Entrepreneurship & Networks
Hello readers! This week’s assignment of the course Entrepreneurship & Networks is about embeddedness. Firstly, I’ll give a short theoretical explanation for the concepts structural embeddedness, relational embeddedness and the paradox of embeddedness. Then I will connect the theory to practice by interviewing an entrepreneur.
Structural embeddedness is the structure of the overall network/configuration of one’s network (Granovetter, 1992). Relational embeddedness can be explained as the personal relationships people have developed with each other through a history of interactions (Nahapiet and Ghoshal, 1998). In general, embeddedness is beneficial because it enriches your network, but when an entrepreneur becomes over-embedded it will result in complete insulation of network from market demands and new possibilities. This is called the paradox of embeddedness.
I’ve invited the entrepreneur Meysam, an owner of a restaurant, for an interview about his structural and relational embeddedness. During the interview, I realized that the most important component of his embeddedness was trust. He said for example that he knew most of his suppliers in person and that they were good friends. As a result of that, it wouldn’t really matter if he would pay them after a while and even if he would pay them less than the normal price. Of course it’s also true the other way around. For instance if the flesh Meysam gets is not so good, he would not immediately ask his money back but he would just make the supplier aware of it. These are examples of two of the outcomes of embeddedness, namely integrative agreements and investment advantages. However, he consciously tries to keep the ties between him and his employees at arm’s length. Meysam is aware of the fact that it’s not always beneficial to have embedded ties. This is because he was very close with his employees before (over-embeddedness) which resulted in derailed performance (an outcome of over-embeddedness). They would for example be very late and always wanted to go home early, but at the same time wanted to receive more money. So Meysam agreed with the paradox of embeddedness.
Hope you learned something! See you!