Embeddedness and Price Formation in the Corporate Law Market

Abstract

The determination of prices is a key function of markets, yet sociologists are just beginning to study it. Most theorists view prices as a consequence of economic processes. By contrast, we consider how social structure shapes prices. Building on embeddedness arguments and original fieldwork at large law firms, we propose that a firm's embedded relationships influence prices by prompting private-information flows and informal governance arrangements that add unique value to goods and services. We test our arguments with a separate longitudinal dataset on the pricing of legal services by law firms that represent corporate America. We find that embeddedness can significantly increase and decrease prices net of standard variables and in markets for both complex and routine legal services. Moreover, results show that three forms of embeddedness—embedded ties, board memberships, and status—affect prices in different directions and have different magnitudes of effects that depend on the complexity of the legal service.

Licensing Exchange - Insights from the Biopharmaceutical Industry

“…On the basis of this combined information, we derive the board composition for firm i in year t. Subsequently, we count the number of links to external boards (restricted to the biopharmaceutical industry) over all the firm's board members, which is an index of firm i's degree centrality in the board interlock network in year t (corrected for redundancies). Mariolis and Jones (1982) show that this measure, also used in recent studies on board interlocks (e.g., Fiss & Zajac, 2004;Uzzi & Lancaster, 2004), is more stable and reliable than other measures of centrality, such as the ones proposed by Bonacich (1972 The measure for licensing centrality where represents a 20% depreciation rate and T = 0 corresponds with the inception of firm i thus becomes:…”

Collaboration and Creativity: The Small World Problem

“…Would we find the same patterns for Off-Broadway and experimental theatre where there is less of a focus on creativity through convention-plus-extension than there is for Broadway? While more research is obviously needed before extensions of this research can be made to other contexts and to target levels of Q, it does provide a new avenue of research that follows in the tradition of research on the strength of weak ties and embeddedness, which have been extended from their original sites of job search and organizational behavior to social movements, gender and race studies, mergers and acquisitions, norm formation, price formation, international trade, and other socio-economic phenomena (Montgomery 1998;Rao et al 2001;Lincoln et al 1992;Sacks et al Uzzi 2001;Ingram and Roberts 2000;Uzzi and Lancaster 2004).…”

How Exactly Do Networking Investments Pay Off? Analyzing the Impact of Nascent Entrepreneurs Networking Investments on Access to Start-Up Resources

“…Second, there are indirect costs stemming from the time spent on maintaining network relationships; these costs are especially relevant for entrepreneurs (Zhao & Aram, 1995;Watson, 2007). While the direct costs in terms of resource obligations can be seen as the price of obtaining specific resources via network exchange, which is usually more favorable than the one realized in market relationships (Uzzi, 1999;Uzzi & Lancaster, 2004), the indirect or opportunity costs make networking an investment. To establish and maintain network relationships that might be useful in terms of potentially providing resources crucial for founding a new venture, nascent entrepreneurs have to invest time and energy in the first place, which negatively impacts their time available for other tasks that are important for founding a new venture.…”