognized that there was a noncontractual basisto contract that implied that personal relationships werenecessary for people to honor contracts. Finally, in the di-vision of labor the major mechanism that drove modernsociety was competition. Durkheim’s argument was thatpeople divided up tasks to lessen their competition withother people. This mechanism is arguably at the core ofthe population ecology view that market niches becomepartitioned by competition and White’s arguments abouthow firms avoid competition by signaling which part of themarket they will produce for.

repeated exchanges occur between buyers andsellers under a set of formal and informalrules governing relations between competi-tors, suppliers, and customers.4 These fieldsoperate according to local understandings andformal and informal rules and conventionsthat guide interaction, facilitate trade, definewhat products are produced, indeed are con-stitutive of products, and provide stability forbuyers, sellers, and producers. These market-places are dependent on governments, laws,and larger cultural understandings support-ing market activity. The first thing a sociol-ogy of markets suggests is that market actorswill develop social structures to mediate theproblems they encounter in exchange, com-petition, and production. We discuss each ofthese in turn and delineate the primary contri-butions of each perspective with regard to howmarket actors solve these problems and, in do-ing so, construct and navigate their worlds.

Many aspects of exchange relationshipsin markets have been examined by sociolo-gists. Institutional theory suggests not onlythat contractual market exchange dependson the rule setting and sanction enforce-ment of states, but also that states may de-fine what types of products are appropriatefor exchange. Furthermore, the internal struc-ture of the state as rule setter and regulatorcan influence the types of products states al-low to be exchanged and the rules support-ing and surrounding exchange (Caruthers &Halliday 1998, Delaney 1992, Schneiberg &Soule 2005). Buyers and sellers also are gener-ally known to one another and in many casesare involved in repeated exchange. Networktheorists have emphasized the role that so-cial networks play in generating trust betweenbuyers and sellers that makes exchange possi-ble (Granovetter 1985). Cultural sociologistshave looked at how specific exchange relations

4Of course, some of the identities of the buyers and sellerschange over time. In addition, more peripheral buyers andsellers come into the market, leave, and do not return. Butthe core players in the market, the largest producers andconsumers, create a social structure.


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are deeply constructed by the cultural mean-ings behind the products being bought andsold (Zelizer 1983). Finally, sociologists gen-erally believe that power influences social re-lations and, thus, market relations (Pfeffer &Salancik 1978). Relationships of exchange canbe deeply influenced by the relative power ofthe actors over the supply and demand of whatis being exchanged and by their relative de-pendence on what is being exchanged. Thisconception of power in markets is generallyreferred to as resource dependence and hasbeen described and employed in a variety ofways by many sociologists.

Resource dependence is a general con-struct used in the sociology of markets. Theidea begins with the premise that in any socialexchange, one side of the exchange may bemore dependent on what is being exchangedthan the other (Emerson 1962). If one partyto the exchange was much more dependentthan the other, that party was either morelikely to have to obey the dictates of the sup-plier/customer or else face extinction.5 Thisidea has great generality when it comes toexamining exchange. So, for example, firmsmust obtain finance, secure inputs for theirproducts and labor, and establish relationshipsto their competitors, governments, and cus-tomers. The empirical literature has shownthat who might have the power in these rela-tionships varies on the basis of the nature ofthe resource dependency and the particularmarket being studied.

Although many scholars who have stud-ied exchange interactions have focused on us-ing network methods, they frequently positmechanisms that involve resource depen-dence. For example, Lincoln et al. (1996) showhow the ownership linkages between Japanesefirms affect the ability of the owner firms todictate actions to their subsidiaries. Formingrelationships to one’s principal suppliers can

5Note that in neoclassical economics, exchange is assumedto be equal. If buyers and sellers have perfect informationabout prices, then buyers will not pay more than they needto and sellers cannot ask more.

also be a way to coopt such dependence. Burt(1980a) demonstrates how American corpo-rations use board membership strategically tobring on representatives of firms upon whoma particular firm is dependent for resources.Stuart et al. (1999) demonstrate that gettingmoney from the right venture capitalists af-fects the probability that a particular firm sur-vives. They interpret such connections as notjust about securing funding but also aboutconferring legitimacy upon a particular start-up firm and thereby allowing it to be more ableto secure workers and customers. In essence,one purpose of the ties between suppliers andcustomers is to control resource dependenceand enhance the probability of a firm sur-viving. Here, network theorists are rooted inthe more general camp of both populationecology and institutional theory by worryingabout how resource dependence affects the le-gitimacy and survival of firms.

