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: Consider Ganovetter’s claim “economic action is embedded in social relations” and the evidence on the role of social identity and social status in markets

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: Consider Ganovetter’s claim “economic action is embedded in social relations” and the evidence on the role of social identity and social status in markets
MG429: Consider Ganovetter’s claim “economic action is embedded in social relations” and the evidence on the role of social identity and social status in markets.

Part I: How do identity and status influence economic action in the market context?
What opportunities do they open and what constraints do they generate?
What is your opinion about the way economics explains the influence of social factors of in general and influence of identity and status in particular?

Part II: Consider the claim of San Mateo County investment pool in 2008. What happened to Ernst & Young after San Mateo County investment Pool sued and why? Link your arguments with evidence from the readings

Part III: Consider the claims of the report from March 2010. What do you expect to see happening to E & Y and why?

For: Dr. Daniela Lup
Candidate number: 19912
Due date: May 14th 2010
Word count: 2,152

Introduction:

Sociological relations constrain the extent to which actors make individual economic decisions. Strategic decision-making, even when structured to solely serve the firm’s individual interests is subsequently affected by both actors that relate directly to the firm (i.e. buyers, suppliers, partners, stockholders) and the wider social audience (i.e. media, individual investors, customers, regulatory institutions). In order to provide an all-encompassing account of the origin of firms’ economic actions and to fully comprehend successive economic outcomes, socially embedded economic actions (Granovetter, 1985) and the presence of social identity and status need to be considered. Identity includes idiosyncrasies, values and competencies that distinguish one entity from another. An identity is socially embedded as socio-economic processes evaluate and validate firms’ actions based on the perceived values of the firm. Identity is a necessary element in economic analysis as individuals make better decisions when



Bibliography: Baer, J. (2010, March 12). Vaulkas report finds few heros. Financial Times. Christie, J. (2008, November 20). US investors sue E&Y over Lehman woes. Retrieved from Http://www.accountancyage.com/2230856. Harris, J., & Bromiley, P. (2007). Incentives to Cheat: the Influence of Executive Compensation and Firm Performance on Financial Misrepresentation. Organization Science, 18(3), may-june, 350-367. Giordano, P. C. (1983). Sanctioning the High Status Deviant: An Attributional Analysis. Social Psychology Quarterly, 46(4), 329-342. Granovetter, M. (1985). Economic Action and Social Structure: the Problem of Embeddedness. American Journal of Sociology, 91(3), 481. Jensen, M. (2006). Should We Stay or Should We go? Accountability, Status Anxiety and Client Defections. Administrative Science Quarterly, 51(1), march, 97-128. Jonsson, S., Greve, H. R., & Fujiwara-Greve, T. (2009). Undeserved Loss: the Spread of Legitimacy Loss to Innocent Organizations in Response to Reported Corporate Deviance. Administrative Science Quarterly, 54(2), 195-228. De la Merced, M. J., & Sorkin, A. R. (2010, March 12). Report details on how Lehman hid its woes. New York Times. Podolny, M. J. (1993). A Status-Based Model of Market Competition. American Journal of Sociology, 98(4), 829-869. Rhee, M., & Haunschild, P. R. (2006). The liability of good reputation: A study of product recalls in the US automobile industry. Organization Science, 17, 101. Rindova, V. P., Williamson, I. O., & Petkova, A. P. (2005). Being Good or Being Known. An Empirical Examination of the Dimensions, Antecedents and Consequences of Organizational Reputation. Academy of Management Journal, 48(6), 1033-1049. Sanderson, R. (2010, March 12). E&Y claims to shake accounting fraternity. Financial Times.

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