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V I E E W R S

I E

N C N A D V A

The Sociology of Markets

Neil Fligstein and Luke Dauter

Department of Sociology, University of California, Berkeley, California 94720; email: fl[email protected], [email protected]

Annu. Rev. Sociol. 2007. 33:6.1–6.24 Key Words The Annual Review of Sociology is online at fields, networks, institutions, performativity, culture, politics http://soc.annualreviews.org

This article’s doi: Abstract 10.1146/annurev.soc.33.040406.131736 The sociology of markets has been one of the most vibrant fields in Copyright c 2007 by Annual Reviews. sociology in the past 25 years. There is a great deal of agreement All rights reserved that markets are social structures characterized by extensive social 0360-0572/07/0811-0001$20.00 relationships between firms, workers, suppliers, customers, and gov- ernments. But, like in many sociological literatures, the theory camps that have formed often seem to speak by each other. We show that some of the disagreement between theory camps is due to differ- ences in conceptual language, and other disagreements stem from the fact that theory camps ignore the concepts in other theory camps, thereby making their theories less complete. We end by considering deeper controversies in the literature that seem open both to new conceptualization and further empirical research.

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O how they cling and wrangle, some who claim their attempts to understand the origins, op- For preacher and monk the honored name! erations, and dynamics of markets as social For, quarreling, each to his view they cling. structures, the primary perspectives that have Such folk see only one side of a thing. emerged tend to remain separate and distinct at the theoretical level. Much like the blind (from the text of Jain and Buddhist origin, monks and preachers who fail to see the whole Udana 68–69, “Parable of the Blind Men and of the elephant in Buddha’s famous parable, the Elephant”) scholars have often focused on a particular so- cial aspect of markets and acted as if it was a INTRODUCTION more general understanding. The sociology of markets has been one of the This theoretical separateness produces most vibrant fields in sociology in the past two problems. First, because many scholars 25 years.1 Starting with a trickle of empiri- use similar concepts but identify them by cal and theoretical papers, it has grown to a different terms, confusion results about the river. One of the seminal pieces in the field, degree to which people are saying different Granovetter’s (1985) “Economic Action and things. For example, most scholars, regardless Social Structure: The Problem of Embedded- of their approach, believe that culture (shared ness” has been cited over 2500 times since its meanings, normative understandings, identi- publication, making it the most cited paper in ties, local practices) plays an important role sociology in the postwar era.2 Although so- in market projects. Much of this conceptual ciologists have made significant progress in overlap is hidden by the use of jargon (for ex- ample, the use of terms like frames, logics, per- 1We want to distinguish the sociology of markets from formativity, scripts, conceptions of control, or the broader project of economic sociology (Fligstein 2001). local knowledge). Thus, scholars who purport Following Polanyi (1957), economic sociology is the gen- eral study of the conditions of the production and repro- to approach their subject matter from a partic- duction of social life. Such a study would include studies ular perspective actually share concepts with of consumption, the family, and the links between states a wide variety of other scholars. and households, schooling, and economic life more broadly (Smelser & Swedberg 2005, p. 3). The sociology of markets Second, to the degree that scholars are refers more narrowly to the study of one kind of social ex- really saying different things, assessing how change, that of markets, and to the structuring of that kind much their theoretical views are complemen- of social exchange, under the conditions we call capitalist. This focus includes the study of firms, product markets, and tary or contradictory is difficult. When one labor markets as well as their broader linkages to suppliers, viewpoint complements another, theory is ad- workers, and states and the role of local cultures (i.e., local vanced. Takinginto account other possible el- in the sense of belonging to a particular market), systems of meanings insofar as they influence what products are, and ements in the social structuring of markets the role of morality in the generation of particular kinds of yields a more complete view of market pro- markets. cesses. But when theories contradict, scholars 2 Recently Jerry Jacobs (2005) calculated the most cited need to understand why their perspectives dif- papers in the American Sociological Review in the postwar era. The paper with the most citations was DiMaggio & fer and how those differences can be usefully Powell’s (1983) “Institutional Isomorphism” paper, with explored to further both theory and research. 1700 citations. Granovetter’s paper appeared in the Amer- The primary purpose of this review is to be- ican Journal of Sociology and, as far as we know, no one has created a similar list for that journal. But, with almost gin to untangle the theoretical and empirical 2500 citations, it is hard to believe that many papers outdid work on the sociology of markets, clarifying Granovetter’s. It should also be noted that the DiMaggio & what we know and where scholars really dis- Powell paper has greatly influenced the sociology of mar- kets as well. We argue that this paper has greatly influenced agree. at least one strain of thought in the sociology of markets The literature (and the way that peo- (i.e., institutional theory). If one takes both of these pa- ple teach their graduate courses) has of- pers as part of the foundation of the field, arguably the two most cited papers in the postwar era are at the core of the ten been divided into three theory groups sociology of markets. (Fourcade-Gourinchas 2007) according to

