For this week’s blog we had to invite an entrepreneur for an interview and talk about ‘the paradox of embeddedness’. This was also the topic of lasts week’s lecture and I think it was both the most interesting and most difficult part so far. So in the latter of this blog I will talk about the interview I did, but first let me explain this paradoxical theory. If an entrepreneur has too many embedded ties, it can result in a decrease of access to new information and opportunities. In other words, embeddedness can result in only redundant information. Therefore, as an entrepreneur you need to find a balance in it.
I asked my uncle to do the interview with. He is in the sports clothing industry since 2003 and had a very successful period from 2008 through 2011. He has a webshop and he often goes to sporting events. Now he doesn’t sells as much as before, but as we speak a new stock is being shipped from Brazil.
Components of embeddedness that played a major role in his business were trust and problem solving. This has everything to do with his contacts with the fabric in Brazil where the cloths are made. These contacts are far away and when you are here in Holland you cannot check if everything is going fine. He spent a lot of time in Brazil to make this tie strong enough to build some kind of trust. The tie became more than only a market tie, it became embedded. This leads to the second component: problem solving. Because this relationship is based on trust problems can easily be solved in a way that both parties are convenient with it.
“One time, back in 2010, there was a mistake with an order. I wasn’t mad. We’re all human, so we make mistakes. My contact at the fabric called me and apologized and we arranged something. Only a week later the right order was already on my doorstep.”
Also overembedded components were part of his business. This can be seen in the relationships with his customers. When he started the business, he sold his first stock to close friends and family. They were all very positive about it (I think partly because the relationship already existed). Next stocks were all sold through the networks of his close relationships and so on. I think these overembedded ties made him a bit vulnerable and stopped him from growing at a certain point. The clothing line stayed the same for a long time and at a certain moment the selling stopped. I think this can be coupled to the paradox of embeddedness. The customer relationships were too close to see what the market really wanted, which is change I think.
As I said earlier a new stock is being shipped. It is a sample stock with a new type of pants. He decreased his offer changed the look a bit. So in the end he did noticed that the market was ready for something else. He found balance in embeddedness!
Till next week!