Exchange and Dependency Theories

Extensive research has been conducted that seeks to explain the emergence of networks based on exchange and dependency mechanisms. Social exchange theory, originally developed by Romans (1950, 1974) and Blau (1964), seeks to explain human action by a calculus of exchange of material or information resources. In its original formulation, social exchange theory attempted to explain the likelihood of a dyadic relationship based on the supply and demand of resources that each member of the dyad had to offer. Emerson (1962, 1972a, 1972b) extended this original formulation beyond the dyad, arguing that in order to examine the potential of exchange and power-dependence relationships, it was critical to examine the larger network within which the dyad was embedded. Since then several scholars have developed this perspective into what is now commonly referred to as network exchange theory (Bienenstock & Bonacich, 1992, 1997; Cook, 1977, 1982; Cook & Whitmeyer, 1992; Cook & Yamagishi, 1992; Markovsky, Wilier, & Patton, 1988; Skvoretz & Wilier, 1993; Wilier & Skvortez, 1997; Yamagishi, Gillmore, & Cook, 1988). Network exchange theory posits that the bargaining power of individuals is a function of the extent to which they are vulnerable to exclusion from communication and other exchanges within the network. The argument is that individuals forge network links on the basis of their analysis of the relative costs and returns in exchanging their investments with others in the network. This is in contrast with theories of self-interest where actors seek to maximize their individual investments independent of its exchange value. Likewise, individuals maintain links based on the frequency, the uncertainty, and the continuing investments to sustain the interaction. Location in the network may confer on some people an advantage over others in engaging in exchange relationships. Aldrich (1982) notes that this argument is at the core of several theories dealing with social exchange as well as resource dependence theories. Within organizations, network researchers have proposed a social exchange mechanism for the study of (1) power, (2) leadership, and (3) trust and ethical behavior. At the interorganizational level, researchers have (1) tested resource dependence theory, (2) examined the composition of corporate elites and interlocking board of directorates, and (3) sought to explain the creation, maintenance, and dissolution of interorganizational links.