Network theorists and experimental socialpsychologists posit one additional mechanismthat links buyers and sellers: trust (Cheshire &Cook 2004; Granovetter 1985, 2005; Kollock1994, 1999; Uzzi 1996; Yamigushi & Cook1993). Granovetter’s main argument aboutembeddedness is that if one has close ties toothers over long periods of time, one can trustthat in any particular transaction, people areless likely to try to cheat one another. Theexperimental literature has shown that trustmatters most in situations in which there is agreat deal of uncertainty about the qualitiesof the product being exchanged (Cheshire &Cook 2004, Kollock 1994). Kollock (1999) hasexamined how reputation works as a way to in-crease trust between actors. Although trust isnot a major mechanism in either populationecology or institutional theory, it does connectback to those theories. Judging the trustwor-thiness of another actor is not just a matterof having a long-term network tie to them.Trust is also about power and resource de-pendence. Firms work to reduce uncertaintyand resource dependence by choosing part-ners who they either know to be reliable orothers think are reliable.


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Scholars interested in culture and con-sumption have also focused on exchangein markets. The sociology of consump-tion (Bourdieu 1984; Csikszentmihalyi &Rochberg-Halton 1981; Slater 1997; Zelizer1983, 1994, 1997; for review papers seeZelizer 2005, Zukin & Smith Maguire 2004)focuses on what products mean for people andhow people use money and markets to estab-lish meaning, status, and morality. For thesescholars, culture is deeply implicated in mar-ket exchange. Products are cultural objectsimbued with meaning based on shared under-standings and are themselves symbols or rep-resentations of these meanings. Consumptionreproduces the material lives of consumersand provides them means to express theiridentities and affiliations with status groups.But most importantly for these scholars, themeanings attached to products that are nego-tiated by consumers and producers shape theinterpersonal relations of embedded marketexchange and, in turn, are shaped by them.

Although exchange characterizes the re-lation between buyer and seller in mar-kets, competition characterizes the relationbetween producers.6 Sociologists posit thatcompetitive markets confront producers asproblems to be solved, and they do so usingstrategies of cooperation, combination, andproduct differentiation. The degrees to whicha market is competitive, to which producersare allowed to cooperate, and to which pro-ducers are allowed to combine, as well as howproperty rights are organized, are all regu-lated by the government. Although producersattempt to use a variety of strategies to con-trol competition, government defines accept-able modes of relation between producers andregulates competition through reacting to thestrategies firms employ.

Population ecology, network theory, andinstitutional theory all recognize that the dif-

6Relationships to competitors can be characterized in termsof resource dependence as well. In White’s model, whenfirms signal their intentions to enter a different part of themarket, they are trying to control their interdependency.

ferentiation of products is one of the mainmechanisms firms have to control competi-tion. This works in two ways. If firms canchoose in which part of the market they wantto compete, then they can go where theircompetitors are not. Carroll (1985), callingthis process niche partitioning, showed thatmicrobreweries were able to create a fastgrowing niche for themselves even as thelargest brewing companies were steadily in-creasing their hold over the brewing industry(Carroll & Swaminathan 2000). White (1981)has made a similar argument. Markets for himare reproducible role structures where firmsdecide between the prices they want to chargefor a good and the quality of that good theyproduce. In making this decision, they decidewhich part of the market to be in.

Leifer & White (1987) demonstrated howthis works for the frozen pizza market. White(2002) later identified this mechanism as a wayto produce entirely new markets. If productsbecome differentiated enough, then they areno longer competing. White’s perspective caneasily be translated into the language of pop-ulation ecology. White is arguing that mar-kets would be differentiated by firms occupy-ing different positions in the niche, and, tothe degree that firms were in fact not com-peting, this could result in niche partitioningor, in White’s language, the creation of newmarkets.

The differentiation of products can alsohelp the stability of the firm through spread-ing competitive pressures across multipleproduct markets. If firms decide to producemultiple products, a downturn in a particularmarket will not threaten the firm’s existencebecause it is not totally resource dependenton the exchange of one product. Populationecology noted this process, describing thediversification tactic as a generalist strategy(Hannan & Freeman 1977). Fligstein (1990)comes at this process from the point of viewof institutional theory. He shows that prod-uct differentiation in U.S. corporations be-gan as a marketing strategy in the 1920s thatwas pioneered by large firms to stabilize their


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overall structure. During the Great Depres-sion of the 1930s, the largest corporationsproduced as many different kinds of productsas they could to continue to exist in such dis-mal business conditions.

