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MENTAL MODEL · M3377

Embeddedness

Embeddedness
BusinessHigh supportEconomics
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Version 1.0.0 · Updated 2026-07-28

CORE DEFINITION

In economics and economic sociology, embeddedness refers to the degree to which economic activity is constrained by non-economic institutions. The term was created by economic historian Karl Polanyi as part of his substantivist approach. Polanyi argued that in non-market societies there are no pure economic institutions to which formal economic models can be applied. In these cases economic activity is embedded in social, political, and cultural institutions.

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In economics and economic sociology, embeddedness refers to the degree to which economic activity is constrained by non-economic institutions. The term was created by economic historian Karl Polanyi as part of his substantivist approach.

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Economic sociologist Granovetter proposed 'embeddedness': economic behavior is constrained by the trust, norms, and structure of social networks, not solely driven by price signals. The closer the relationships, the stronger the trust and sanction mechanisms, and the lower the transaction costs and default risks.

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/EmbeddednessZH · Explicit
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