Podolny 2001

Networks as the Pipes and Prisms of the Market

Abstract

Analytic tool

Analytical distinction between two types of market uncertainty

1) egocentric, which refers to a focal actor’s uncertainty regarding the best way to convert a set of inputs to an output desired by a potential exchange partner, 

2) Altercentric, which denotes the uncertainty confronted by a focal actor’s exchange partners regarding the quality of the output that the focal actor brings to the market.

-> How the value of “structural holes” and market status vary with these two types of uncertainty

Argument

1) The value of structural holes increases with egocentric uncertainty, but not with altercentric uncertainty

2) The value of status increases with altercentric uncertainty but declines with egocentric uncertainty

Implication

Thus actors with networks rich in structural holes should sort into markets or market segments that are high in egocentric uncertainty

High-status actors should sort into markets that are low in egocentric uncertainty. 

Scope

The venture capital markets.