markets.In essence,they discovered that the ological convergence of institutions toward atomized,price-taking actors,with perfect Western models implied by the economic un- and symmetrical information assumed by neo- derpinnings in much of modernization theory classical theory,did not seem to exist empiri- led scholars to look into how the evolving in- cally.Social relations seemed to be crucial to stitutions of capitalism (laws,regulations,and the functioning of markets and market actors institutionalized practices)came to regulate in a myriad of ways.Although all these sub- the relationships between firms,owners,gov- fields began to criticize economics,they did ernments,and workers in ways that produced so from different perspectives and for differ- fundamental differences in the market struc- ent reasons,and the critiques internal to the tures of these societies. logics of these fields were the first moves to- As development projects took off,first in ward the creation ofa contemporary sociology Japan and then later in Taiwan and Korea, of markets.It is useful to understand these de- scholars delved into how local arrangements bates in order to make sense of the different between governments,economic elites,and theoretical voices in the sociology of markets. workers provided the conditions of economic Political economy in the 1960s was domi-growth in both developed and less developed nated by modernization theory.This perspec-societies (Amsden 1991;Aoki 1990;Dore tive sought to explain how economically un-1973,1987,1997;Evans 1995;Johnson 1982; derdeveloped countries might develop along Wade 1990).Meanwhile,the study of com- the lines of industrialized nations.Generally, parative capitalisms revealed that the rela- studies in this vein focused on how similar tionships between these groups showed re- cultural and structural features in develop-markable diversity and reflected very much ing nations,characterized as traditional,could a historical,cultural,and national trajectory be overcome with the emulation of institu- (Campbell et al.1991,Campbell Lindberg tional models extant in developed countries to 1990,Fligstein Choo 2005).This perspec- promote economic growth(Eisenstadt 1973,tive suggested that governments,workers,and Kerr 1960,Lerner Riesman 1963,Rostow capitalists produced market structures that 1961).Critiques of modernization theory in were different across countries(Albert 1993, political economy led researchers to new per- Berger Dore 1996,Boyer Drache 1996, spectives on development and comparative Hall Soskice 2001,Hollingsworth et al. capitalisms. 1994).Markets were not given by outsiders, Scholars in this field looked back to but instead reflected the social and politi- Polanyi's(1957)The Great Transformation for cal construction of each society,where the inspiration(see Block Evans 2005 for a re-history and culture surrounding class rela- view of the literature on the links between tions and the various kinds of interventions by states and markets).Polanyi argued not only governments produced unique institutional that the creation of markets required states, orders. but also that the formation of capitalist mar- Organizational theory,much of which was kets would produce social chaos.In response,centered in business schools,was concerned he suggested that governments would have with understanding how the managers of to intervene in markets to stabilize them firms read the demands of their environ- and to provide social protection for work-ments and adjust their organizational struc- ers and rules to guide the interactions be-tures in line with those contingencies(Miles tween groups of capitalists.The ways they 1980).Although managerial theory rejected did this would necessarily be contingent and some of the tenets of economics(March et al. implied that historical institutional variation 1958,Simon 1957),such as perfect informa- could help explain cross-national variation in tion and perfect rationality,the purpose of market structures.The rejection of the tele- the firm was still to adjust to the world of Fligstein·Dauter
ANRV316-SO33-06 ARI 24 May 2007 10:6 markets. In essence, they discovered that the atomized, price-taking actors, with perfect and symmetrical information assumed by neoclassical theory, did not seem to exist empirically. Social relations seemed to be crucial to the functioning of markets and market actors in a myriad of ways. Although all these sub- fields began to criticize economics, they did so from different perspectives and for different reasons, and the critiques internal to the logics of these fields were the first moves toward the creation of a contemporary sociology of markets. It is useful to understand these debates in order to make sense of the different theoretical voices in the sociology of markets. Political economy in the 1960s was dominated by modernization theory. This perspective