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whether scholars use (a) networks (Burt 1992; come to be created and sold, and in how the Granovetter 1974, 2005; White 1981, 2002), local cultures of particular markets form what (b) institutions (Dobbin 1994; Fligstein 1990, institutionalists call the institutionalization of 2001; Powell & DiMaggio 1991), or (c) perfor- particular markets. mativity (Beunza & Stark 2004, Callon 1998, Although these three approaches encom- Callon & Muniesa 2005, MacKenzie & Milo pass a large portion of the work done in the 2003, MacKenzie 2005) as explanatory mech- sociology of markets, they are by no means anisms in the emergence and ongoing dynam- exhaustive. Along with considering these par- ics of markets. Scholars in the network tradi- ticular perspectives with the goal of extracting tion have focused on relational ties between what sociologist have learned about markets actors as the material of social structure. Insti- and what remains to be resolved, we consider tutionalists focus on how cognition and action in this review the degree to which the differ- are contextualized by market rules, power, and ent theory groups offer incomplete represen- norms. The performative school of thought tations of the social structuring of markets. views economic action as a result of calculative The division of the field into networks, in- processes involving the specific technologies stitutions, and performativity excludes other and artifacts that actors employ. theoretical perspectives that should also be at This division of the field overemphasizes the core of thinking about markets as social the extent to which these perspectives are structures. We focus on two important ap- in fact separate theory groups. All three ap- proaches that have been underplayed in the proaches rely on viewing markets as social are- literature: political economy and population nas where firms, their suppliers, customers, ecology. workers, and government interact, and all Political economy has pioneered thinking three approaches emphasize how the connect- about the linkages between states, law, and edness of social actors affects their behavior. markets and the historical emergence of sys- Network analysis is a technique for finding tems of governance. The literature on the social structures in relational data. It is not a comparative study of capitalist arrangements theory of the underlying relationships in the and their effects on various outcomes, includ- data and the mechanisms that they represent. ing economic development, is part and par- Scholars who use network techniques invoke cel of the sociology of markets. Institutional theoretical constructs like power, resource de- theory is the approach that most frequently pendence, cooptation, information, and trust adds political economy into its analyses. It to explain the social structures that emerge focuses on the role of governments and law from their analyses. These mechanisms are in the creation of particular features of mar- common to institutional theory and to other kets, for example the types of alliances and theories relevant to the sociology of markets. forms of cooperation that are legal or forms of Institutional theorists are interested in how property rights (Campbell & Lindberg 1990, field-level phenomena diffuse to make fields Carrutherst & Ariovich 2004). But network isomorphic, often through social networks theorists and scholars interested in perfor- (Davis 1991). Performativists have explicitly mativity have generally ignored the possible connected their approach to network theory effects of government and law and the role in what Callon (1998) calls the actor-network of preexisting relationships between the own- approach. The actor-network approach views ers of firms, managers, workers, and govern- not only humans, but also objects and artifacts, ments on market processes. This makes their techniques, and ideas as agents embedded in accounts of particular markets incomplete. networks of calculative relations. In addition, Population ecology is the branch of or- performative approaches overlap with institu- ganizational theory that deals most directly tional theory in their interest in how products with the effects of competition on the

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production of markets. Scholars who use this pendence or mediate competition. But other approach have drawn on network or institu- scholars who view the links between produc- tional analyses (Baron et al. 1999, Haveman ers and consumers as pivotal to the produc- & Rao 1997). But population ecology has tion of markets emphasize the role of trust and not figured into the core of the sociology of culture (i.e., commonly held meanings about markets, primarily because it has developed the product, its morality, and its usefulness) a vocabulary and set of methods that do not in those relationships as key to understand- easily translate into many of the current ap- ing market processes. Granovetter (1985) ar- proaches to social structure. This is unfortu- gued early on that the main purpose of em- nate because several developments in popula- beddedness in markets was that it increased tion ecology have paralleled those in the other the trust between buyers and sellers. Zelizer approaches. We show how many ideas in pop- has taken the relationship between produc- ulation ecology have been expressed in a dif- ers and consumers in a different direction. ferent language in the other points of view Her argument is that consumers must be con- and argue that the insights of population ecol- vinced not just of the utility of the products ogy should be added more explicitly to schol- they buy and the trustworthiness of those who arly thinking about the social structuring of sell them, but also of the morality of the prod- markets. uct (Zelizer 1983, 1994, 1997). Her more cul- After one notes the similar ideas that run tural approach alerts scholars to the problem through the literature, including the less rec- of framing products so that consumers find ognized areas of contribution, there remain them not just useful, but in concert with their a number of interesting problems that stem values. from theoretical differences. Scholars in the A third source of disagreement is that performative tradition have presented their some scholars view market structures as either perspective as a critique of the predominant emergent or in equilibrium, whereas others sociological modes of understanding markets. argue that markets are always changing. The Their basic idea is that economic action is possibility for a sociological definition of mar- about calculation, and that how the qualities ket equilibrium is intriguing. White (1981), of goods are calculated (i.e., the amenability of for example, has defined a market as a “repro- goods to calculation, the calculative capacities ducible role structure.” This idea implies that of actors, and the interaction between them the social processes that occur when a market in the act of exchange) is crucial to under- is formed are different from the social pro- standing market structure. These scholars ar- cesses that occur once a more stable set of so- gue that the tools actors have at their disposal cial relationships appear. Population ecology to interpret and define their economic worlds has an implied theory of what could be called and how they organize interaction over ex- punctuated equilibrium. At the beginning of change are created by and enact ideas about markets, there is often a period of turmoil how economic activity should and does oper- and change followed by some stasis and per- ate. We interpret the performative argument haps a second period of turmoil. The alterna- as an attempt to insert cultural understandings tive view is that markets are always fluid, with of actors into the core of the social construc- products, processes, and advantage constantly tion of markets. shifting. Here, equilibrium solutions to the A second disagreement focuses on link- problem of what other market actors will do ages between producers and consumers. Many never form (Nelson & Winter 1982). These analyses of markets focus exclusively on pro- different views of market dynamics are impor- ducers and their competitive relationships. tant because they imply very different ways of Here, attention is given to how social struc- looking at the social structuring of a market. tures resolve the myriad forms of resource de- On the one hand, if actors trying to find a place

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in a market can collectively produce equilib- whether a particular set of social structures rium, then the goal of actors in this market protects incumbents or, rather, fosters eco- becomes the preservation of that order. This nomic growth and competition. implies relationships of power and domina- In this review, we discuss the intellectual tion in markets. On the other hand, if firms are roots of the sociology of markets and how the resigned to live in a world where reproducing field evolved from problems posed in nearby one’s position is not possible, then social re- fields. We then examine the crystallization of lationships become temporary arrangements the major ideas in the sociology of markets and that allow one to get information or secure in doing so discuss what we know. Finally, we cutting edge technology. Because change is consider what the real differences of opinion ubiquitous, one chooses one’s friends for their are and suggest avenues for future research. usefulness, and when that usefulness ends, one moves on. Finally, sociologists generally have a com- CONTEMPORARY ROOTS OF plicated relationship to the problem of THE SOCIOLOGY OF MARKETS whether a given set of social arrangements is Many good reviews have been written about efficient. The fact that so many kinds of so- the intellectual history of the sociology of cial relationships exist in markets has led to markets as a field (Biggart & Beamish 2003, the argument that social relationships exist be- Fourcade-Gourinchas 2007, Krippner 2001, tween market actors to solve market problems Lie 1997, Smelser & Swedberg 1994, Trigilia such as agency costs (Fama & Jensen 1983) 2002). Our goal in this section is to put this and transaction costs (Williamson 1985) and literature together in a different way. Rather to promote trust between buyers and sell- than focusing on the roots of the sociology of ers. Some sociologists seem prepared to ac- markets in classical theory, we focus on the cept that social structures could be efficient contemporary fields of study that contributed (Baker 1984, Uzzi 1996). From this point of to the intellectual ferment around the soci- view, social structures in markets operate to ology of markets. In particular, we trace the reduce information costs, give firms access to influence of nearby fields on the different per- knowledge about what the competition is do- spectives in the sociology of markets. ing, allow market actors to trust one another, New fields of social inquiry are built in re- and reduce resource dependencies. These so- lation to other fields of social inquiry. When cial structures provide firms with information scholars working within one field find them- that allows them to learn and adapt and, in do- selves in a dialogue with scholars working ing so, compete effectively. But other scholars on similar problems in other fields, some- are agnostic on this question (Fligstein 1990, times a new field of inquiry is created. At Podolny 1993). For them, social structures the outset, new fields involve scholars bor- can operate to mitigate the effects of competi- rowing one another’s perspectives and look- tion. In this view, firms try to control markets ing for mechanisms and models that might by using their size, technology, and access to help explain new objects of inquiry. In this governments to promote a status hierarchy of case, political economy, the sociology of la- incumbents and challengers. Incumbent firms bor markets, and organizational theory pio- use their advantages to signal to their princi- neered thinking about the sociology of mar- pal competitors what they will do to defend kets, and the cross-pollination of ideas in these the existing market order. For these scholars, fields formed the basic insights leading to the social structure of markets exists to pro- the establishment of the sociology of mar- duce this order. One way to make progress on kets as a field in its own right. Scholars in this issue is to problematize efficiency. The all these fields doubted that economics could sociology of markets gives us tools to decide sufficiently make sense of what happens in

