Mark Granovetter

The Strength of Weak Ties: A Network Theory Revisited

of Ph.D. dissertation, University of Haifa, Israel.

The Impact of Social Structure on Economic Outcomes

S ocial structure, especially in the form of social networks, affects economic outcomes for three main reasons. First, social networks affect the flow and the quality of information. Much information is subtle, nuanced and difficult to verify, so actors do not believe impersonal sources and instead rely on people they know. Second, social networks are an important source of reward and punishment, since these are often magnified in their impact when coming from others personally known. Third, trust, by which I mean the confidence that others will do the “right” thing despite a clear balance of incentives to the contrary, emerges, if it does, in the context of a social network. Economists have recently devoted considerable attention to the impact of social structure and networks on the economy; for example, see the economists’ chapters in Rauch and Casella (2001) (and the illuminating review essay of this volume by Zuckerman, 2003), as well as Dutta and Jackson (2003) and CalvoArmengol (2004). However, I focus here on sociologists’ contributions. Sociologists have developed core principles about the interactions of social structure, information, ability to punish or reward, and trust that frequently recur in their analyses of political, economic and other institutions. I begin by reviewing some of these principles. Building on these, I then discuss how social structures and social networks can affect economic outcomes like hiring, price, productivity and innovation.

Threshold models of interpersonal effects in consumer demand

Abstract Whether one buys may be determined in part by how many others have. When the correlation is positive we refer to ‘bandwagon’ effects, and when negative, ‘reverse bandwagons’. We construct demand schedules in the presence of such effects and, with simple assumptions about supply, investigate the existence of and approach to equilibrium. Stable price-quantity equilibria exist, but for many plausible parameter values, equilibria are asymptotically unstable, and system trajectories consist of cycles that can move, with slight parameter changes, via successive bifurcations into what has been called ‘chaotic’ dynamics, essentially indistinguishable from random noise. These conditions occur despite assumptions of [erfect information, profit maximizing firms and utility maximizing individuals.

The role of venture capital firms in Silicon Valley's complex innovation network

Abstract We still poorly understand why Silicon Valley has originated so many breakthrough innovations and large companies. The durability of Silicon Valleys innovative competence over the last seventy years also needs more explanation. The failure of several policy-makers around the world to reproduce the Silicon Valley cluster reveals the misunderstanding of the innovative dynamic in Silicon Valley. This study uses complex network theory – CNT (Barabási, Newman & Watts, 2006; Jen, 2006; Thompson, 2004a) to analyse the complex innovative capability of Silicon Valley and to understand the heterogeneity of agents and the multiplexity of ties that support creation and development of high-tech start-ups. As proposed by Barabási (2002, p. 200), we view the economy as a complex network, whose nodes are companies and whose links represent the various economic and financial ties connecting them. Innovation and entrepreneurship are understood as resulting from the interactions of numerous economic agents. In a systemic perspective, by definition, the presence of a specific agent in a network induces specific interactions with other agents that could not take place if this agent were not there. Thus, the diversity of agents influences the dynamics of the system. The presence of venture capital (hereafter VC) firms in an innovative cluster opens potential specific interactions with other agents in the network (universities, large companies, laboratories) that determine a particular dynamic of innovation. In this perspective, what is distinctive about Silicon Valley is its complete and robust complex system of innovation supported by social networks of interdependent economic agents in which the VC firms have a specific function. Our perspective examines five different contributions of VC firms to Silicon Valley: financing, selection, collective learning, embedding and signalling. These five functions are different ways for the VC firms to interact with the other members of the complex network of innovation and to support the robustness of the system.

The Sociological and Economic Approaches to Labor Market Analysis

This chapter reviews recent economic and sociological work on labor markets, concentrating on studies whose comparison is particularly revealing of differences in strategies and underlying assumptions between the disciplines. The sociological studies reviewed are especially those stressing the embeddedness (Granovetter, 1985) of labor market behavior in networks of social interaction and demographic constraints. Most of these studies share with microeconomics the stance of “methodological individualism” (see Blaug, 1980:49–52) that attempts to ground all explanations in the motives and behaviors of individuals, but they differ in emphasizing social structural constraints and in avoiding the functionalist arguments now common in neoclassical work.