sought to explain how economically underdeveloped countries might develop along the lines of industrialized nations. Generally, studies in this vein focused on how similar cultural and structural features in developing nations, characterized as traditional, could be overcome with the emulation of institutional models extant in developed countries to promote economic growth (Eisenstadt 1973, Kerr 1960, Lerner & Riesman 1963, Rostow 1961). Critiques of modernization theory in political economy led researchers to new perspectives on development and comparative capitalisms. Scholars in this field looked back to Polanyi’s (1957) The Great Transformation for inspiration (see Block & Evans 2005 for a review of the literature on the links between states and markets). Polanyi argued not only that the creation of markets required states, but also that the formation of capitalist markets would produce social chaos. In response, he suggested that governments would have to intervene in markets to stabilize them and to provide social protection for workers and rules to guide the interactions between groups of capitalists. The ways they did this would necessarily be contingent and implied that historical institutional variation could help explain cross-national variation in market structures. The rejection of the teleological convergence of institutions toward Western models implied by the economic underpinnings in much of modernization theory led scholars to look into how the evolving institutions of capitalism (laws, regulations, and institutionalized practices) came to regulate the relationships between firms, owners, governments, and workers in ways that produced fundamental differences in the market structures of these societies. As development projects took off, first in Japan and then later in Taiwan and Korea, scholars delved into how local arrangements between governments, economic elites, and workers provided the conditions of economic growth in both developed and less developed societies (Amsden 1991; Aoki 1990; Dore 1973, 1987, 1997; Evans 1995; Johnson 1982; Wade 1990). Meanwhile, the study of comparative capitalisms revealed that the relationships between these groups showed remarkable diversity and reflected very much a historical, cultural, and national trajectory (Campbell et al. 1991, Campbell & Lindberg 1990, Fligstein & Choo 2005). This perspective suggested that governments, workers, and capitalists produced market structures that were different across countries (Albert 1993, Berger & Dore 1996, Boyer & Drache 1996, Hall & Soskice 2001, Hollingsworth et al. 1994). Markets were not given by outsiders, but instead reflected the social and political construction of each society, where the history and culture surrounding class relations and the various kinds of interventions by governments produced unique institutional orders. Organizational theory, much of which was centered in business schools, was concerned with understanding how the managers of firms read the demands of their environments and adjust their organizational structures in line with those contingencies (Miles 1980). Although managerial theory rejected some of the tenets of economics (March et al. 1958, Simon 1957), such as perfect information and perfect rationality, the purpose of the firm was still to adjust to the world of 110 Fligstein · Dauter Annu. Rev. Sociol. 2007.33:105-128. Downloaded from www.annualreviews.org Access provided by Shanghai Jiaotong University on 02/04/15. For personal use only
competition,as economics implied.The cri- that sectors that join all interested parties look tique of management theory's focus on in- quite similar to the set of actors that po- ternal organizational processes led organiza- litical economy focuses on,i.e.,firms,gov- tional theorists in two directions. ernments,and workers.DiMaggio Powell Hannan Freeman (1977)argued that (1983)extended these arguments and called scholars had paid too much attention to such environments "organizational fields,"a adaptive processes in organizations.Instead,term that has caught on.The field metaphor they studied the emergence of organizational implies that firms watch one another,engage forms at the level of populations.They im-in strategic behavior vis-a-vis one another, plied that market opportunity brought for-and look to one another for clues as to what ward the birth of firms.But the character of constitutes successful behavior.DiMaggio the market,i.e.,the resources that could be Powell's main focus was how firms in organi- exploited by firms,would determine which zational fields came to resemble one another 3J0'SMOIA3IEnUUE MMM wO forms of organization would survive.The through processes of mimetic,coercive,and main problem that competition created for normative isomorphism. firms,from Hannan Freeman's perspective,In 1981,White produced a sociological was resource dependence(Pfeffer Salancik view of what he thought firms do in markets. 