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markets. In essence, they discovered that the ological convergence of institutions toward atomized, price-taking actors, with perfect Western models implied by the economic un- and symmetrical information assumed by neo- derpinnings in much of modernization theory classical theory, did not seem to exist empiri- led scholars to look into how the evolving in- cally. Social relations seemed to be crucial to stitutions of capitalism (laws, regulations, and the functioning of markets and market actors institutionalized practices) came to regulate in a myriad of ways. Although all these sub- the relationships between firms, owners, gov- fields began to criticize economics, they did ernments, and workers in ways that produced so from different perspectives and for differ- fundamental differences in the market struc- ent reasons, and the critiques internal to the tures of these societies. logics of these fields were the first moves to- As development projects took off, first in ward the creation of a contemporary sociology Japan and then later in Taiwan and Korea, of markets. It is useful to understand these de- scholars delved into how local arrangements bates in order to make sense of the different between governments, economic elites, and theoretical voices in the sociology of markets. workers provided the conditions of economic Political economy in the 1960s was domi- growth in both developed and less developed nated by modernization theory. This perspec- societies (Amsden 1991; Aoki 1990; Dore tive sought to explain how economically un- 1973, 1987, 1997; Evans 1995; Johnson 1982; derdeveloped countries might develop along Wade 1990). Meanwhile, the study of com- the lines of industrialized nations. Generally, parative capitalisms revealed that the rela- studies in this vein focused on how similar tionships between these groups showed re- cultural and structural features in develop- markable diversity and reflected very much ing nations, characterized as traditional, could a historical, cultural, and national trajectory be overcome with the emulation of institu- (Campbell et al. 1991, Campbell & Lindberg tional models extant in developed countries to 1990, Fligstein & Choo 2005). This perspec- promote economic growth (Eisenstadt 1973, tive suggested that governments, workers, and Kerr 1960, Lerner & Riesman 1963, Rostow capitalists produced market structures that 1961). Critiques of modernization theory in were different across countries (Albert 1993, political economy led researchers to new per- Berger & Dore 1996, Boyer & Drache 1996, spectives on development and comparative Hall & Soskice 2001, Hollingsworth et al. capitalisms. 1994). Markets were not given by outsiders, Scholars in this field looked back to but instead reflected the social and politi- Polanyi’s (1957) The Great Transformation for cal construction of each society, where the inspiration (see Block & Evans 2005 for a re- history and culture surrounding class rela- view of the literature on the links between tions and the various kinds of interventions by states and markets). Polanyi argued not only governments produced unique institutional that the creation of markets required states, orders. but also that the formation of capitalist mar- Organizational theory, much of which was kets would produce social chaos. In response, centered in business schools, was concerned he suggested that governments would have with understanding how the managers of to intervene in markets to stabilize them firms read the demands of their environ- and to provide social protection for work- ments and adjust their organizational struc- ers and rules to guide the interactions be- tures in line with those contingencies (Miles tween groups of capitalists. The ways they 1980). Although managerial theory rejected did this would necessarily be contingent and some of the tenets of economics (March et al. implied that historical institutional variation 1958, Simon 1957), such as perfect informa- could help explain cross-national variation in tion and perfect rationality, the purpose of market structures. The rejection of the tele- the firm was still to adjust to the world of

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competition, as economics implied. The cri- that sectors that join all interested parties look tique of management theory’s focus on in- quite similar to the set of actors that po- ternal organizational processes led organiza- litical economy focuses on, i.e., firms, gov- tional theorists in two directions. ernments, and workers. DiMaggio & Powell Hannan & Freeman (1977) argued that (1983) extended these arguments and called scholars had paid too much attention to such environments “organizational fields,” a adaptive processes in organizations. Instead, term that has caught on. The field metaphor they studied the emergence of organizational implies that firms watch one another, engage forms at the level of populations. They im- in strategic behavior vis-a-vis` one another, plied that market opportunity brought for- and look to one another for clues as to what ward the birth of firms. But the character of constitutes successful behavior. DiMaggio & the market, i.e., the resources that could be Powell’s main focus was how firms in organi- exploited by firms, would determine which zational fields came to resemble one another forms of organization would survive. The through processes of mimetic, coercive, and main problem that competition created for normative isomorphism. firms, from Hannan & Freeman’s perspective, In 1981, White produced a sociological was resource dependence (Pfeffer & Salancik view of what he thought firms do in markets. 1978). Many firms could not get the resources His central argument was that firms in pro- they needed to survive, and this led to high duction markets position their organizations rates of failure at the beginning of market vis-a-vis` one another. Using the price and rel- opening projects. Despite population ecol- ative quality of their product, they signal to ogy’s focus on competition, scholars in this each other what kind of producer they want to field realized that the formation of market be. This signaling produces what White called boundaries was a social process and that the a market that he defined as a reproducible formation of niches often reflected the ability role structure. White’s view combines some of firms to segregate their markets (Carroll insights from economics about how price can 1985, Hannan & Freeman 1988). Firms de- be used as a signal (Spence 1974) with the or- pend on legitimacy, and external shocks to a ganizational sociology focus on the construc- niche, such as the introduction of a law, can tion of fields or niches. have a profound effect on the dynamics of a While organizational scholars examined niche (Ranger-Moore et al. 1991, Ingram & social processes structuring the relationships Rao 2004, Haveman & Rao 1997). Recently, between organizations, scholars in stratifica- ecologists have begun to focus on how firms tion and labor markets looked anew at the role form identities and how these identities form of firms in resource distribution. During the markets (Carroll & Swaminathan 2000). 1960s and 1970s, the main approach sociol- While population ecology viewed the en- ogists used to examine labor markets was the vironment of the firm as “hard,” and thus the status attainment model. This view focused on main mechanism of selection was the avail- how individuals were sorted into a relatively ability of the scarcest resource, institutional fixed set of positions according to their per- theory posited that the environment was at sonal characteristics, such as family origins, least partially a social construction. Scott & education, gender, and race (Blau & Duncan Meyer (1982) called such environments “sec- 1967, Hauser & Featherman 1977). Because tors” and described the socially constructed the status attainment model views the linkages environment of firms as a function of all the between individuals and their socioeconomic other organizations that might impinge on a outcomes as mainly a function of their per- particular organization. They included gov- sonal characteristics, the problem of the de- ernments, suppliers, workers, and customers mand for labor, and thus the role of the firm, as part of such a social construction. We note was outside its purview.