The making of an industry: electricity in the United States

Although economic sociology has enjoyed a strong resurgence in recent years, it has focused on relatively low or high levelsof aggregation. One central concern has been what determines the actions of individuals and firms, and another the role of government and largescale interest groups in the governance and evolution of the economy. With some notable exceptions (eg, Hirsch, 1972; Campbell, Lindberg and Hollingsworth, 1992; Dobbin, 1994; Roy, 1997), few have paid close attention to middle levels of aggregation such as industries. Problems of industrial organization have largely been left to economists, who treat industry boundaries as resulting unproblematically from the nature of the product, the state of technology at a given time (as summed up by production functions), consumer demand, and the attempt to reduce production and transaction costs. Sociologists have reacted to some general arguments on the subject of organizational form, especially those of Chandler (1962, 1975, 1990) and Williamson (1975, 1985), and to some of the other standard assumptions. But these critiques, whatever their merits, have been largely defensive; they have followed and responded to economic arguments rather than setting the agenda with a distinctively sociological position about industry and organizational form. A substantial sociology of industry must be a persuasive alternative based on serious research about particular industries and their evolution, rooted in a coherent view of how people and organizations form and co-operate in such a way as to produce those goods and services that consumers demand. We do not dispute the convenience of defining industries as sets of firms that produce the same or related products. But we argue

The Micro-Structure of School Desegregation

Studies of the effects of desegregation have produced a confusing array of inconsistent results. It is the general theme of this volume that this inconsistency derives from the actual wide variety of disparate situations too sweepingly subsumed under the vague rubric of desegregation. In retrospect, this should not be surprising. The literature on intergroup relations is replete with studies showing that highly specific details of a situation rather than global attitudes toward other groups mainly determine behavior. Easy commingling in the workplace coexists with unyielding residential segregation; written request for reservations from identified ethnic groups or mixed parties are frequently refused by establishments that accept such patrons readily when they appear in person (Pettigrew, 1971).

Granovetter Replies to Gans

I may have written as if everything could be chalked up to networks, since I felt that they are usually ignored, and that a correction of emphasis was needed. Especially with respect to Ganss argument about the West End, I felt that his tendency to explain behavior by subcultural differences needed balancing by the to me-more concrete network factors. Networks, are, of course, only a necessary, rather than a necessary and sufficient, condition for the level of organization needed to achieve some political goal. (But this is not as simple as it sounds; network structure is often both cause and effect of situations uch as the lack of organizational life in the West End.) Let me take up Ganss argument point by point. I agree strongly with the fourth and sixth points: West Enders surely did have difficulty moving outside kin and peer-group circles, and networks may well have functioned within subneighborhoods only. But these are not arguments against my position rather, they are fully consistent with, and even implied by, it. Ganss second point that the West Enders took urban renewal seriously only when it was too late is clearly important. However, there remains room for doubt about why this occurred. One reason may be that given the existing fragmentation of West End networks, those few in the area who did really understand the gravity of the situation were unable to communicate their concern effectively. It is also true that the West End was poorly connected politically. This fact may have had to do with its small population size-less than half that of the North End or Charlestown. But I have raised the question of why no organization within the West End could be formed to fight renewal effectively. I do not see how lack of outside connections makes it impossible for an organization to form. Rather, it seems to me, the network structure of the West End inhibited organization by making trust in any leader-even of an ad hoc organization unlikely. Perhaps the West End had fewer potential leaders than other areas, but this is not obvious. The facts Gans cites in his first and fifth points-the place of the West End in the history of Boston (and American) urban renewal and the position of churches and settlement houses in the neighborhood-were un-

Attitudes towards Social Networking and Sharing Behaviors among Consumers of Direct-to-Consumer Personal Genomics

Little is known about how consumers of direct-to-consumer personal genetic services share personal genetic risk information. In an age of ubiquitous online networking and rapid development of social networking tools, understanding how consumers share personal genetic risk assessments is critical in the development of appropriate and effective policies. This exploratory study investigates how consumers share personal genetic information and attitudes towards social networking behaviors. Methods: Adult participants aged 23 to 72 years old who purchased direct-to-consumer genetic testing from a personal genomics company were administered a web-based survey regarding their sharing activities and social networking behaviors related to their personal genetic test results. Results: 80 participants completed the survey; of those, 45% shared results on Facebook and 50.9% reported meeting or reconnecting with more than 10 other individuals through the sharing of their personal genetic information. For help interpreting test results, 70.4% turned to Internet websites and online sources, compared to 22.7% who consulted their healthcare providers. Amongst participants, 51.8% reported that they believe the privacy of their personal genetic information would be breached in the future. Conclusion: Consumers actively utilize online social networking tools to help them share and interpret their personal genetic information. These findings suggest a need for careful consideration of policy recommendations in light of the current ambiguity of regulation and oversight of consumer initiated sharing activities.

Comment on "Capitalist Entrepreneurship: Making Profit through the Unmaking of Economic Orders" (by Thorbjørn Knudsen and Richard Swedberg)

This paper is a comment on Capitalist Entrepreneurship: Making Profit Through the Unmaking of Economic Orders by Thorbjorn Knudsen and Richard Swedberg which can be found at: http://ssrn.com/abstract=2209371.