In addition to product differentiation, pro-ducers often seek to cooperate and to combinewith one another to reduce competitive pres-sure. In the old industrial organization litera-ture in economics, a small number of firmsdominating a market act to reduce compe-tition in that market. Challenger firms can-not undercut the prices of their larger corebrethren because the large firms can outlastany competitor in a price war. Podolny (1993),a network theorist, terms this kind of struc-ture a status hierarchy. He studies how in-vestment banks form such a hierarchy that isprimarily held in place by the large size andprestige of the biggest banks. These banksget the largest deals, and they reproduce theirplace in that structure by being able to under-cut their competitors if necessary. Fligstein(1996), in a more institutionalist vein, callsthis an incumbent-challenger structure. Heargues that such structures get reproduced asincumbents use their market power to sus-tain their advantage in a given market overtime.

Although producers may attempt to exertmarket power through the creation of hier-archies, this strategy has its limits. Govern-ments regulate competition (Ranger-Mooreet al. 1991, Dobbin & Dowd 2000, Fligstein1990, Haveman & Rao 1997, Ingram & Rao2004, Ingram et al. 2005), in turn affectingthe opportunities for firms to expand andsurvive. The role of government and lawin the production of markets has been ac-knowledged by the population ecology, insti-tutionalist, and, of course, political economycamps. These theory groups understand thatgovernments can both open up opportuni-ties and set up constraints for markets. Forexample, Hannan & Freeman (1987) showhow the legalization of union activities af-fected the founding and survival of those or-ganizations. Ranger-Moore et al. (1991) show

how the insurance industry in the nineteenthcentury expanded and contracted as regula-tors shifted their roles over time. Haveman& Rao (1997) demonstrate similar processesoperating in the savings and loan industries.Fligstein (1990) presents evidence that theU.S. government played a major role in pre-venting the cartelization and monopoliza-tion of American business at the end of thenineteenth century by using antitrust laws.He also demonstrates that the federal gov-ernment played a role in closing down the1960s merger movement by aggressively pur-suing conglomerate mergers. Dobbin (1994)shows how government policies toward rail-roads early on affected their organization indifferent countries. Dobbin & Dowd (2000)have documented how government playedan important role in railroads in the UnitedStates. Campbell & Lindberg (1990) arguethat property rights are at the heart of therelationships between governments and firms(for a review of the sociological literature onproperty rights, see Carruthers & Ariovich2004).

The sociological view of relations amongproducers begs the question of who these pro-ducers are and how they make production de-cisions. From the point of view of neoclassicaleconomics, whether producers are individualsor organizations matters little; what is impor-tant is the production function and the com-bination of capital and labor used in the pro-ductive process (Shepard 1970). Conversely,sociologists have long examined organizationsas social structures. Some take the unitary or-ganization of the firm as a starting point, butmost agree that organizations have complexinternal dynamics that are important for or-ganizational form and for the strategies theyuse to solve the problems of competition andexchange. They have pointed to competitionwithin the firm, culture, and power struggles,in addition to environmental influence, as im-portant to understanding a firm’s strategy andthus the structure of markets (Fligstein 1990,Ocasio & Kim 1999, Pfeffer 1981, Pfeffer &Salancik 1978).


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The study of the internal dynamics of firmsand how firms relate to their environmentsis rooted in organization theory. Althoughmuch of the empirical work in the sociol-ogy of markets treats firms as unitary, soci-ologists are generally committed, at least the-oretically, to viewing the internal dynamics ofthe firm as important (Bourdieu 2005). Thetwo key aspects of firms with which organiza-tional scholars have been most concerned arestrategy and structure (Miles & Snow 1978).The design of the organization is its structure.This includes lines of authority and the for-mal and informal relationships between posi-tions in the firm. Meanwhile, strategy refersto the means the organization employs toachieve its goals. The central questions sur-rounding these aspects of organizations havebeen where they come from and how they arerelated to market structures.

