embeddedness

Embeddedness is a concept in sociology and economics describing how economic actions are shaped by social relations, cultural norms, and institutional contexts, rather than by abstract market forces alone. Karl Polanyi argued that modern economies are historically embedded in social and political structures and that markets rely on social protections; they can become disembedded, producing social disruption.

Mark Granovetter refined the idea in 1985, arguing that economic action is sustained through networks of interpersonal ties. Trust, information, and reciprocity within social networks shape decisions, prices, and market outcomes.

Since then, embeddedness has been expanded to institutional and organizational forms and to geographic or place-based analyses, examining how institutions, firms, and locations influence economic behavior. It is used to study supply chains, labor markets, entrepreneurship, and local development.

Critics warn that the concept can overemphasize social constraint or be too diffuse, potentially downplaying power and global structural forces. Proponents maintain that it provides a necessary counterweight to purely market-centric explanations.

In practice, embeddedness helps explain why markets operate differently across places and times by tracing social ties, norms, and institutional arrangements that sustain or impede exchange.