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Functionalism Revisited: A practice based Functionalism
Unformatted Document Text:  Functionalism Revisited 13 industrial networks; and such patterns are mapped not only into the group members but also the potential partners, who are indirectly connected to the group members. Uzzi, combining a social network approach (using the concept of embeddedness of Granovetter, 1985) with the TCT perspective, investigates 23 entrepreneurial firms in a garment industry, strongly suggesting that embeddedness of the business network becomes the locus of integration and adaptation of business (1997). Granovetter also argues that the high level of obligation among business group members encourages a stabilized business environment. Under such an environment, opportunism disappears (1995). Powell also points out that the norm of reciprocity becomes a guiding principle of the network form of organizations (1990). Nevertheless, terms and concepts such as reciprocal obligation and trust, in general, presume the existence of the social system. In fact, most empirical findings in interorganizational relationships tend to emphasize the socially structured norms of interorganizational networks (Gulati, 1995; Gulati & Gargiulo, 1999; Mizruchi, 1993; Podolny, Stuart, & Hannan, 1996; Stuart, 1998). Studying the relations between a large population of corporations and investment banks, Baker points out that during the period, 1980-1985, the economic industry had witnessed “the death of relationships.” That is, as the industry became mature, the financial relations seemed to become more purely transactional, excluding particular relationships between a corporate and an investment bank (1990; see also Mintz & Schwartz, 1985; and Mizruchi, 1982). Employing Williamson’s TCE approach, he identifies three types relationship interfaces – transactional (strict loan business), relational (loan business based on existing relations), and hybrid (seeking multiple sources of investment banks) form; and finds that most companies deploy the third interface. He argues that such movement can be interpreted as the organizations’ effort to reduce their dependence on financial sources. Although Baker does not strongly suggest this, his finding on the third interface might indicate that fully institutionalized interorganizational relations or structures foster more transaction-oriented practices. His finding does make a sense in relation to the industrialization process. Specifically, industrialization tends to alienate individuals from their social world and engage them in a more formal and rule-binding world (Organization Man, for example, Whyte, 1956). Applying this assumption to the general public of corporations (as in predicting a specific group of individual organizational practices) may commit an ecological fallacy because of some contending findings such as Uzzi’s study (1997). Nevertheless, it is compelling that a fully mature, institutionalized industry may demand more formalized and task-oriented economic activities. Viewpoints taken by Gulati (1995) and Uzzi (1997) tend to weigh in on the post hoc explanation on the formation of alliance, which may result in some limitations. Specifically, first, even though there

Authors: Kim, Hyo.
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Functionalism Revisited 13
industrial networks; and such patterns are mapped not only into the group members but also the potential
partners, who are indirectly connected to the group members.
Uzzi, combining a social network approach (using the concept of embeddedness of Granovetter,
1985) with the TCT perspective, investigates 23 entrepreneurial firms in a garment industry, strongly
suggesting that embeddedness of the business network becomes the locus of integration and adaptation of
business (1997). Granovetter also argues that the high level of obligation among business group members
encourages a stabilized business environment. Under such an environment, opportunism disappears
(1995). Powell also points out that the norm of reciprocity becomes a guiding principle of the network
form of organizations (1990). Nevertheless, terms and concepts such as reciprocal obligation and trust, in
general, presume the existence of the social system. In fact, most empirical findings in
interorganizational relationships tend to emphasize the socially structured norms of interorganizational
networks (Gulati, 1995; Gulati & Gargiulo, 1999; Mizruchi, 1993; Podolny, Stuart, & Hannan, 1996;
Stuart, 1998).
Studying the relations between a large population of corporations and investment banks, Baker
points out that during the period, 1980-1985, the economic industry had witnessed “the death of
relationships.” That is, as the industry became mature, the financial relations seemed to become more
purely transactional, excluding particular relationships between a corporate and an investment bank
(1990; see also Mintz & Schwartz, 1985; and Mizruchi, 1982). Employing Williamson’s TCE approach,
he identifies three types relationship interfaces – transactional (strict loan business), relational (loan
business based on existing relations), and hybrid (seeking multiple sources of investment banks) form;
and finds that most companies deploy the third interface. He argues that such movement can be
interpreted as the organizations’ effort to reduce their dependence on financial sources. Although Baker
does not strongly suggest this, his finding on the third interface might indicate that fully institutionalized
interorganizational relations or structures foster more transaction-oriented practices. His finding does
make a sense in relation to the industrialization process. Specifically, industrialization tends to alienate
individuals from their social world and engage them in a more formal and rule-binding world
(Organization Man, for example, Whyte, 1956). Applying this assumption to the general public of
corporations (as in predicting a specific group of individual organizational practices) may commit an
ecological fallacy because of some contending findings such as Uzzi’s study (1997). Nevertheless, it is
compelling that a fully mature, institutionalized industry may demand more formalized and task-oriented
economic activities.
Viewpoints taken by Gulati (1995) and Uzzi (1997) tend to weigh in on the post hoc explanation
on the formation of alliance, which may result in some limitations. Specifically, first, even though there


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