THE SOURCES AND CONSEQUENCES OF EMBEDDEDNESS FOR THE ECONOMIC-PERFORMANCE OF ORGANIZATIONS - THE NETWORK EFFECT

In this paper, I attempt to advance the concept of embeddedness beyond the level of a programmatic statement by developing a formulation tha t specifies how embeddedness and network structure affect economic act ion. On the basis of existing theory and original ethnographies of 23 apparel firms, I develop a systematic scheme that more fully demarcate s the unique features, functions, and sources of embeddedness. From th is scheme, I derive a set of refutable implications and test their pla usibility, using another data set on the network ties of all better dr ess apparel firms in the New York apparel economy. Results reveal that embeddedness is an exchange system with unique opportunities relative to markets and that firms organized in networks have higher survival chances than do firms which maintain arm's-length marker relationships . The positive effect of embeddedness reaches a threshold, however aft er which point the positive effect reverses itself.