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Social Exchange Theory

Social exchange theory is a major theoretical perspective in sociology. Within this framework, social behavior is viewed primarily in terms of the pursuit of rewards and the avoidance of punishment and other forms of cost. Individuals engage in interaction to meet their needs. The basic unit of analysis is the relationship between actors. Thus, exchange theorists view social relations and the social structures generated by the ties that bind people in different forms of association as the central object of sociological inquiry. Major topics of study within this tradition of research include the nature and effects of the interconnections among actors and the distribution of power within exchange structures. Power and status relations among actors in different types of social structures are considered key forces in determining the nature of structural change over time. The major exchange theorists all have treated power, structural sources of power, and the dynamics of power use as primary in their theoretical formulations.

Social exchange theory derives from several distinct lines of theoretical work in the social sciences, including social behaviorism, utilitarianism, and functionalism (Turner 1986). Major proponents of the social exchange perspective within sociology include Homans (1961, 1974), Blau (1964, 1987), and Emerson (1962, 1972a, 1972b). Within psychology, the work of Thibaut and Kelley (1959; Kelley and Thibaut 1978) bears a strong resemblance to social exchange theory in its emphasis on the interdependence of actors and the social implications of different forms of interdependence. Anthropologists such as Malinowski (1922), Mauss (1925), Schneider (1974), and Levi-Strauss (1949, 1969) have contributed in different ways to the emergence of this theoretical perspective (see Ekeh 1974). In addition, the foundation of microeconomics has much in common with some variants of social exchange theory (Heath 1976). This affinity is clearest in Blau’s Exchange and Power in Social Life (1964) and in subsequent theoretical developments (e.g., Cook and Emerson 1978; Coleman 1972, 1990). The breadth of the intellectual heritage of social exchange theory accounts in part for its continued significance in the social sciences.

Homans’s well-known essay ‘‘Social Behavior as Exchange’’ (1958) clarified the nature of this theoretical orientation and introduced it into mainstream sociology. An elaboration of Homans’s perspective was published in Social Behavior: Its Elementary Forms (revised in 1974). An important distinguishing feature of Homans’s work was its reliance on the language and propositions of behavioral psychology. The use of operant psychology as the behavioral basis of exchange theory created much of the early controversy surrounding the utility of this perspective for sociologists. In particular, the corresponding claim made by Homans that laws of social behavior could be ‘‘reduced to’’ the basic underlying principles of psychological behaviorism generated much debate (e.g., Deutsch 1964). According to Homans, ‘‘The general propositions we shall use in explanation are psychological in two senses: they refer to the actions of individuals and they have . . . been formulated and tested by psychologists’’ (1974, p. 12). However, Homans explicitly took as the major theoretical task the explanation of social phenomena. This emphasis on social behavior and the social structures generated and altered by human social interaction has sustained the influence of social exchange theory in sociology. In this regard, Homans viewed the line drawn between psychology and sociology as fundamentally arbitrary.

The initial theoretical formulation developed by Homans (1961) and revised in 1974 included five main propositions, all of which have to do with the fact that behavior is a function of its payoffs: the consequent rewards and punishments. The first proposition is the ‘‘success proposition,’’ which states that the more frequently an activity is rewarded, the greater is the likelihood of its performance. Behavior that generates positive consequences for the individual is likely to be repeated. The second proposition, the ‘‘stimulus proposition,’’ stipulates that similar environmental or situational circumstances will stimulate behavior that has been rewarded on similar occasions in the past. This allows for the generalization of behavioral responses to ‘‘new’’ situations. The ‘‘value proposition’’ specifies that the more valuable the result of an action is to the actor, the more likely that action is to be performed. This proposition is qualified by the ‘‘deprivation-satiation’’ proposition, which introduces the general ideal of diminishing marginal utility. According to this proposition, the more often a person has recently received a particular reward for an action, the less valuable is an additional unit of that reward. Thus, some rewards become less effective over time in eliciting specific actions, though this is less true for generalized rewards such as money and affection and for anything for which satiation is less likely to occur except at extreme levels. The fifth theoretical proposition in Homans’s basic framework specifies the conditions under which persons react emotionally to different reward situations. This proposition has two parts. People who do not receive what they anticipate are expected to become angry and behave aggressively, based on the original Miller and Dollard (1941) ‘‘frustration-aggression’’ hypothesis (see Homans 1974, p. 37). People who receive more than they expect or do not receive anticipated punishments will be happy and will behave approvingly. This system of propositions forms the original core set of ideas of what has come to be called social exchange theory.