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During the 1970s, scholars became in- What began next was an exploration of terested in two other questions: How does product and labor markets. Scholars studied the structure of jobs affect individual mo- concrete cases and attempted to apply these bility patterns and what is the actual pro- tools to account for what had emerged. The cess through which people are matched to sociology of markets has been used to ex- jobs? Sociologists answered these questions plain many aspects of markets. Some schol- by considering the role of firms in the hir- ars have demonstrated how the social re- ing process and social relationships in the lationships in markets produce more stable matching process. The new structuralism prices (Baker 1984; Uzzi 1997, 2004). Oth- modeled how firms affect the distribution of ers have focused on how the social structur- rewards (Baron & Bielby 1980, Hodson 1983, ing of markets has affected the birth and death Kalleberg & Griffin 1980). White’s (1970) of small firms (Stuart et al. 1999, Stuart & Chains of Opportunity elaborated how vacancy Sorenson 2003). Still others have observed the chains of jobs helped produce the distribu- innovation and spread of new market strate- tion of workers and rewards. Granovetter’s gies such as new products, financial inno- (1974) Getting a Job took on the question of vations, or changes in organizations such as how people got matched to jobs. He intro- the diversification of products, geographic ex- duced the idea that social networks mediate pansion, and vertical integration, as well as the links between employers and employees. changes in which subunit controls the firm Both White and Granovetter championed (Ahmadjian & Robinson 2001; Beckman et al. network analysis as a way to understand 2002; Davis 1991; Davis et al. 1994; Fiss the social structure linking employers and & Zajac 2004; Fligstein 1985, 1991; Gulati employees. & Westphal 1999; Haunschild 1993; Hirsch 1986; Ocasio & Kim 1999; Westphal & Zajac 1998; Zorn 2004; Zuckerman 1999, 2000). AGREEMENTS IN THE The exploration of all possible link- SOCIOLOGY OF MARKETS ages between firms, suppliers, customers, At the core of the sociology of markets is the governments, and workers pushed scholars attempt to insert sociologists into the study to postulate a plethora of mechanisms for of the economic realm by bringing social the- embeddedness. The literature groped with ory and the way social life works in general trying to generalize these cases and began to into firms, markets, and industries. As our re- elaborate different ways of thinking about the view suggests, the theoretical pieces for the problem of the social embeddedness of mar- construction of the sociology of markets were kets. Krippner (2001) has argued that the term in place by 1983. Firms, the social structures embeddedness has become vaguely defined. that defined their relationships to competi- We argue that this was the case from the very tors, and the social structures that linked them beginning. Scholars who were coming at the to suppliers, customers, workers, and govern- problem from very different points of view ments were already theorized to exist and to examined different ways in which economic vary across markets, historical time periods, transactions were socially structured. and countries. Granovetter’s declaration that The variety of approaches has made pro- economic life was always embedded in social viding a sociological definition for markets life has proven to be the intellectual frame that difficult. For neoclassical theory, markets justified opening a floodgate of research and simply imply exchange between actors for brought a massive set of scholars armed with goods or services. These exchanges are usu- sociological ideas into studying market activ- ally thought to be fleeting, with price (i.e., ity and, even more importantly, engaging one the amount of a commodity that is exchanged another in discourse. for another using a generalized medium of

