Social exchange theory of entrepreneurship

What is the social exchange theory of entrepreneurship?

Social exchange theory regards trading relations as built on norms of reciprocity and mutual attraction (Emerson, 1981; De Clercq et al., 2010). Reciprocity is the exchange of privileges between parties on the basis of mutual trust. For instance, a lunch or round of drinks may be purchased by one individual, with the understanding that other will pay back the debt at some unspecified time. In extended reciprocity, the assumption is that the environment will pay it forward to ensure repayment, even if indirectly over time.

Mutual attraction implies that one party is not predating on the other, that both parties that have something to gain. There is therefore an assumption of trust between the parties. For example, it has been observed that in traditional subsistence cultures, tribes will often donate their surpluses to neighboring tribes with no time bound expectations of repayment.

Social exchange and entrepreneurship

There seems to be some budding evidence that the mechanisms that allow social exchanges to occur matter considerably. Overall, the advice coming from this stream of research is that we should probably give each other the benefit of the doubt. In contrast to other theories about entrepreneurship, such as psychological theories that suggest that individuals are the key units of measure in entrepreneurship, the social exchange perspective is focused on the entrepreneurs relationships.

Successful entrepreneurs nurture the processes of social exchange with their stakeholders. They are careful to build a reputation for fairness over time, which engenders trust from stakeholders.

Individual characteristics may matter most as antecedents of social exchange processes. For instance, some individuals may be more predisposed to nurture trusting relationships, while others may prefer arms-length relationships.

Social exchange processes need continual care to keep them flowing efficiently. A reputation for reciprocity may be path dependent, making it difficult to recover from a tarnished reputation.

 

 

Sources:


De Clercq, D., Dimov, D., and Thongpapanl, N. T. (2010). The moderating impact of internal social exchange processes on the entrepreneurial orientation–performance relationship. Journal of business venturing, 25(1), 87-103.

Emerson, R. M.(1981). Social exchange theory. Social psychology: Sociological perspectives. New York: Basic Books.