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Market Uncertainty and the Social Character of Economic Exchange

Joel M. Podolny
Administrative Science Quarterly
Vol. 39, No. 3 (Sep., 1994), pp. 458-483
DOI: 10.2307/2393299
Stable URL:
Page Count: 26
Subjects: Business Sociology Public Policy & Administration Management & Organizational Behavior
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Market Uncertainty and the Social Character of Economic Exchange
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This paper proposes that organizations overcome problems of market uncertainty by adopting a principle of exclusivity in selecting exchange partners. This general proposition in turn implies two specific hypotheses. First, the greater the market uncertainty, the more that organizations engage in exchange relations with those with whom they have transacted in the past. Second, the greater the uncertainty, the more that organizations engage in transactions with those of similar status. A study of investment banking relationships in the investment grade and non-investment-grade debt markets from 1981 to 1987 provides support for the hypotheses. The implications of this analysis for stratification and concentration in the market are discussed.

Notes and References

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