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exchange, i.e., money) determined by the sup- repeated exchanges occur between buyers and ply and demand for the commodity. From the sellers under a set of formal and informal point of view of the sociology of markets, the rules governing relations between competi- problem is that this type of exchange already tors, suppliers, and customers.4 These fields shows a great deal of social structure. Mar- operate according to local understandings and ket actors have to find one another. Money formal and informal rules and conventions has to exist to allow market actors to get be- that guide interaction, facilitate trade, define yond bartering nonequivalent goods. Actors what products are produced, indeed are con- have to know what the price is. Underlying stitutive of products, and provide stability for all exchange is that both buyers and sellers buyers, sellers, and producers. These market- have faith that they will not be cheated. Such places are dependent on governments, laws, faith often implies informal (i.e., personal and larger cultural understandings support- knowledge of the buyer or seller) and formal ing market activity. The first thing a sociol- mechanisms (i.e., law) that govern exchange. ogy of markets suggests is that market actors Furthermore, market actors are often organi- will develop social structures to mediate the zations, implying that organizational dynam- problems they encounter in exchange, com- ics influence market structures. For sociolo- petition, and production. We discuss each of gists, market exchange implies a whole back- these in turn and delineate the primary contri- drop of social arrangements that economics butions of each perspective with regard to how does not even begin to hint at. market actors solve these problems and, in do- But the sociology of markets goes further ing so, construct and navigate their worlds. than just questioning the institutional embed- Many aspects of exchange relationships dedness of an anonymous market. It is pre- in markets have been examined by sociolo- pared to unpack the black boxes of exchange, gists. Institutional theory suggests not only competition, and production. Sociologists be- that contractual market exchange depends gin by realizing that market actors are in- on the rule setting and sanction enforce- volved in day-to-day social relationships with ment of states, but also that states may de- one another, relationships based on trust, fine what types of products are appropriate friendship, power, and dependence. For the for exchange. Furthermore, the internal struc- modern sociology of markets (Durkheim ture of the state as rule setter and regulator 1964)3, unstructured, haphazard, one-shot, can influence the types of products states al- anonymous social exchange is not a market. low to be exchanged and the rules support- Instead, markets imply social spaces where ing and surrounding exchange (Caruthers & Halliday 1998, Delaney 1992, Schneiberg & Soule 2005). Buyers and sellers also are gener- 3Ironically, scholars of the sociology of markets almost ally known to one another and in many cases never cite Durkheim. But a good case can be made that are involved in repeated exchange. Network almost all of the important ideas in the sociology of mar- kets have Durkheimian roots. Durkheim recognized the theorists have emphasized the role that so- pivotal role of the state and law in capitalist exchange, pre- cial networks play in generating trust between figuring the political economy concern with these issues. buyers and sellers that makes exchange possi- He also recognized that there was a noncontractual basis to contract that implied that personal relationships were ble (Granovetter 1985). Cultural sociologists necessary for people to honor contracts. Finally, in the di- have looked at how specific exchange relations vision of labor the major mechanism that drove modern society was competition. Durkheim’s argument was that people divided up tasks to lessen their competition with other people. This mechanism is arguably at the core of 4Of course, some of the identities of the buyers and sellers the population ecology view that market niches become change over time. In addition, more peripheral buyers and partitioned by competition and White’s arguments about sellers come into the market, leave, and do not return. But how firms avoid competition by signaling which part of the the core players in the market, the largest producers and market they will produce for. consumers, create a social structure.

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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 of exchange 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 allowing it 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.5 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 et al. (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 5 Note that in neoclassical 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.

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Scholars interested in culture and con- ferentiation of products is one of the main sumption have also focused on exchange mechanisms firms have to control competi- in markets. The sociology of consump- tion. This works in two ways. If firms can tion (Bourdieu 1984; Csikszentmihalyi & choose in which part of the market they want Rochberg-Halton 1981; Slater 1997; Zelizer to compete, then they can go where their 1983, 1994, 1997; for review papers see competitors are not. Carroll (1985), calling Zelizer 2005, Zukin & Smith Maguire 2004) this process niche partitioning, showed that focuses on what products mean for people and microbreweries were able to create a fast how people use money and markets to estab- growing niche for themselves even as the lish meaning, status, and morality. For these largest brewing companies were steadily in- scholars, culture is deeply implicated in mar- creasing their hold over the brewing industry ket exchange. Products are cultural objects (Carroll & Swaminathan 2000). White (1981) imbued with meaning based on shared under- has made a similar argument. Markets for him standings and are themselves symbols or rep- are reproducible role structures where firms resentations of these meanings. Consumption decide between the prices they want to charge reproduces the material lives of consumers for a good and the quality of that good they and provides them means to express their produce. In making this decision, they decide identities and affiliations with status groups. which part of the market to be in. But most importantly for these scholars, the Leifer & White (1987) demonstrated how meanings attached to products that are nego- this works for the frozen pizza market. White tiated by consumers and producers shape the (2002) later identified this mechanism as a way interpersonal relations of embedded market to produce entirely new markets. If products exchange and, in turn, are shaped by them. become differentiated enough, then they are Although exchange characterizes the re- no longer competing. White’s perspective can lation between buyer and seller in mar- easily be translated into the language of pop- kets, competition characterizes the relation ulation ecology. White is arguing that mar- between producers.6 Sociologists posit that kets would be differentiated by firms occupy- competitive markets confront producers as ing different positions in the niche, and, to problems to be solved, and they do so using the degree that firms were in fact not com- strategies of cooperation, combination, and peting, this could result in niche partitioning product differentiation. The degrees to which or, in White’s language, the creation of new a market is competitive, to which producers markets. are allowed to cooperate, and to which pro- The differentiation of products can also ducers are allowed to combine, as well as how help the stability of the firm through spread- property rights are organized, are all regu- ing competitive pressures across multiple lated by the government. Although producers product markets. If firms decide to produce attempt to use a variety of strategies to con- multiple products, a downturn in a particular trol competition, government defines accept- market will not threaten the firm’s existence able modes of relation between producers and because it is not totally resource dependent regulates competition through reacting to the on the exchange of one product. Population strategies firms employ. ecology noted this process, describing the Population ecology, network theory, and diversification tactic as a generalist strategy institutional theory all recognize that the dif- (Hannan & Freeman 1977). Fligstein (1990) comes at this process from the point of view of institutional theory. He shows that prod- 6 Relationships to competitors can be characterized in terms uct differentiation in U.S. corporations be- of resource dependence as well. In White’s model, when firms signal their intentions to enter a different part of the gan as a marketing strategy in the 1920s that market, they are trying to control their interdependency. was pioneered by large firms to stabilize their

