Social Embeddedness of Economic Action

Abstract

Abstract The concept of embeddedness expresses the notion that social actors exist within relational, institutional, and cultural contexts and cannot be seen as atomized decision‐makers maximizing their own utilities. Embeddedness is based on several assumptions about society: the actor is not an atomized individual; immediate utility cannot explain the full meaning of social relations; logics underlying the formation of institutions and their norms of behavior cannot be removed from the contexts of social interaction within which these institutions exist; convergent trends of transformation result in diverse processes of adaptation, which evolve from specific social, cultural, and cognitive configurations. The concept of embeddedness that followed from the work of Polanyi was revisited by Granovetter and has ever since been at the centre of the debates within the so‐called “new economic sociology.” At the core of this approach a number of important contributions illustrate the importance of social networks, social capital, the diversity of cultural and cognitive elements, and the social construction of markets. More recently, the concept of embeddedness, and in particular Polanyi's seminal idea of double movement, has been called for as an interpretative frame to explain societal transformation in the light of the recent economic crisis.