are deeply constructed by the cultural mean- also be a way to coopt such dependence.Burt ings behind the products being bought and (1980a)demonstrates how American corpo- sold(Zelizer 1983).Finally,sociologists gen- rations use board membership strategically to erally believe that power influences social re- bring on representatives of firms upon whom lations and,thus,market relations(Pfeffer a particular firm is dependent for resources. Salancik 1978).Relationships ofexchange can Stuart et al.(1999)demonstrate that getting be deeply influenced by the relative power of money from the right venture capitalists af- the actors over the supply and demand of what fects the probability that a particular firm sur- is being exchanged and by their relative de- vives.They interpret such connections as not pendence on what is being exchanged.This just about securing funding but also about conception of power in markets is generally conferring legitimacy upon a particular start- referred to as resource dependence and has up firm and thereby allowingit to be more able been described and employed in a variety of to secure workers and customers.In essence, ways by many sociologists. one purpose of the ties between suppliers and Resource dependence is a general con-customers is to control resource dependence struct used in the sociology of markets.The and enhance the probability of a firm sur- idea begins with the premise that in any social viving.Here,network theorists are rooted in exchange,one side of the exchange may be the more general camp of both population more dependent on what is being exchanged ecology and institutional theory by worrying than the other (Emerson 1962).If one party about how resource dependence affects the le- to the exchange was much more dependent gitimacy and survival of firms. than the other,that party was either more Network theorists and experimental social likely to have to obey the dictates of the sup- psychologists posit one additional mechanism plier/customer or else face extinction.This that links buyers and sellers:trust(Cheshire idea has great generality when it comes to Cook 2004;Granovetter 1985,2005;Kollock examining exchange.So,for example,firms 1994,1999;Uzzi 1996;Yamigushi Cook must obtain finance,secure inputs for their 1993).Granovetter's main argument about products and labor,and establish relationships embeddedness is that if one has close ties to to their competitors,governments,and cus- others over long periods of time,one can trust tomers.The empirical literature has shown that in any particular transaction,people are that who might have the power in these rela-less likely to try to cheat one another.The tionships varies on the basis of the nature of experimental literature has shown that trust the resource dependency and the particular matters most in situations in which there is a market being studied. great deal of uncertainty about the qualities Although many scholars who have stud- of the product being exchanged (Cheshire ied exchange interactions have focused on us- Cook 2004,Kollock 1994).Kollock (1999)has ing network methods,they frequently posit examined how reputation works as a way to in- mechanisms that involve resource depen-crease trust between actors.Although trust is dence.For example,Lincoln etal.(1996)show not a major mechanism in either population how the ownership linkages between Japanese ecology or institutional theory,it does connect firms affect the ability of the owner firms to back to those theories.Judging the trustwor- dictate actions to their subsidiaries.Forming thiness of another actor is not just a matter relationships to one's principal suppliers can of having a long-term network tie to them. Trust is also about power and resource de- pendence.Firms work to reduce uncertainty 5Note that in ncoclassical economics,exchange is assumed and resource dependence by choosing part- to be equal.If buyers and sellers have perfect information about prices,then buyers will not pay more than they need ners who they either know to be reliable or to and sellers cannot ask more. others think are reliable. Fligstein·DauterANRV316-SO33-06 ARI 24 May 2007 10:6 are deeply constructed by the cultural mean￾ings behind the products being bought and sold (Zelizer 1983). Finally, sociologists gen￾erally believe that power influences social re￾lations and, thus, market relations (Pfeffer & Salancik 1978). Relationships of exchange can be deeply influenced by the relative power of the actors over the supply and demand of what is being exchanged and by their relative de￾pendence on what is being exchanged. This conception of power in markets is generally referred to as resource dependence and has been described and employed in a variety of ways by many sociologists. Resource dependence is a general con￾struct used in the sociology of markets. The idea begins with the premise that in any social exchange, one side of the exchange may be more dependent on what is being exchanged than the other (Emerson 1962). If one party to the exchange was much more dependent than the other, that party was either more likely to have to obey the dictates of the sup￾plier/customer or else face extinction.5 This idea has great generality when it comes to examining exchange. So, for example, firms must obtain finance, secure inputs for their products and labor, and establish relationships to their competitors, governments, and cus￾tomers. The empirical literature has shown that who might have the power in these rela￾tionships varies on the basis of the nature of the resource dependency and the particular market being studied. Although many scholars who have stud￾ied exchange interactions have focused on us￾ing network methods, they frequently posit mechanisms that involve resource depen￾dence. For example, Lincoln et al. (1996) show how the ownership linkages between Japanese firms affect the ability of the owner firms to dictate actions to their subsidiaries. Forming relationships to one’s principal suppliers can 5Note that in neoclassical economics, exchange is assumed to be equal. If buyers and sellers have perfect information about prices, then buyers will not pay more than they need to and sellers cannot ask more. also be a way to coopt such dependence. Burt (1980a) demonstrates how American corpo￾rations use board membership strategically to bring on representatives of firms upon whom a particular firm is dependent for resources. Stuart et al. (1999) demonstrate that getting money from the right venture capitalists af￾fects the probability that a particular firm sur￾vives. They interpret such connections as not just about securing funding but also about conferring legitimacy upon a particular start￾up firm and thereby allowing it to be more able to secure workers and customers. In essence, one purpose of the ties between suppliers and customers is to control resource dependence and enhance the probability of a firm sur￾viving. Here, network theorists are rooted in the more general camp of both population ecology and institutional theory by worrying about how resource dependence affects the le￾gitimacy and survival of firms. Network theorists and experimental social psychologists posit one additional mechanism that links buyers and sellers: trust (Cheshire & Cook 2004; Granovetter 1985, 2005; Kollock 1994, 1999; Uzzi 1996; Yamigushi & Cook 1993). Granovetter’s main argument about embeddedness is that if one has close ties to others over long periods of time, one can trust that in any particular transaction, people are less likely to try to cheat one another. The experimental literature has shown that trust matters most in situations in which there is a great deal of uncertainty about the qualities of the product being exchanged (Cheshire & Cook 2004, Kollock 1994). Kollock (1999) has examined how reputation works as a way to in￾crease trust between actors. Although trust is not a major mechanism in either population ecology or institutional theory, it does connect back to those theories. Judging the trustwor￾thiness of another actor is not just a matter of having a long-term network tie to them. Trust is also about power and resource de￾pendence. Firms work to reduce uncertainty and resource dependence by choosing part￾ners who they either know to be reliable or others think are reliable. 114 Fligstein · Dauter Annu. Rev. Sociol. 2007.33:105-128. Downloaded from www.annualreviews.org Access provided by Shanghai Jiaotong University on 02/04/15. For personal use only