Homans’s (1961, 1974) uses this set of theoretical ideas to explain phenomena such as the exercise of power and authority, cooperation, conformity and competition, structures of sentiment and interaction, status and influence, satisfaction and productivity, leadership, distributive justice, and the emergence of stratification. He addressed these social phenomena primarily in terms of the nature of the interpersonal relations involved. Furthermore, he emphasized ‘‘elementary’’ forms of behavior, or what he referred to as the‘‘subinstitutional’’ level of analysis. ‘‘We gain our fullest understanding of the elementary features of social behavior by observing the interactions between members of small, informal groups,’’ Homans (1974, p. 356) argued. By studying such forms of behavior, he hoped to illuminate the elementary, informal subinstitutional bases of more complex forms of social behavior that often are more formal and institutionalized. What he bequeathed to modern-day sociology, besides his particular form of theorizing, was an emphasis on the microfoundations of social structures and social change.

Whereas Homans focused on elementary forms of behavior and the subinstitutional level of analysis, Blau (1964, 1987) moved beyond the micro level to the institutional level, dealing with authority and power, conflict, and change in the context of institutionalized systems of exchange. In disagreement with Homans’s reductionistic strategy, Blau (1987, p. ix) claims that his ‘‘theory is rooted in the peculiarly social nature of exchange, which implies that it cannot be reduced to or derived from psychological principles that govern the motives of individuals, as Homans aims to do.’’ In distinct contrast to Homans’s reductionism, Blau assumed that social structures has ‘‘emergent’’ properties that cannot be explained by characteristics or processes that involve only the subunits. Thus, Blau parted company from Homans in two major ways. First, Blau’s framework was not based on principles of behavioral psychology; instead, he introduced microeconomic reasoning into the analysis of distinctly social exchange. Second, he explicitly introduced the notion of emergent processes into his theoretical treatise, not only rejecting reductionism but also expanding the theory to extend far beyond its original subinstitutional base.

Blau (1964) developed a general framework for analyzing macro structures and processes based on an extension of his micro-level theory of social exchange processes. Drawing on Simmel’s understanding of social life, he explains the general structure of social associations rooted in psychological processes, such as attraction, approval, reciprocation, and rational conduct. Group formation, cohesion, and social integration as well as processes of opposition, conflict, and dissolution are explained in terms of social exchange processes. These forms of social association generated by exchange processes come to constitute very complex social structures (and substructures) over time. These more complex social structures are then examined by Blau as they are created and changed by power processes and the dynamics of legitimation and political opposition. Common values mediate and make possible indirect exchanges and thus the coordination of action in large collectivities. According to Blau, they also ‘‘legitimate the social order.’’ Throughout this major work, Blau contrasts and compares social exchange processes in simple structures with those in more complex social structures and institutions. The major social forces he analyzes include differentiation, integration, organization, and opposition that sets up the dialectic necessary for the explanation of structural change.

The strategy of building a theory of macro structure and processes on an explicitly microlevel theory was a distinguishing feature of Blau’s (1964) original work, which also became the focus of a major stream of theoretical work in sociology on the ‘‘micro–macro link’’ in the 1980s and 1990s. Ironically, Blau (1986) himself challenged the utility of his approach in his subsequent writings (Blau 1987), fueling the debate further. In his introduction to the second printing of his book on exchange and power (1986), he argues that microsociological and macrosociological theories ‘‘require different approaches and conceptual schemes though their distinct perspectives enrich each other’’ (1986, p. xv). This theoretical debate will not be over soon since it lies at the heart of the nature of sociological analysis and relates to broad issues of the primacy of particular units and levels of analysis as well as to complex metatheoretical and methodological issues.

