The Architecture of Markets: an Economic Sociology of Twenty-First-Century Capitalist Societies - Book Review

Administrative Science Quarterly, Dec, 2002 by Mitchel A. Abolafia

Neil Fligstein. Princeton, NJ: Princeton University Press, 2001. 274 pp. $35.00.

Since its revival in the early 1980s, the sociology of markets has stood in the long shadow of economics, especially the subfield of industrial organization. "What," asks the researcher, "can I say that is uniquely sociological about this phenomenon?" There is some measure of pathos to be drawn from the fact that we have invested so heavily in the concept of embeddedness, defining it variously in terms of trust, status, dependency (power), culture, and relatedness. In this important new book, Fligstein suggests that what is lacking is a coherent theory of markets as social institutions.

Fligstein focuses his approach on the assumption that actors in a market are searching for stability and survival. As he explains, "... no actor can determine which behaviors will maximize profits ..., and action is therefore directed toward the creation of stable worlds" (p. 71). As a result, entrepreneurs and managers are expected to "avoid price competition and stabilize their position vis-a-vis other competitors" (p. 70). Sellers do this by finding a secure source of suppliers and customers. The networks formed by these relationships function as a solution to the problem of competition (p. 69).

Fligstein's contribution is not in mapping networks but, rather, in understanding the structuring of these exchange relationships and the strategies actors employ to create them. He wants to understand how a stable market or "field" is established, maintained, and changed. A field can be said to exist when the product or service has legitimacy with customers and the sellers have created a status hierarchy among themselves that the dominant players can reproduce. The author's conceptualization of markets focuses on tactics and strategies (power dynamics), as well as the cognitive understanding (culture) used to stabilize and reproduce the structure.

Among the most useful contributions in the book is the continuous illustration of how rules organize fields. The author elaborates four types of rules or understanding that "are necessary" to make fields possible: property rights, governance structures, rule of exchange, and conceptions of control (p. 32). These rules emerge historically in fields as solutions to the problems of competition, cooperation, and instability. In examples throughout the book, Fligstein shows the often tacit influence of these social constructs on how firms organize themselves and manage their external relations. Although one or another of these constructs has been used by other institution-minded economic sociologists, Fligstein suggests that all four are necessary conditions for markets. Further, it is the author's own notion of conceptions of control, basically industry-based logics of action, that best captures the social construction of market relations. Fligstein convincingly illustrates how conceptions of control are the focus of politics in new and changing markets.

Also at the heart of the contribution made by The Architecture of Markets is the role of the state in market creation and maintenance. The state here is not monolithic but, rather, divided into various policy domains that reflect the balance of power among workers, owners, and state officials. No group controls all institutions over' time, so various fields are organized differently. States intervene during market crises, usually to the benefit of the dominant group. Fligstein reminds us that market exchange does not exist in a vacuum, that states and firms are mutually dependent actors in producing markets, and that a comprehensive sociology of markets cannot be divorced from an underlying political sociology.

In the second part of the book, chapters 5-10, the author applies his approach to national employment systems, corporate governance, and globalization. These chapters show the author combining the political and cultural elements in his perspective to explain the emergence and transformation of conceptions of control. The book is at its best when illustrating how different conceptions of control can offer effective solutions to the problem of stability in different times and places. Chapters 6 and 7 extend ideas from the author's earlier book, The Transformation of Corporate Control. Chapters 8 and 9 are more controversial. Chapter 8 suggests that there is no convergence in property rights, governance structures, and conceptions of control among capitalist economies. In chapter 9, the author argues that the degree of globalization of markets has been exaggerated and that the obsolescence of nation-based firms and governments is overstated.

This is an important book. It charts a course for an institutional sociology of markets. The author has created systematic theory about the structures that are important for market stability and transformation. The Architecture of Markets will undoubtedly redirect research attention and encourage new work on the rules and politics that structure market relations. This book pushes us forward and suggests a rich vein waiting to be mined.