1978).Many firms could not get the resources His central argument was that firms in pro- 'OO u they needed to survive,and this led to high duction markets position their organizations rates of failure at the beginning of market vis-a-vis one another.Using the price and rel- opening projects.Despite population ecol-ative quality of their product,they signal to ogy's focus on competition,scholars in this each other what kind of producer they want to field realized that the formation of market be.This signaling produces what White called boundaries was a social process and that the a market that he defined as a reproducible formation of niches often reflected the ability role structure.White's view combines some of firms to segregate their markets(Carroll insights from economics about how price can 1985,Hannan Freeman 1988).Firms de-be used as a signal(Spence 1974)with the or- 1002 pend on legitimacy,and external shocks to a ganizational sociology focus on the construc- niche,such as the introduction of a law,can tion of fields or niches. have a profound effect on the dynamics of a While organizational scholars examined niche (Ranger-Moore et al.1991,Ingram social processes structuring the relationships Rao 2004,Haveman Rao 1997).Recently,between organizations,scholars in stratifica- ecologists have begun to focus on how firms tion and labor markets looked anew at the role form identities and how these identities form of firms in resource distribution.During the markets(Carroll Swaminathan 2000). 1960s and 1970s,the main approach sociol- While population ecology viewed the en- ogists used to examine labor markets was the vironment of the firm as“hard,”and thus the status attainment model.This view focused on main mechanism of selection was the avail-how individuals were sorted into a relatively ability of the scarcest resource,institutional fixed set of positions according to their per- theory posited that the environment was at sonal characteristics,such as family origins, least partially a social construction.Scott education,gender,and race(Blau Duncan Meyer(1982)called such environments "sec-1967,Hauser Featherman 1977).Because tors"and described the socially constructed the status attainment model views the linkages environment of firms as a function of all the between individuals and their socioeconomic other organizations that might impinge on a outcomes as mainly a function of their per- particular organization.They included gov- sonal characteristics,the problem of the de- ernments,suppliers,workers,and customers mand for labor,and thus the role of the firm, as part of such a social construction.We note was outside its purview. www.annualreviews.org The Sociology of Markets
ANRV316-SO33-06 ARI 24 May 2007 10:6 competition, as economics implied. The critique of management theory’s focus on internal organizational processes led organizational theorists in two directions. Hannan & Freeman (1977) argued that scholars had paid too much attention to adaptive processes in organizations. Instead, they studied the emergence of organizational forms at the level of populations. They implied that market opportunity brought forward the birth of firms. But the character of the market, i.e., the resources that could be exploited by firms, would determine which forms of organization would survive. The main problem that competition created for firms, from Hannan & Freeman’s perspective, was resource dependence (Pfeffer & Salancik 1978). Many firms could not get the resources they needed to survive, and this led to high rates of failure at the beginning of market opening projects. Despite population ecology’s focus on competition, scholars in this field realized that the formation of market boundaries was a social process and that the formation of niches often reflected the ability of firms to segregate their markets (Carroll 1985, Hannan & Freeman 1988). Firms depend on legitimacy, and external shocks to a niche, such as the introduction of a law, can have a profound effect on the dynamics of a niche (Ranger-Moore et al. 1991, Ingram & Rao 2004, Haveman & Rao 1997). Recently, ecologists have begun to focus on how firms form identities and how these identities form markets (Carroll & Swaminathan 2000). While population ecology viewed the environment of the firm as “hard,” and thus the main mechanism of selection was the availability of the scarcest resource, institutional theory posited that the environment was at least partially a social construction. Scott & Meyer (1982) called such environments “sectors” and described the socially constructed environment of firms as a function of all the other organizations that might impinge on a particular organization. They included governments, suppliers, workers, and customers as part of such a social construction. We note that sectors that join