Relational Counterbalances to Economic Endogamy: A Theory and a Historical Example

We theorize integration and estrangement maintenance as two relational mechanisms that counterbalance economic endogamy, i.e. economic actors’ tendency to transact and cooperate within rather than across socially meaningful groups. We test empirical implications of these mechanisms using longitudinal data on merchant cooperation networks in the 18 century English city of Bristol, where a severe political cleavage between Tory and Whig merchants consistently failed to damage cross-party business cooperation. Our results are inconsistent with the integration mechanism, which implies that cross-party business relations are forged in joint activities that obviate group identity, such as joint participation in civil associations. Instead, we find that such relations resulted from political rivals’ maintenance of pointedly arm’s length, unequal-status contacts while avoiding same-status business partnerships common within their own parties. These findings expand the perspective of the research on economic endogamy, which has hitherto emphasized non-relational forces, external to contexts at hand, as antidotes to endogamy. Relational Counterbalances to Economic Endogamy: A Theory and a Historical Example Economic endogamy, i.e. preferring members and avoiding non-members of one’s own social group as economic partners, is persistent in organizational life. Research has detected economic endogamy in transactions as diverse as hiring (Gorman 2005), stock trade (Carruthers 1996), admission to a profession (Moser 2008), and informal exchange within organizations (Ibarra 1992). The enduring scholarly interest in endogamy has been fueled by the conviction that its various forms are unfair, economically inefficient, or both. There is a variety of scholarly explanations of economic endogamy. When membership in groups is based on ascriptive traits, researchers often explain it by reference to entrenched culturally reproduced biases (e.g. Reskin 2002; Ridgeway 2006). Another widely mentioned and empirically supported origin of endogamy is homophily, i.e. emotional preference for communication with others who are similar on group-defining attributes (e.g. Lazarsfeld and Merton 1954; Brewer and Brown 1998). Endogamy may also result from the tendency of group co-members to be proximate in physical (Blau 1977) or social (Ibarra 1993) space. Landa (1981; Cooter and Landa 1984) suggested a model where endogamy reduces transaction costs and is therefore a result of individual actors’ rational choice. Carruthers (1994) advocated an alternative model where endogamy exists because it serves the actors’ political rather than economic interests. Such multitude of suggested endogamy-producing mechanisms, and of empirical examples that their proponents use for illustration, has underscored the importance of understanding how economic endogamy can be absent. Yet it has offered little guidance in specifying the conditions when it is absent, beyond the implication that this must be the case