Although economistic explanations forvarious strategies and structures generallycenter on transaction costs, agency costs, oraspects of the technology the firm uses inproduction (Chandler 1962, Fama & Jensen1983, Williamson 1985), sociologists haveemphasized the contingent nature of the goalsof the firm and how culture and managers’backgrounds influence the firm’s strategy andstructure. This emphasis makes the existingdivisions within the firm and the career pathsof managers important. The way the firm di-vides up functions, how the firm promotesfrom within, and political struggle determinewho manages the firm and thus the perspec-tive that will dominate firm strategy. For ex-ample, Fligstein (1990) has emphasized howthe rise to prominence of managers with salesand marketing or finance backgrounds pre-ceded the adoption of multidivisional struc-tures and strategies of product diversifi-cation. Processes of managerial succession,the distribution of resources, and promo-tion are subject to internal competition. Per-haps the most promising aspect of the soci-ology of markets is the potential to theorizeas well as empirically examine the con-nections between intraorganizational dynam-

ics and interorganizational competition andexchange.

Probably the most studied mechanismtheorized to pass strategies and structuresfrom one firm to another is the board inter-lock (Mizruchi 1996). Board interlocks influ-ence the spread of different kinds of struc-tural and strategic innovations (Burt 1980b,Davis 1991, Gulati & Westphal 1999, Rao& Sivakumar 1999). Sociologists tend to seeboard interlocks as mechanisms for cooptingvarious kinds of resource dependencies, forgenerating trust, sharing information, medi-ating competition, and forming political al-liances (here, one can make the link back topolitical economy).

The social structuring of markets is gener-ally in response to the problems of competi-tion and exchange. The sociology of marketsdoes not posit that these problems will alwaysbe solved. But it does imply that where stablemarkets emerge, such structures will appear asfirms figure out how to resolve their problems.By establishing social relationships not justwith competitors, but also with customers,suppliers, and employees, firms can establishtrust and guarantee access to scarce resources.By responding to directives from the govern-ment and trying to coopt government agen-cies, firms can also secure their futures. Allthese social mechanisms make it possible forfirms to juggle their resource dependenciesand survive. One can conclude that despitethe varying theoretical perspectives and dif-fering language and data analysis techniques,the empirical literature on the sociology ofmarkets converges on a few main mechanismsby which the social structuring of markets maybe understood. The right way to think aboutthese mechanisms is that they form a toolbox that might plausibly be used to analyzea particular market. One of the great dangersin the literature is that scholars frequently fo-cus on their favorite mechanism at the expenseof other possible ways to understand what isgoing on in the market of interest. We discusshow to solve this problem at the end of thisreview.


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DIVERGENT ARGUMENTS

The real controversies in the sociology ofmarkets are those that do not turn on the dif-fering use of terms to describe similar con-cepts or the fact that scholars in some theorygroup ignore the ideas of the others. One ofthe most important critiques of the generalperspectives outlined above has come fromthe performativist school of thought. Per-formativists have criticized the extant socio-logical work on markets for neglecting howmarkets are structured by the interaction ofeconomic activity with scientific discovery andthe creation of new technology. From this per-spective, Callon (2002) has argued that thesociology of markets has been worried toomuch about critiquing the neoclassical viewthat markets are anonymous, one-shot ex-changes and not worried enough about therole of economists (and others) in the creationof cultural tools that actually enact the mar-ket in fields like finance (Guala 2001; KnorrCetina & Bruegger 2002; MacKenzie & Milo2003; MacKenzie 2004, 2005). To demon-strate this point, scholars have studied the di-alectic between financial theories and the im-plementation of new financial products andhow the growth of these markets reflects theways those theories are used and applied.

This perspective introduces a kind of cul-tural dynamism into market processes andheightens the role of technological innova-tion. Actors in current markets invent newproducts in a self-aware fashion, and thisworks to transform existing markets. Here,we think that fruitful dialogue could occur.Despite Callon’s assertion to the contrary,scholars using population ecology, institu-tional theory, and network theory have beeninterested in the linkage between the new cul-tural forms of products and the deploymentof firm resources (for example, Carroll &Swandinathan 2000, Granovetter & McGuire1998, Haveman & Rao 1997, Lounsbury &Rao 2004, Powell et al. 2005). Of course,much of the research has focused more onquestions of legitimacy, resource dependence,

and trust, something in which Callon seemsuninterested. But, given that scholars havebeen interested in the coevolution of indus-try technologies and organizational forms,Callon’s focus on how actors creating tech-nology produce new markets seems less tocontradict production-oriented models thanto complement them. Linking the process ofdiscovery and implementation of technologyin new markets to the problems of resourcedependence, competition, exchange, and le-gitimacy will likely be a fruitful avenue ofresearch.

