Networks as the pipes and prisms of the market

This article draws an analytical distinction between two types of market un certainty: egocentric, which refers to a focal actor's uncertainty regardin g the best way to convert a set of inputs to an output desired by a potenti al exchange partner, and altercentric, which denotes the uncertainty confro nted by a focal actor's exchange partners regarding the quality of the outp ut that the focal actor brings to the market. Given this distinction, the a rticle considers how the value of "structural holes" and market status vary with these two types of uncertainty. The article proposes that the value o f structural holes increases with egocentric uncertainty, but not with alte rcentric uncertainty. In contrast, the value of status increases with alter centric uncertainty, but declines with egocentric uncertainty. Thus actors with networks rich in structural holes should sort into markets or market s egments that are high in egocentric uncertainty; high-status actors should sort into markets that are low in egocentric uncertainty. Support for this claim is found in an examination of the venture capital markets.