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overall structure. During the Great Depres- how the insurance industry in the nineteenth sion of the 1930s, the largest corporations century expanded and contracted as regula- produced as many different kinds of products tors shifted their roles over time. Haveman as they could to continue to exist in such dis- & Rao (1997) demonstrate similar processes mal business conditions. operating in the savings and loan industries. In addition to product differentiation, pro- Fligstein (1990) presents evidence that the ducers often seek to cooperate and to combine U.S. government played a major role in pre- with one another to reduce competitive pres- venting the cartelization and monopoliza- sure. In the old industrial organization litera- tion of American business at the end of the ture in economics, a small number of firms nineteenth century by using antitrust laws. dominating a market act to reduce compe- He also demonstrates that the federal gov- tition in that market. Challenger firms can- ernment played a role in closing down the not undercut the prices of their larger core 1960s merger movement by aggressively pur- brethren because the large firms can outlast suing conglomerate mergers. Dobbin (1994) any competitor in a price war. Podolny (1993), shows how government policies toward rail- a network theorist, terms this kind of struc- roads early on affected their organization in ture a status hierarchy. He studies how in- different countries. Dobbin & Dowd (2000) vestment banks form such a hierarchy that is have documented how government played primarily held in place by the large size and an important role in railroads in the United prestige of the biggest banks. These banks States. Campbell & Lindberg (1990) argue get the largest deals, and they reproduce their that property rights are at the heart of the place in that structure by being able to under- relationships between governments and firms cut their competitors if necessary. Fligstein (for a review of the sociological literature on (1996), in a more institutionalist vein, calls property rights, see Carruthers & Ariovich this an incumbent-challenger structure. He 2004). argues that such structures get reproduced as The sociological view of relations among incumbents use their market power to sus- producers begs the question of who these pro- tain their advantage in a given market over ducers are and how they make production de- time. cisions. From the point of view of neoclassical Although producers may attempt to exert economics, whether producers are individuals market power through the creation of hier- or organizations matters little; what is impor- archies, this strategy has its limits. Govern- tant is the production function and the com- ments regulate competition (Ranger-Moore bination of capital and labor used in the pro- et al. 1991, Dobbin & Dowd 2000, Fligstein ductive process (Shepard 1970). Conversely, 1990, Haveman & Rao 1997, Ingram & Rao sociologists have long examined organizations 2004, Ingram et al. 2005), in turn affecting as social structures. Some take the unitary or- the opportunities for firms to expand and ganization of the firm as a starting point, but survive. The role of government and law most agree that organizations have complex in the production of markets has been ac- internal dynamics that are important for or- knowledged by the population ecology, insti- ganizational form and for the strategies they tutionalist, and, of course, political economy use to solve the problems of competition and camps. These theory groups understand that exchange. They have pointed to competition governments can both open up opportuni- within the firm, culture, and power struggles, ties and set up constraints for markets. For in addition to environmental influence, as im- example, Hannan & Freeman (1987) show portant to understanding a firm’s strategy and how the legalization of union activities af- thus the structure of markets (Fligstein 1990, fected the founding and survival of those or- Ocasio & Kim 1999, Pfeffer 1981, Pfeffer & ganizations. Ranger-Moore et al. (1991) show Salancik 1978).

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The study of the internal dynamics of firms ics and interorganizational competition and and how firms relate to their environments exchange. is rooted in organization theory. Although Probably the most studied mechanism much of the empirical work in the sociol- theorized to pass strategies and structures ogy of markets treats firms as unitary, soci- from one firm to another is the board inter- ologists are generally committed, at least the- lock (Mizruchi 1996). Board interlocks influ- oretically, to viewing the internal dynamics of ence the spread of different kinds of struc- the firm as important (Bourdieu 2005). The tural and strategic innovations (Burt 1980b, two key aspects of firms with which organiza- Davis 1991, Gulati & Westphal 1999, Rao tional scholars have been most concerned are & Sivakumar 1999). Sociologists tend to see strategy and structure (Miles & Snow 1978). board interlocks as mechanisms for coopting The design of the organization is its structure. various kinds of resource dependencies, for This includes lines of authority and the for- generating trust, sharing information, medi- mal and informal relationships between posi- ating competition, and forming political al- tions in the firm. Meanwhile, strategy refers liances (here, one can make the link back to to the means the organization employs to political economy). achieve its goals. The central questions sur- The social structuring of markets is gener- rounding these aspects of organizations have ally in response to the problems of competi- been where they come from and how they are tion and exchange. The sociology of markets related to market structures. does not posit that these problems will always Although economistic explanations for be solved. But it does imply that where stable various strategies and structures generally markets emerge, such structures will appear as center on transaction costs, agency costs, or firms figure out how to resolve their problems. aspects of the technology the firm uses in By establishing social relationships not just production (Chandler 1962, Fama & Jensen with competitors, but also with customers, 1983, Williamson 1985), sociologists have suppliers, and employees, firms can establish emphasized the contingent nature of the goals trust and guarantee access to scarce resources. of the firm and how culture and managers’ By responding to directives from the govern- backgrounds influence the firm’s strategy and ment and trying to coopt government agen- structure. This emphasis makes the existing cies, firms can also secure their futures. All divisions within the firm and the career paths these social mechanisms make it possible for of managers important. The way the firm di- firms to juggle their resource dependencies vides up functions, how the firm promotes and survive. One can conclude that despite from within, and political struggle determine the varying theoretical perspectives and dif- who manages the firm and thus the perspec- fering language and data analysis techniques, tive that will dominate firm strategy. For ex- the empirical literature on the sociology of ample, Fligstein (1990) has emphasized how markets converges on a few main mechanisms the rise to prominence of managers with sales by which the social structuring of markets may and marketing or finance backgrounds pre- be understood. The right way to think about ceded the adoption of multidivisional struc- these mechanisms is that they form a tool tures and strategies of product diversifi- box that might plausibly be used to analyze cation. Processes of managerial succession, a particular market. One of the great dangers the distribution of resources, and promo- in the literature is that scholars frequently fo- tion are subject to internal competition. Per- cus on their favorite mechanism at the expense haps the most promising aspect of the soci- of other possible ways to understand what is ology of markets is the potential to theorize going on in the market of interest. We discuss as well as empirically examine the con- how to solve this problem at the end of this nections between intraorganizational dynam- review.