One aspect that undermines Callon’s argu-ment is that new markets are often founded forone purpose yet ultimately serve an entirelydifferent purpose. For example, the telephonewas thought to be useful only for business, andearly on telephone companies discouraged ca-sual use of the phone (Fischer 1992). But onceconsumers discovered the phone as a way tokeep in touch with each other, phone com-panies were driven to expand their servicesdramatically. These more accidental discov-eries of uses for technology imply less agencyand intention and more processes of discoveryabout what things are good for.

A second arena of disagreement concernsthe fact that studies focus either on competi-tors or on suppliers and customers. Manystudies in the sociology of markets focus oncommunities of producers. These producer-focused studies often only present consumersto the degree that the machinations of firmseventually produce a stable social structurethat effectively mitigates competition or re-duces the resource dependence of competi-tor firms (see Zelizer 2005 for an extendedversion of this critique). When scholars fo-cus on suppliers and customers, their discus-sions focus on different relationships. Mostfrequently, these relationships are thought tobe about trust indexed through direct networkties that reflect ongoing social relationshipsbetween buyers and sellers (Baker et al. 1998;Uzzi 1996, 1997).

None of these perspectives captures whatgoes on in big consumer markets in which the


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buyers are individuals and their preferencesare expressed in more roundabout ways.Scholars most interested in the cultural con-struction of products have criticized the fo-cus in the sociology of markets on production.To some degree, the use of products to makemoral judgments or claim social status canbe analytically separated from the problem ofproducing a stable product market. After all,how people use automobiles and what theymean to them and others may not affect whichfirms survive at the high or low end of the mar-ket or how many firms there are and how theyare organized. Still, this disjuncture betweenproducers and consumers is one of the inter-esting frontiers in the sociology of markets.

Zelizer argues that the focus on productionmisses the fact that consumers have to becomeconvinced about the value and legitimacy ofproducts (Zelizer 1983, 1994, 1997). She ar-gues that moral issues abound in the creationof new markets. The life insurance industry,for example, had to overcome the obviousmoral ambiguity of people buying insurancethat put a price on their deaths. Moreover,firms were put in the position of gambling onother people’s deaths. Many people resistedbuying life insurance because of these ghoul-ish qualities. Only when consumers becameconvinced through marketing efforts that lifeinsurance was a way to provide for one’s lovedones after death did the market take off. Aproduction-focused sociology of markets failsto consider consumers and consumer market-ing and, in so doing, misses an important as-pect of where markets come from.

The life insurance industry presents anempirical puzzle that allows scholars to ex-plore the relative role of consumers, govern-ments, and firms in the production of a newproduct. The industry’s problems were notjust to convince people to buy insurance. Atthe beginning of the market, firms frequentlysold policies at too low a price to make money.When people came to collect, many of thesmaller firms went bankrupt and their ownersdisappeared. Eventually, government regula-tion became more extensive to protect con-

sumers. These interventions appear to havebeen as important in generating trust (be-tween firms and customers) as the problemof the morality of the market (Heimer 1985).

A fruitful dialogue is needed between thosewho favor a more cultural approach to con-sumers that focuses on the moral and socialuses of products and those who favor an ap-proach that stresses solving the problems ofcompetition for producers. Such a dialoguewould allow us to understand if these viewsare contradictory or complementary. Consid-ering all sides of the problem would help usget a clearer picture as to how the produc-tion and legitimation of new products and thestructuring of stable markets are related.

The question of the dynamics of mar-kets leads to a more general disagreementin the literature surrounding stability andchange. Population ecology, institutional the-ory, and some versions of network theory (i.e.,White) have an explicit argument that market-opening projects are going to be very differ-ent than market-stabilizing projects. For pop-ulation ecology, the liability of newness andsmallness are particularly acute at the forma-tion of new markets. In these moments, firmseither do not know what their key resourcedependencies are or are not reliably able todeliver products that people want. Thus, theyare more vulnerable to competition. Oncemarkets have settled, existing firms can re-main stable incumbent players for long peri-ods. Such firms continuously face challengers,but these moments are qualitatively differ-ent from market formation moments. Institu-tional theory (Fligstein 1996) also posits thatproducing a market as a field is a social andpolitical project that begins without stable re-lationships. White’s basic argument is that iffirms cannot find a reproducible role struc-ture, stable markets will not emerge and firmswill go out of business.

