Theories of Embeddedness

Theories of embeddedness explore how economic activities, such as trade and investment, are shaped by social relationships, networks, and local contexts. They suggest that businesses don’t operate in isolation; instead, their decisions and success are influenced by their connections with friends, family, and community. These relationships provide trust, information, and support, which can affect how markets function. Essentially, embeddedness highlights that economic actions are embedded within social structures, emphasizing that understanding local cultures and networks is crucial for comprehending economic behaviors and development.