The subject of assignment three is embeddedness. But in this interview task we take a deeper look at the phenomenon because we’re talking about the paradox concerning embeddedness. Wikipedia defines embeddedness as the degree to which economic activity is constrained by non-economic institutions. In this particular case it’s mainly about the network of people an entrepreneur uses to accomplish his of her goals. This network can be of great use because it allows a wider access to recourses but it can also have negative effects. These negative effects create an ‘embeddedness paradox’.
I interviewed café owner Hans for this assignment and I soon found out that Hans benefitted greatly from his network. When he started working in the hospitality industry twenty years ago his network of people working in the same business kept growing. Finally he used his connections to attain a loan for his first café. In the following years he opened two additional places and shut two down again, mainly because of the economic environment.
When analysed we see that Hans used a lot of arms length ties in the beginning days of his business. He found out who could help him achieve his goals and got in contact with him. The more his business grew the more he started using embedded ties.
With hiring people he most of the time used his gut feelings instead of objective opinion. Because he didn’t want to fire anybody who was nice, those people ended up working with him for many years. It would be better to keep in mind that you are running a business and you have to make a profit. So he accumulated personnel that weren’t being assessed on their capabilities anymore. And it also was the other way around. Hans didn’t get any critique about his business anymore so he wasn’t aware of thing that could go better.
This situation portrays the embeddedness paradox perfectly. On the one hand Hans’ network helped him get his own business. But the fact that Hans since then turned to embedded ties was a bad decision. As you can see, to keep a healthy business people should be careful about the type of network they use.