There are several alternative views of theseprocesses. Inspired by Nelson & Winter’s(1982) view of population ecology, manyscholars have argued that some industriesare in a constant state of flux. Firms must


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be nimble, change technologies, and inno-vate or risk dying (Powell et al. 2005, Stark& Vedrez 2006). Some scholars have arguedthat network organizations produce continu-ous transformation and that modern marketsare so dynamic that they rarely settle into any-thing like equilibrium for very long (Stark &Vedrez 2006). The performativity perspectivealso seems to be compatible with this view.

To resolve such arguments, scholars needto be clearer about how they might measureand interpret stability or equilibrium. Put an-other way, when is a change in a market achange? The general view of a market as aniche, role, status, or hierarchical structureof incumbents and challengers implies that amarket change would involve a change in theidentities and positions of the main actors. Itwould also involve a change in the underly-ing definition of the market (i.e., its princi-pal activities, ways of organizing, etc.). Butthis definition of change has several problems.First, shifts in the identities of either chal-lenger or incumbent firms occur all the time.One would not want to be left arguing thatany such changes deinstitutionalize the mar-ket. Second, changes in products and produc-tion also evolve over time (often in piecemealforms). Here, again, one is left wonderingat which point such changes represent un-derlying transformations of existing markets.Many of the disagreements about stability andchange in the literature rest on how one thinksabout exactly what a change is.

Finally, one of the problems that hauntsall the discussions in the sociology of marketsis the problem of efficiency. The economicidea of efficiency is that scarce resources be-come allocated so as to maximize their returns.Neoclassical economic theory assumes thatthere is only one way for such an allocationto occur when a market is in equilibrium, andthat constant updating of information meansthat firms are always shifting their activitiesto maintain efficiency. The sociology of mar-kets has an ambiguous relationship to this as-sertion that extends from basically acceptingeconomic logic to basically denying it. So,

for example, in the population ecology view,organizations’ resource dependencies dictatethat organizations that do not fit their en-vironments will perish. Hannan & Freeman(1977), of course, construct a general argu-ment about all forms of organization. Theyassume that whatever resource dependencecharacterizes the niche (and here they includenonprofit organizations and states) will oper-ate to select winners and losers. If the nicheis a market, then one can infer that the popu-lation ecology argument seems hard to sepa-rate from the economic view propounded byMilton Friedman (1957), which suggests thatmarket forces determine efficiency and hencewinners and losers. What separates popula-tion ecology from economics is that the pricemechanism is only one potential source of re-source dependence.

Many of our studies of the social structur-ing of markets end up arguing that the so-cial relationships underlying markets have ef-ficiency effects. If firms have the right socialconnections, they can solve their resource de-pendence problems and reproduce themselves(Baker et al. 1998, Stuart et al. 1999, Stuart& Sorenson 2003, Uzzi 1997). But some au-thors also recognize that while social relation-ships might produce stable outcomes for par-ticipants, they might also actually underminemarket efficiency (Podolny 2001). Long-termsocial relationships not only produce trust,but also allow for cartels and price stabil-ity and in some cases make firms more vul-nerable because their suppliers can take ad-vantage of them by charging higher prices.Granovetter (1985) is ambivalent about this,appearing sometimes to view social networksas ways for people to solve their problemsof trust and therefore produce efficient out-comes and other times to view these networksas possible mechanisms for rent seeking (andeven illegal behavior). In his more recent re-view of the literature on business groups, forexample, he appears to portray these groupsas efficiency generating (Granovetter 1994).

The political economy literature has alsodisplayed this ambivalence. Scholars who have


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documented that different national systems ofcapitalism exist swing between viewing thosesystems as protectionist and viewing themas efficient. So, for example, a whole seriesof books have begun with the premise thatthe differences between national capitalist sys-tems are about to disappear because the spreadof global capitalism is forcing firms to se-lect the most efficient forms of organizations(Berger & Dore 1996). The assumption is thatthe various national models must be hidinginefficiencies that protect workers and thatthe world market will simply force them tochange. Then, these books document that infact Japanese, Korean, German, and Frenchcapitalisms appear to be resilient. They fre-quently conclude that these national modelsmust each be efficient in some way and thatin the face of international competition, firmsadapt to new circumstances without chang-ing their ways completely. Hall & Soskice(2001) argue that the national systems musthave some efficiency properties as well as theability to adapt to internationally changed cir-cumstances most forcefully. The debate overthe role of states, law, and class struggle in de-velopment projects suggests how difficult it isto understand market efficiency.

