We use a sensemaking len to illuminate the micro-processes underlying socially embedded transactions.

We use a sensemaking len to illuminate the micro-processes underlying socially embedded transactions, investigating to what degree social ties affect the logic of exchange governing the transaction. In transcripts of 87 two-party negotiations, we find that in the greatest degree pairs quickly coordinate a shared logic of exchange and improvise in accord with its implied masterys throughout their interaction. The improvisations take the form of opening up working together, or haggling. Negotiators make go round to three dynamic processes--trust testing, proces clarification, and emotional punctuation--when they have difficulty moving the interaction toward a coherent, mutually agreed concerning improvisation. We examine in detail the hardly any asymmetric negotiations, which do not involve a shared logic of exchange. Social ties ease coordination within the negotiation and nearly eliminate asymmetry. We explore in what manner an understanding of the micro-processes underlying negotiations reveals the underpinnings of market exchange.

Far from the alto gether impersonal markets pictured by Weber (1947) markets are indelibly colored from transactions carried out between clan who are socially tied to common another. Organizational researchers are becoming increasingly interested in market behavior, owing in part to the growing acknowledgement that market behavior frequently resembles embedded social exchange to a great degree more than it does arm's-length transactions. Awareness of and attention to others is at the heart of social interaction, and social interaction within market-based negotiations appears to be no exception.

Arm's-length transactions, those between actors who share little familiarity or affect and no put offed past or expected future social ties, have been differentiated from socially embedded transactions, those facilitated from dyadic or structural social relations between the actors (Granovetter, 1973; Coleman, 1990; Becker, 1991) Dyadic relations entail direct ties between the focal actors, while structural relations can exist equal in the absence of dyadic relations if the focal actors are tied indirectly within mutual ties with others. Theoretically, negotiations taking place in a market would involve arm's-length transactions, while those taking place within organizations would involve socially embedded ties. on the other hand economic sociologists have asserted that socially embedded ties drive multiple aspects of market negotiations, from the choice of transaction partners to the price risk in the exchange. Studying transactions in the consumer market, DiMaggio and Louch (1998) ground that buyers turned to their friends when making large, unique transactions of the like kind as house or car purchases. Similarly, in Uzzi's studies of the apparel industry (1997) and mid-market banking (1999) he institute evidence that while arm's-length transactions were more numerous overall, the majority of critical transactions involved shut personal relationships. Even securities exchange markets meditate the presence of social embeddedness; Baker (1984: 803) fix that dyadic and structural relations among the traders "dramatically influenced" option prices and volatility.

Macro-level imports which reflect social distance among actors within the market, necessarily aggregate from a multitude of negotiations. Lying dormant over the sociological and economic research onward markets is the implication that the basic processe of exchange in arm's-length transactions differ fundamentally from those in socially embedded transactions (Marsden, 1981; Montgomery 1998; Uzzi, 1999) Uzzi's (1999) interviews with bankers provide a glimpse into in what manner social embeddedness may affect the micro-processes underlying market negotiations. The bankers he interviewed stated that transactions with others with whom they were socially tied entailed mutual trust, detailed information exchange, and joint question solving, features not present in transactions with distant others. on the other hand the customary approach to studying social relations in economic exchange has been to focus forward the structure and implications of exchange rather than the specifics of the processe of exchange. Differences between socially e mbedded and arm's-length interactions, when considered, are inferred from observation of the transaction results (Manski, 2000). This study attempts to fill the gap in our understanding of the differences between socially embedded and arm's-length transactions by dint of examining the micro-processes of negotiations--in particular, the dynamic creation of a shared logic of exchange--as a way of thinking about the micro-processes of definition, interpretation, and interaction that take place in a negotiation.

SOCIAL EMBEDDEDNESS AND THE LOGIC OF EXCHANGE

Different approaches in negotiation research arise from alternative explanations for the succes or failure of negotiation and, through implication, divergent assumptions regarding the logic underlying exchange. Negotiation research coming public of the Raiffa (1982) and Bazerman and Neale (1992) tradition portrays negotiations as rational theorys (Scott, 1987). In this research, negotiation failures are befitting to irrationality in assessing the various inputs to the negotiation. From this perspective, the [i]clavis[/i] to understanding and succeeding in negotiations lies in greater awareness of the limitations in individual cognitions. In contrast, those following in the traditions of Walton and McKersie (1965) Fisher and Ury (1984) and Pruitt (1995) treat negotiations as natural arrangements (Scott, 1987). This work moves that negotiators must cooperate to be successful; negotiators fall short when they fail to find the used by all interests that would hold them together. From this perspective, negotiations are an exercise in question at issue solving, in which mutually beneficial trades are the goal and information regarding relative precedences is the key to achieving that goal. In contrast, research treating negotiations as unclose systems draws from a exceedingly different and eclectic base, from early management theory (Follett 1924) communications literature (eg Donohue, 1981; Putnam and Jone 1982) psychoanalytic theory (Greenhalgh and Chapman, 1995) feminist theory (Putnam and Kolb 2000) and organizational anthropology (Barley, 1990) Open-system research postulates a negotiation as foundationed in the co-construction of the interaction and in the socially driven definition and interpretation of exchange (Blumer 1969) According to this perspective, negotiations fail not because of cognitive limitations or a lack of information exchange, moreover because the social relations between the parties break down. From an open-system perspective, it tread close upons that the success of a negotiation may quiescence on the social ties between the parties. Because it posit s the underlying logic of exchange as central to understanding the negotiation, an open-system perspective expands the potential for linking negotiation research with more macro-level research in succession the effects of social embeddedness in economic exchange.