This article highlights how maintaining close relationships with the government can be both a blessing and a burden. While Airbus has gained a lot of resources due to its close ties to the European governments, their decisions are also greatly constrained by European labor rules and politics. Therefore, in considering a firm's decision options, one must keep in mind its current set of contracts, agreements, and relationships. Decisions do not exist independently. Strategic moves are usually intertwined. Therefore, analyzing a firm's decisions independently is underinstitutionalizing these decisions -- we may overestimate its choices.
If you are interested in the issue of embeddedness, this is one great article to read:
Granovetter, Mark. 1985. Economic action and social structure: The problem of embeddedness, American Journal of Sociology, 91(3): 481-510.
Sunday, March 4, 2007
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