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DIVERGENT ARGUMENTS and trust, something in which Callon seems uninterested. But, given that scholars have The real controversies in the sociology of been interested in the coevolution of indus- markets are those that do not turn on the dif- try technologies and organizational forms, fering use of terms to describe similar con- Callon’s focus on how actors creating tech- cepts or the fact that scholars in some theory nology produce new markets seems less to group ignore the ideas of the others. One of contradict production-oriented models than the most important critiques of the general to complement them. Linking the process of perspectives outlined above has come from discovery and implementation of technology the performativist school of thought. Per- in new markets to the problems of resource formativists have criticized the extant socio- dependence, competition, exchange, and le- logical work on markets for neglecting how gitimacy will likely be a fruitful avenue of markets are structured by the interaction of research. economic activity with scientific discovery and One aspect that undermines Callon’s argu- the creation of new technology. From this per- ment is that new markets are often founded for spective, Callon (2002) has argued that the one purpose yet ultimately serve an entirely sociology of markets has been worried too different purpose. For example, the telephone much about critiquing the neoclassical view was thought to be useful only for business, and that markets are anonymous, one-shot ex- early on telephone companies discouraged ca- changes and not worried enough about the sual use of the phone (Fischer 1992). But once role of economists (and others) in the creation consumers discovered the phone as a way to of cultural tools that actually enact the mar- keep in touch with each other, phone com- ket in fields like finance (Guala 2001; Knorr panies were driven to expand their services Cetina & Bruegger 2002; MacKenzie & Milo dramatically. These more accidental discov- 2003; MacKenzie 2004, 2005). To demon- eries of uses for technology imply less agency strate this point, scholars have studied the di- and intention and more processes of discovery alectic between financial theories and the im- about what things are good for. plementation of new financial products and A second arena of disagreement concerns how the growth of these markets reflects the the fact that studies focus either on competi- ways those theories are used and applied. tors or on suppliers and customers. Many This perspective introduces a kind of cul- studies in the sociology of markets focus on tural dynamism into market processes and communities of producers. These producer- heightens the role of technological innova- focused studies often only present consumers tion. Actors in current markets invent new to the degree that the machinations of firms products in a self-aware fashion, and this eventually produce a stable social structure works to transform existing markets. Here, that effectively mitigates competition or re- we think that fruitful dialogue could occur. duces the resource dependence of competi- Despite Callon’s assertion to the contrary, tor firms (see Zelizer 2005 for an extended scholars using population ecology, institu- version of this critique). When scholars fo- tional theory, and network theory have been cus on suppliers and customers, their discus- interested in the linkage between the new cul- sions focus on different relationships. Most tural forms of products and the deployment frequently, these relationships are thought to of firm resources (for example, Carroll & be about trust indexed through direct network Swandinathan 2000, Granovetter & McGuire ties that reflect ongoing social relationships 1998, Haveman & Rao 1997, Lounsbury & between buyers and sellers (Baker et al. 1998; Rao 2004, Powell et al. 2005). Of course, Uzzi 1996, 1997). much of the research has focused more on None of these perspectives captures what questions of legitimacy, resource dependence, goes on in big consumer markets in which the

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buyers are individuals and their preferences sumers. These interventions appear to have are expressed in more roundabout ways. been as important in generating trust (be- Scholars most interested in the cultural con- tween firms and customers) as the problem struction of products have criticized the fo- of the morality of the market (Heimer 1985). cus in the sociology of markets on production. A fruitful dialogue is needed between those To some degree, the use of products to make who favor a more cultural approach to con- moral judgments or claim social status can sumers that focuses on the moral and social be analytically separated from the problem of uses of products and those who favor an ap- producing a stable product market. After all, proach that stresses solving the problems of how people use automobiles and what they competition for producers. Such a dialogue mean to them and others may not affect which would allow us to understand if these views firms survive at the high or low end of the mar- are contradictory or complementary. Consid- ket or how many firms there are and how they ering all sides of the problem would help us are organized. Still, this disjuncture between get a clearer picture as to how the produc- producers and consumers is one of the inter- tion and legitimation of new products and the esting frontiers in the sociology of markets. structuring of stable markets are related. Zelizer argues that the focus on production The question of the dynamics of mar- misses the fact that consumers have to become kets leads to a more general disagreement convinced about the value and legitimacy of in the literature surrounding stability and products (Zelizer 1983, 1994, 1997). She ar- change. Population ecology, institutional the- gues that moral issues abound in the creation ory, and some versions of network theory (i.e., of new markets. The life insurance industry, White) have an explicit argument that market- for example, had to overcome the obvious opening projects are going to be very differ- moral ambiguity of people buying insurance ent than market-stabilizing projects. For pop- that put a price on their deaths. Moreover, ulation ecology, the liability of newness and firms were put in the position of gambling on smallness are particularly acute at the forma- other people’s deaths. Many people resisted tion of new markets. In these moments, firms buying life insurance because of these ghoul- either do not know what their key resource ish qualities. Only when consumers became dependencies are or are not reliably able to convinced through marketing efforts that life deliver products that people want. Thus, they insurance was a way to provide for one’s loved are more vulnerable to competition. Once ones after death did the market take off. A markets have settled, existing firms can re- production-focused sociology of markets fails main stable incumbent players for long peri- to consider consumers and consumer market- ods. Such firms continuously face challengers, ing and, in so doing, misses an important as- but these moments are qualitatively differ- pect of where markets come from. ent from market formation moments. Institu- The life insurance industry presents an tional theory (Fligstein 1996) also posits that empirical puzzle that allows scholars to ex- producing a market as a field is a social and plore the relative role of consumers, govern- political project that begins without stable re- ments, and firms in the production of a new lationships. White’s basic argument is that if product. The industry’s problems were not firms cannot find a reproducible role struc- just to convince people to buy insurance. At ture, stable markets will not emerge and firms the beginning of the market, firms frequently will go out of business. sold policies at too low a price to make money. There are several alternative views of these When people came to collect, many of the processes. Inspired by Nelson & Winter’s smaller firms went bankrupt and their owners (1982) view of population ecology, many disappeared. Eventually, government regula- scholars have argued that some industries tion became more extensive to protect con- are in a constant state of flux. Firms must

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be nimble, change technologies, and inno- for example, in the population ecology view, vate or risk dying (Powell et al. 2005, Stark organizations’ resource dependencies dictate & Vedrez 2006). Some scholars have argued that organizations that do not fit their en- that network organizations produce continu- vironments will perish. Hannan & Freeman ous transformation and that modern markets (1977), of course, construct a general argu- are so dynamic that they rarely settle into any- ment about all forms of organization. They thing like equilibrium for very long (Stark & assume that whatever resource dependence Vedrez 2006). The performativity perspective characterizes the niche (and here they include also seems to be compatible with this view. nonprofit organizations and states) will oper- To resolve such arguments, scholars need ate to select winners and losers. If the niche to be clearer about how they might measure is a market, then one can infer that the popu- and interpret stability or equilibrium. Put an- lation ecology argument seems hard to sepa- other way, when is a change in a market a rate from the economic view propounded by change? The general view of a market as a Milton Friedman (1957), which suggests that niche, role, status, or hierarchical structure market forces determine efficiency and hence of incumbents and challengers implies that a winners and losers. What separates popula- market change would involve a change in the tion ecology from economics is that the price identities and positions of the main actors. It mechanism is only one potential source of re- would also involve a change in the underly- source dependence. ing definition of the market (i.e., its princi- Many of our studies of the social structur- pal activities, ways of organizing, etc.). But ing of markets end up arguing that the so- this definition of change has several problems. cial relationships underlying markets have ef- First, shifts in the identities of either chal- ficiency effects. If firms have the right social lenger or incumbent firms occur all the time. connections, they can solve their resource de- One would not want to be left arguing that pendence problems and reproduce themselves any such changes deinstitutionalize the mar- (Baker et al. 1998, Stuart et al. 1999, Stuart ket. Second, changes in products and produc- & Sorenson 2003, Uzzi 1997). But some au- tion also evolve over time (often in piecemeal thors also recognize that while social relation- forms). Here, again, one is left wondering ships might produce stable outcomes for par- at which point such changes represent un- ticipants, they might also actually undermine derlying transformations of existing markets. market efficiency (Podolny 2001). Long-term Many of the disagreements about stability and social relationships not only produce trust, change in the literature rest on how one thinks but also allow for cartels and price stabil- about exactly what a change is. ity and in some cases make firms more vul- Finally, one of the problems that haunts nerable because their suppliers can take ad- all the discussions in the sociology of markets vantage of them by charging higher prices. is the problem of efficiency. The economic Granovetter (1985) is ambivalent about this, idea of efficiency is that scarce resources be- appearing sometimes to view social networks come allocated so as to maximize their returns. as ways for people to solve their problems Neoclassical economic theory assumes that of trust and therefore produce efficient out- there is only one way for such an allocation comes and other times to view these networks to occur when a market is in equilibrium, and as possible mechanisms for rent seeking (and that constant updating of information means even illegal behavior). In his more recent re- that firms are always shifting their activities view of the literature on business groups, for to maintain efficiency. The sociology of mar- example, he appears to portray these groups kets has an ambiguous relationship to this as- as efficiency generating (Granovetter 1994). sertion that extends from basically accepting The political economy literature has also economic logic to basically denying it. So, displayed this ambivalence. Scholars who have

