LEGAL CHARGES: EMBEDDEDNESS AND PRICE FORMATION IN CORPORATE LAW MARKETS.

This article discusses how social exchange relations between producers and consumers affect the prices producers charge their clients in the large corporate law market. The embeddedness framework offers one of several possible sociological accounts of how social behavior affects price setting. It argues that economic actors, to varying degrees, are imbedded in social relations and networks of affiliations that shape the actors' opportunities for value creation in ways that differ from markets or hierarchies. The model examines how the quality of relationships as well as the positions actors hold in a network affect their access to information and their ability to govern transactions. On the level of relationship quality, ties vary between arm's-length and embedded. Arm's-length ties characterize the atomistic and socially detached market relationship. Such ties have been shown to be an excellent means of cheaply acquiring public information, such as advertisements or published data. Embedded ties differ from arm's-length ties in that commercial exchanges between actors are embedded in social attachments and affiliations, a process that injects into the business exchange expectations of trust and shared norms of compliance. Replacing the motives associated with arm's-length ties, these expectations are used to govern exchanges with persons that one comes to know well.