What Do Markets Really Look Like?

Social scientists have conceptualized market exchange relationships as governed by market calculus, socially embedded ties of trust and obligation, and legal ties of contract. We conceptualize and then measure these orientations to exchange relationships. We focus on the relationships of market exchange for a sample of Australian organizations with their largest supplier and customer. We find that market, socially embedded, and contract governance of exchange are widespread in the Australian economy. Consistent with the socially embedded perspective in sociology, we find that market calculus expectations are actually enhanced when the exchange relationship is socially embedded. The use of contracts is not strongly related to either market or social governance mechanisms. We also estimate statistical models predicting variation in market, social and legal governance mechanisms derived from neoclassical, social embeddedness, transaction cost, and flexible specialization theories. All of these theories, with the exception of flexible specialization, receive considerable support in these models. [ABSTRACT FROM AUTHOR]