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documented that different national systems of ory is to worry less about efficiency and more capitalism exist swing between viewing those about organizational effectiveness. Organiza- systems as protectionist and viewing them tional theory realized long ago that organiza- as efficient. So, for example, a whole series tions’ survival could come from many sources of books have begun with the premise that (Thompson 1967): exploiting resource-rich the differences between national capitalist sys- environments, defending themselves from tems are about to disappear because the spread competitors, or coopting their resource de- of global capitalism is forcing firms to se- pendencies. Thus, solving the problem of class lect the most efficient forms of organizations struggle, obtaining finance, and getting state (Berger & Dore 1996). The assumption is that intervention to enforce solutions to cutthroat the various national models must be hiding competition are all tactics we should expect inefficiencies that protect workers and that firms to use to survive. The efficient alloca- the world market will simply force them to tion of internal resources from this point of change. Then, these books document that in view is only one tactic. fact Japanese, Korean, German, and French The problem with this perspective (even capitalisms appear to be resilient. They fre- though it helps fill out our view of relevant quently conclude that these national models firm behavior!) is that we know that mar- must each be efficient in some way and that kets rise and fall, come and go, and that the in the face of international competition, firms firms that exist today may disappear tomor- adapt to new circumstances without chang- row. Sociologists do not want to say that firms ing their ways completely. Hall & Soskice in markets do not worry about prices, costs, (2001) argue that the national systems must and pleasing customers but care only about have some efficiency properties as well as the controlling their resource dependencies or ability to adapt to internationally changed cir- getting the government to intervene to pro- cumstances most forcefully. The debate over tect their market shares. One way out of this the role of states, law, and class struggle in de- dilemma is to realize that sometimes social velopment projects suggests how difficult it is structures can promote efficiencies, and other to understand market efficiency. times they can be used to protect incumbents. Some scholars are even more skeptical One of the goals of economic sociology should about the efficiency of social relationships. be to use our tools to understand how this Fligstein (1990) views the emergence of the works in particular markets. This is akin to large corporation in the United States at the the task of the old industrial economics that turn of the twentieth century as principally a sought a way to identify when market struc- function of the attempt to control competition tures were the result of efficient processes or within particular industries, thereby deny- attempts to control markets. ing the efficiency interpretations of Chandler Competition in new markets is likely to be (1977) and Williamson (1985). Dobbin (1994) different from competition in stable markets. views the different ways in which state-firm Firms in both cases will try to do what they can relationships shaped the railroad industries to survive. In new markets, firms have many as a reflection more of differences in culture resource dependencies that make survival dif- and politics than of differences in efficiency. ficult. But even here, they can use their so- The literature on comparative capitalisms fre- cial relationships with larger corporate enti- quently demonstrates that the main factors ties, suppliers, customers, and governments that effect firms’ organization in a nation-state to build coalitions that can produce stabil- concern history, culture, class struggle, and ity. Relations with competitors can evolve as the role of the state (Roe 2003). firms realize which part of the market they One interpretation that comes from both want to be in and as the market segments be- organizational theory and institutional the- come defined. In stable markets, incumbents

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have more tools to fight off competitors by has been detrimental to the focused growth either undercutting their prices, using vari- of the field. There are many points of agree- ous tools to resist competitors’ entry into the ment in the sociology of markets, and we have market, or coopting competitors by copying attempted to draw them out. them or buying them out. Markets are always If people are convinced by our argument, rising and falling, which means that attempts this implies two proscriptions for subsequent to control are always potentially under assault. research. Scholars should seek out and explore So, for example, the U.S. automobile industry the differences in terminology between their was stable from roughly the mid-1930s until perspectives and other perspectives to decide the 1970s (and even into the 1990s). The main the relevance of those differences to making U.S. participants in that market are firms that sense of empirical cases. Scholars should also now are approaching 100 years old. But, chal- be open to the possibility that the mechanisms lenges to that industry exist today, and noth- that other scholars propose are relevant to ing guarantees that the main U.S. producers their particular case. An exemplar of this kind will either survive or maintain their separate of research is MacKenzie’s (2005) recent book corporate existence. in which he carefully parses out the role of pol- itics, markets, institutions, and economics in understanding the emergence of modern fi- CONCLUSION nancial markets. This does not mean that all The sociology of markets is now a mature field mechanisms are operative in all cases. Instead, of study. Scholars have developed a set of con- this kind of careful consideration is likely to cepts to describe and understand how social lead to a better understanding of the scope of relationships structure all forms of markets. various authors’ perspectives. If scholars en- Along with the many fascinating questions re- gage in this kind of honest discussion, the field maining to be explored, a cacophony of voices is also more likely to understand better what espousing different strategies and perspec- its real disagreements are and make progress tives still exist with which to explore them. on those issues. We hope our review helps We have argued that in many respects schol- contribute to the intellectual ferment and en- ars have talked past one another and that this courages continued research and debate.

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