all interested parties look quite similar to the set of actors that political economy focuses on, i.e., firms, governments, and workers. DiMaggio & Powell (1983) extended these arguments and called such environments “organizational fields,” a term that has caught on. The field metaphor implies that firms watch one another, engage in strategic behavior vis-a-vis one another, ` and look to one another for clues as to what constitutes successful behavior. DiMaggio & Powell’s main focus was how firms in organizational fields came to resemble one another through processes of mimetic, coercive, and normative isomorphism. In 1981, White produced a sociological view of what he thought firms do in markets. His central argument was that firms in production markets position their organizations vis-a-vis one another. Using the price and rel- ` ative quality of their product, they signal to each other what kind of producer they want to be. This signaling produces what White called a market that he defined as a reproducible role structure. White’s view combines some insights from economics about how price can be used as a signal (Spence 1974) with the organizational sociology focus on the construction of fields or niches. While organizational scholars examined social processes structuring the relationships between organizations, scholars in stratification and labor markets looked anew at the role of firms in resource distribution. During the 1960s and 1970s, the main approach sociologists used to examine labor markets was the status attainment model. This view focused on how individuals were sorted into a relatively fixed set of positions according to their personal characteristics, such as family origins, education, gender, and race (Blau & Duncan 1967, Hauser & Featherman 1977). Because the status attainment model views the linkages between individuals and their socioeconomic outcomes as mainly a function of their personal characteristics, the problem of the demand for labor, and thus the role of the firm, was outside its purview. www.annualreviews.org • The Sociology of Markets 111 Annu. Rev. Sociol. 2007.33:105-128. Downloaded from www.annualreviews.org Access provided by Shanghai Jiaotong University on 02/04/15. For personal use only
During the 1970s,scholars became in- What began next was an exploration of terested in two other questions:How does product and labor markets.Scholars studied the structure of jobs affect individual mo- concrete cases and attempted to apply these bility patterns and what is the actual pro- tools to account for what had emerged.The cess through which people are matched to sociology of markets has been used to ex- jobs?Sociologists answered these questions plain many aspects of markets.Some scholars by considering the role of firms in the hir- have demonstrated how the social relation- ing process and social relationships in the ships in markets produce more stable prices matching process.The new structuralism (Baker 1984,Uzzi 1997,Uzzi Lancaster modeled how firms affect the distribution of 2004).Others have focused on how the social rewards(Baron Bielby 1980,Hodson 1983,structuring of markets has affected the birth Kalleberg Griffin 1980).White's (1970) and death of small firms(Stuart et al.1999, Chains of Opportunity elaborated how vacancy Stuart Sorenson 2003).Still others have chains of jobs helped produce the distribu- observed the innovation and spread of new tion of workers and rewards.Granovetter's market strategies such as new products,finan- (1974)Getting a Tob took on the question of cial innovations,or changes in organizations how people got matched to jobs.He intro-such as the diversification of products,geo- duced the idea that social networks mediate graphic expansion,and vertical integration,as the links between employers and employees. well as changes in which subunit controls the Both White and Granovetter championed firm(Ahmadjian Robinson 2001;Beckman network analysis as a way to understand et al.2002;Davis 1991;Davis et al.1994;Fiss the social structure linking employers and Zajac 2004;Fligstein 1985,1991;Gulati employees. Westphal 1999;Haunschild 1993;Hirsch 1986;Ocasio Kim 1999;Westphal Zajac 1998;Zom2004;Zuckerman1999,2000). AGREEMENTS IN THE The exploration of all possible link- SOCIOLOGY OF MARKETS ages between firms,suppliers,customers, At the core of the sociology of markets is the governments,and workers pushed scholars attempt to insert sociologists into the study to postulate a plethora of mechanisms for of the economic realm by bringing social the- embeddedness.The literature groped with ory and the way social life works in general trying to generalize these cases and began to into firms,markets,and industries.As our re- elaborate different ways of thinking about the view suggests,the theoretical pieces for the problem of the social embeddedness of mar- construction of the sociology