How Personal Networks Shape Business : An Anthropological Study of Social Embeddedness, Knowledge Development and Growth of Firms

Abstract: The research draws from anthropological work on social exchange and later work on embeddedness in an exploration of how personal networks shape business. The purpose of the research is to contribute to an understanding of how social relations shape economic processes and vice versa. The research takes its starting point in small manufacturing firms in southern Sweden primarily in the plastics industry. Internal and external relations of these firms are studied using qualitative methods and formal network analysis. Qualitative methods are used to identify important mechanisms of personal networks. It is argued that personal networks provide a domain of interaction outside short term economic rationality but at the same time, the development of personal networks is fuelled by the need for coordination in achieving business ends. Particularly personal networks are pivotal for gaining access to diverse sets of expertise. Personal networks are shown to be an integral part of both effective production and development in these firms. This is in stark contrast to notions of impersonal markets and bureaucracy that still shape much of discourse on business. Formal network analysis, starting form recurring problems of coordinating production, provides an important complement and expansion of the findings. It becomes evident that certain structures of informal organization provide individuals with means of gaining recognition and a means of navigating a dynamic environment. The same structures are also found to be important for firm development. These networks provide a better basis for acquiring useful information and integrating this meaningfully in the firm. A strong correlation exists between the structure of informal organization and firm growth. The research develops relatively simple methods to differentiate a beneficial informal organization from less beneficial ones in terms of firm development. It also outlines factors shaping the development of beneficial personal network structures in and between firms. These findings, if corroborated in subsequent research, have important implications both for understanding knowledge development and growth of firms and also for understanding how individuals are shaped by the informal structures of their work experience. Hopefully, the research will stimulate further dialogue between anthropology and research on social embeddedness.