Some scholars are even more skepticalabout the efficiency of social relationships.Fligstein (1990) views the emergence of thelarge corporation in the United States at theturn of the twentieth century as principally afunction of the attempt to control competitionwithin particular industries, thereby deny-ing the efficiency interpretations of Chandler(1977) and Williamson (1985). Dobbin (1994)views the different ways in which state-firmrelationships shaped the railroad industriesas a reflection more of differences in cultureand politics than of differences in efficiency.The literature on comparative capitalisms fre-quently demonstrates that the main factorsthat effect firms’ organization in a nation-stateconcern history, culture, class struggle, andthe role of the state (Roe 2003).

One interpretation that comes from bothorganizational theory and institutional the-

ory is to worry less about efficiency and moreabout organizational effectiveness. Organiza-tional theory realized long ago that organiza-tions’ survival could come from many sources(Thompson 1967): exploiting resource-richenvironments, defending themselves fromcompetitors, or coopting their resource de-pendencies. Thus, solving the problem of classstruggle, obtaining finance, and getting stateintervention to enforce solutions to cutthroatcompetition are all tactics we should expectfirms to use to survive. The efficient alloca-tion of internal resources from this point ofview is only one tactic.

The problem with this perspective (eventhough it helps fill out our view of relevantfirm behavior!) is that we know that mar-kets rise and fall, come and go, and that thefirms that exist today may disappear tomor-row. Sociologists do not want to say that firmsin markets do not worry about prices, costs,and pleasing customers but care only aboutcontrolling their resource dependencies orgetting the government to intervene to pro-tect their market shares. One way out of thisdilemma is to realize that sometimes socialstructures can promote efficiencies, and othertimes they can be used to protect incumbents.One of the goals of economic sociology shouldbe to use our tools to understand how thisworks in particular markets. This is akin tothe task of the old industrial economics thatsought a way to identify when market struc-tures were the result of efficient processes orattempts to control markets.

Competition in new markets is likely to bedifferent from competition in stable markets.Firms in both cases will try to do what they canto survive. In new markets, firms have manyresource dependencies that make survival dif-ficult. But even here, they can use their so-cial relationships with larger corporate enti-ties, suppliers, customers, and governmentsto build coalitions that can produce stabil-ity. Relations with competitors can evolve asfirms realize which part of the market theywant to be in and as the market segments be-come defined. In stable markets, incumbents


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have more tools to fight off competitors byeither undercutting their prices, using vari-ous tools to resist competitors’ entry into themarket, or coopting competitors by copyingthem or buying them out. Markets are alwaysrising and falling, which means that attemptsto control are always potentially under assault.So, for example, the U.S. automobile industrywas stable from roughly the mid-1930s untilthe 1970s (and even into the 1990s). The mainU.S. participants in that market are firms thatnow are approaching 100 years old. But, chal-lenges to that industry exist today, and noth-ing guarantees that the main U.S. producerswill either survive or maintain their separatecorporate existence.

CONCLUSION

The sociology of markets is now a mature fieldof study. Scholars have developed a set of con-cepts to describe and understand how socialrelationships structure all forms of markets.Along with the many fascinating questions re-maining to be explored, a cacophony of voicesespousing different strategies and perspec-tives still exist with which to explore them.We have argued that in many respects schol-ars have talked past one another and that this

has been detrimental to the focused growthof the field. There are many points of agree-ment in the sociology of markets, and we haveattempted to draw them out.

If people are convinced by our argument,this implies two proscriptions for subsequentresearch. Scholars should seek out and explorethe differences in terminology between theirperspectives and other perspectives to decidethe relevance of those differences to makingsense of empirical cases. Scholars should alsobe open to the possibility that the mechanismsthat other scholars propose are relevant totheir particular case. An exemplar of this kindof research is MacKenzie’s (2005) recent bookin which he carefully parses out the role of pol-itics, markets, institutions, and economics inunderstanding the emergence of modern fi-nancial markets. This does not mean that allmechanisms are operative in all cases. Instead,this kind of careful consideration is likely tolead to a better understanding of the scope ofvarious authors’ perspectives. If scholars en-gage in this kind of honest discussion, the fieldis also more likely to understand better whatits real disagreements are and make progresson those issues. We hope our review helpscontribute to the intellectual ferment and en-courages continued research and debate.

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