of markets were kets.Krippner(2001)has argued that the term in place by 1983.Firms,the social structures embeddedness has become vaguely defined. that defined their relationships to competi- We argue that this was the case from the very tors,and the social structures that linked them beginning.Scholars who were coming at the to suppliers,customers,workers,and govern-problem from very different points of view ments were already theorized to exist and to examined different ways in which economic vary across markets,historical time periods,transactions were socially structured. and countries.Granovetter's declaration that The variety of approaches has made pro- economic life was always embedded in social viding a sociological definition for markets life has proven to be the intellectual frame that difficult.For neoclassical theory,markets justified opening a floodgate of research and simply imply exchange between actors for brought a massive set of scholars armed with goods or services.These exchanges are usu- sociological ideas into studying market activ- ally thought to be fleeting,with price (i.e., ity and,even more importantly,engaging one the amount of a commodity that is exchanged another in discourse. for another using a generalized medium of 12 ligstein·Dauter
ANRV316-SO33-06 ARI 24 May 2007 10:6 During the 1970s, scholars became interested in two other questions: How does the structure of jobs affect individual mobility patterns and what is the actual process through which people are matched to jobs? Sociologists answered these questions by considering the role of firms in the hiring process and social relationships in the matching process. The new structuralism modeled how firms affect the distribution of rewards (Baron & Bielby 1980, Hodson 1983, Kalleberg & Griffin 1980). White’s (1970) Chains of Opportunity elaborated how vacancy chains of jobs helped produce the distribution of workers and rewards. Granovetter’s (1974) Getting a Job took on the question of how people got matched to jobs. He introduced the idea that social networks mediate the links between employers and employees. Both White and Granovetter championed network analysis as a way to understand the social structure linking employers and employees. AGREEMENTS IN THE SOCIOLOGY OF MARKETS At the core of the sociology of markets is the attempt to insert sociologists into the study of the economic realm by bringing social theory and the way social life works in general into firms, markets, and industries. As our review suggests, the theoretical pieces for the construction of the sociology of markets were in place by 1983. Firms, the social structures that defined their relationships to competitors, and the social structures that linked them to suppliers, customers, workers, and governments were already theorized to exist and to vary across markets, historical time periods, and countries. Granovetter’s declaration that economic life was always embedded in social life has proven to be the intellectual frame that justified opening a floodgate of research and brought a massive set of scholars armed with sociological ideas into studying market activity and, even more importantly, engaging one another in discourse. What began next was an exploration of product and labor markets. Scholars studied concrete cases and attempted to apply these tools to account for what had emerged. The sociology of markets has been used to explain many aspects of markets. Some scholars have demonstrated how the social relationships in markets produce more stable prices (Baker 1984, Uzzi 1997, Uzzi & Lancaster 2004). Others have focused on how the social structuring of markets has affected the birth and death of small firms (Stuart et al. 1999, Stuart & Sorenson 2003). Still others have observed the innovation and spread of new market strategies such as new products, financial innovations, or changes in organizations such as the diversification of products, geographic expansion, and vertical integration, as well as changes in which subunit controls the firm (Ahmadjian & Robinson 2001; Beckman et al. 2002; Davis 1991; Davis et al. 1994; Fiss & Zajac 2004; Fligstein 1985, 1991; Gulati & Westphal 1999; Haunschild 1993; Hirsch 1986; Ocasio & Kim 1999; Westphal & Zajac 1998; Zorn 2004; Zuckerman 1999, 2000). The exploration of all possible linkages between firms, suppliers, customers, governments, and workers pushed scholars to postulate a plethora of mechanisms for embeddedness. The literature groped with trying to generalize these cases and began to elaborate different ways of thinking about the problem of the social embeddedness of markets. Krippner (2001) has argued that the term embeddedness has become vaguely defined. We argue that this was the case from the very beginning. Scholars who were coming at the problem from very different points of view examined different ways in which economic transactions were socially structured. The variety of approaches has made providing a sociological definition for markets difficult. For neoclassical theory, markets simply imply exchange between actors for goods or services. These exchanges are usually thought to be fleeting, with price (i.e., the amount of a commodity that is exchanged for another using a generalized medium of 112 Fligstein · Dauter Annu. Rev. Sociol. 2007.33:105-128. Downloaded from www.annualreviews.org Access provided by Shanghai Jiaotong University on 02/04/15. For personal use only
exchange,ie.,money)determined by the sup- repeated exchanges occur between buyers and ply and demand for the commodity.From the sellers under a set of formal and informal point of view of the sociology of markets,the rules governing relations between competi- problem is that this type of exchange already tors,suppliers,and customers.+These fields shows a great deal of social structure.Mar-operate according to local understandings and ket actors have to find one another.Money formal and informal rules and conventions has to exist to allow market actors to get be-that guide interaction,facilitate trade,define yond bartering nonequivalent goods.Actors what products are produced,indeed are con- have to know what the price is.Underlying stitutive of products,and provide stability for all exchange is that both buyers and sellers buyers,sellers,and producers.These market- have faith that they will not be cheated.Such places are dependent on governments,laws, faith often implies informal (i.e.,personal and larger cultural understandings support- knowledge of the buyer or seller)and formal ing market activity.The first thing a sociol- 3JO'SMOIA3IEnuue Ajuo asn mechanisms(i.e.,law)that govern exchange.ogy of markets suggests is that market actors euosiad Furthermore,market actors are often organi- will develop social structures to mediate the zations,implying that organizational dynam-problems they encounter in exchange,com- 豆 ics influence market structures.For sociolo- petition,and production.We discuss each of gists,market exchange implies a whole back-these in turn and delineate the primary contri- drop of social arrangements that economics butions ofeach perspective with regard to how does not even begin to hint at. market actors solve these problems and,in do- But the sociology of markets goes further ing so,construct and navigate their worlds. 宝 than just questioning the institutional embed- Many aspects of exchange relationships dedness of an anonymous market.It is pre-in markets have been examined by sociolo- pared to unpack the black boxes of exchange,gists.Institutional theory suggests not only 尊 competition,and production.Sociologists be-that contractual market exchange depends gin by realizing that market actors are in-on the rule setting and sanction enforce- volved in day-to-day social relationships with ment of states,but also that states may de- one another,relationships based on trust,fine what types of products are appropriate friendship,power,and dependence.For the for exchange.Furthermore,theinternalstruc- modern sociology of markets (Durkheim ture of the state as rule setter and regulator 1964)3,unstructured,haphazard,one-shot,can influence the types of products states al- anonymous social exchange is not a market.low to be exchanged and the rules support- Instead,markets imply social spaces where ing and surrounding exchange(Carruthers Halliday 1998,Delaney 1992,Schneiberg Soule 2005).Buyers and sellers also are gener- Ironically,scholars of the sociology of markets almost ally known to one another and in many cases never cite Durkheim.But a good case can be made that are involved in repeated exchange.Network almost all of the important ideas in the sociology of mar- kets have Durkheimian roots.Durkheim recognized the theorists have emphasized the role that so- pivotal role of the state and law in capitalist exchange,pre- cial networks play in generating trust between figuring the political economy concern with these issues. buyers and sellers that makes exchange possi- He also recognized that there was a noncontractual basis to contract that implied that personal relationships were ble (Granovetter 1985).Cultural sociologists necessary for people to honor contracts.Finally,in the di- have looked at how specific exchange relations vision of labor the major mechanism that drove modern society was competition.Durkheim's argument was that people divided up tasks to lessen their competition with other people.This mechanism is arguably at the core of +Of course,some of the identities of the buyers and sellers the population ecology view that market niches become change over time.In addition,more peripheral buyers and partitioned by competition and White's arguments about sellers come into the market,leave,and do not return.But how firms avoid competition by signaling which part of the the core players in the market,the largest producers and market they will produce for. consumers,create a social structure. www.annualreviews.org The Sociology of Markets 1I3
ANRV316-SO33-06 ARI 24 May 2007 10:6 exchange, i.e., money) determined by the supply and demand for the commodity. From the point of view of the sociology of markets, the problem is that this type of exchange already shows a great deal of social structure. Market actors have to find one another. Money has to exist to allow market actors to get beyond bartering nonequivalent goods. Actors have to know what the price is. Underlying all exchange is that both buyers and sellers have faith that they will not be cheated. Such faith often implies informal (i.e., personal knowledge of the buyer or seller) and formal mechanisms (i.e., law) that govern exchange. Furthermore, market actors are often organizations, implying that organizational dynamics influence market structures. For sociologists, market exchange implies a whole backdrop of social arrangements that economics does not even begin to hint at. But the sociology of markets goes further than just questioning the institutional embeddedness of an anonymous market. It is prepared to unpack the black boxes of exchange, competition, and production. Sociologists begin by realizing that market actors are involved in day-to-day social relationships with one another, relationships based on trust, friendship, power, and dependence. For the modern sociology of markets (Durkheim 1964)3, unstructured, haphazard, one-shot, anonymous social exchange is not a market. Instead, markets imply social spaces where 3Ironically, scholars of the sociology of markets almost never cite Durkheim. But a good case can be made that almost all of the important ideas in the sociology of markets have Durkheimian roots. Durkheim recognized the pivotal role of the state and law in capitalist exchange, pre- figuring the political economy concern with these issues. He also recognized that there was a noncontractual basis to contract that implied that personal relationships were necessary for people to honor contracts. Finally, in the division of labor the major mechanism that drove modern society was competition. Durkheim’s argument was that people divided up tasks to lessen their competition with other people. This mechanism is arguably at the core of the population ecology view that market niches become partitioned by competition and White’s arguments about how firms avoid competition by signaling which part of the market they will produce for. repeated exchanges occur between buyers and sellers under a set of formal and informal rules governing relations between competitors, suppliers, and customers.4 These fields operate according to local understandings and formal and informal rules and conventions that guide interaction, facilitate trade, define what products are produced, indeed are constitutive of products, and provide stability for buyers, sellers, and producers. These marketplaces are dependent on governments, laws, and larger cultural understandings supporting market activity. The first thing a sociology of markets suggests is that market actors will develop social structures to mediate the problems they encounter in exchange, competition, and production. We discuss each of these in turn and delineate the primary contributions of each perspective with regard to how market actors solve these problems and, in doing so, construct and navigate their worlds. Many aspects of exchange relationships in markets have been examined by sociologists. Institutional theory suggests not only that contractual market exchange depends on the rule setting and sanction enforcement of states, but also that states may de- fine what types of products are appropriate for exchange. Furthermore, the internal structure of the state as rule setter and regulator can influence the types of products states allow to be exchanged and the rules supporting and surrounding exchange (Carruthers & Halliday 1998, Delaney 1992, Schneiberg & Soule 2005). Buyers and sellers also are generally known to one another and in many cases are involved in repeated exchange. Network theorists have emphasized the role that social networks play in generating trust between buyers and sellers that makes exchange possible (Granovetter 1985). Cultural sociologists have looked at how specific exchange relations 4Of course, some of the identities of the buyers and sellers change over time. In addition, more peripheral buyers and sellers come into the market, leave, and do not return. But the core players in the market, the largest producers and consumers, create a social structure. www.annualreviews.org • The Sociology of Markets 113 Annu. Rev. Sociol. 2007.33:105-128. Downloaded from www.annualreviews.org Access provided by Shanghai Jiaotong University on 02/04/15. For personal use only