Blau (1964) and subsequently Emerson (1962, 1972, 1972b) made power the central focus of analysis. Blau treated power, authority, opposition, and legitimation as key topics in his discussion of macro structures and the dynamics of structural change. Emerson’s (1962) theory of power- dependence relations was partially encorporated into Blau’s (1964) treatment of power imbalance and the conditions of social independence. For Emerson (1962), these strategies were power-balancing mechanisms. The central proposition in Emerson’s (1962) article classic was that power, defined in relational terms, is a function of the dependence of one actor on another. In a twoparty exchange relation, the power of one party (A) over another party (B) is a function of the dependence of B on A. Dependence is a function of the value one actor places on the resources (or valued behavior) mediated by the other actor and the availability of those resources from alternative sources. The greater the availability of these resources from other actors (or alternative sources), the lower one actor’s dependence on another. Two features of this approach to power are important:

(1) It treats power as relational (a feature of a social relation, not simply a property of an actor), and

(2) it treats power as potential power; that is, it may or may not be exercised.

This relational conception of power became the basis for most subsequent work on exchange and power.

Emerson (1972a, 1972b) expanded his treatment of power and dependence to form a more extensive exchange theory of social relations. In many ways, his work combined the approaches of Homans (1961) and Blau (1964). In the original formulation, Emerson (1972a) adopted the language and principles of behavioral psychology to form a theory of social relations. However, he quickly moved beyond behavioral principles to the formation of more complex propositions regarding the emergence of various kinds of social structures. Here the theory picks up the Simmelian focus of Blau’s work as well as the concern with emergent properties and complex social structures. Emerson (1972b), like Blau (1964, 1986), viewed the major task of exchange theory as the creation of a framework in which the primary dependent variable is social structure and structural change. The major task was eminently sociological, not psychological, even though all three theorists explicitly encorporated into their thinking notions about the psychology of actors. Emerson and Cook’s subsequent work (e.g., Cook and Emerson 1978) adopted a more cognitive perspective on the actors involved in social exchange. Molm’s (1981, 1987) earlier work extended the original behavioral underpinnings of the theory.

Exchange theory, though originally dyadic in focus, has been extended to apply to the analysis of exchange networks. Both Homans and Blau recognized the ubiquity of social networks and different forms of social association, but Emerson (1972b) made networks and corporate groups a central focus of his theoretical formulation. The definition of exchange relations as being ‘‘connected’’ in various ways to form network structures was the key to this development in the theory. Emerson defined two major types of connections between exchange relations: negative connections and positive connections. Two relations are negatively connected if the magnitude or frequency of exchange in one is negatively correlated with the magnitude or frequency of exchange in the other. In essence, the two relations are strictly alternatives. If a supplier gets parts in an exchange with one vendor, he or she does not need to get the same parts from another vendor. Negatively connected relations are thus competitive in nature. In contrast, when two relations are positively connected, exchange in one relation enhances exchange in the other. For example, the resources one party gets in exchange with one supplier can be used to obtain needed goods from another supplier. In this case, a positive connection exists and the two exchange relations are positively correlated. Such exchange relations are more cooperative than competitive in nature and form the basis for some types of division of labor and specialization within exchange networks. Subsequent theorists such as Willer (1987), Markovsky et al. (1988), Bonacich (1986), and Yamaguchi (1996) have developed other ways of classifying types of exchange connections. Some of this work is discussed below in the discussion of alternative perspectives.

A key concept in Emerson’s exchange theory of power is the idea that exchange relations can be balanced or imbalanced. A power inequality results from an imbalance in power relations between two or more actors. An exchange relation is balanced if both parties are equally dependent on each other for exchange (or resources of value). If they are equally dependent, they have equal power. The central idea that power is based on dependence allows for the specification of ways in which dependencies are altered so that they affect the balance of power in the exchange relation and in networks of exchange relations.

Emerson postulated four power-balancing mechanisms to explain some of the ways in which exchange relations and the networks they form change either to maintain and preserve existing structural arrangements and distributions of power or to alter them. Coalition formation is one of the mechanisms by which power-disadvantaged actors in less powerful network positions can gain power through the collective advantage gained through cooperative action. Not all coalitions are powerbalancing, however. In subsequent work, Emerson addressed the kinds of coalitions that form between powerful actors (sometimes referred to as collusion) or between powerful actors and a subset of the less powerful actors (a divide-and-conquer strategy).

Division of labor, or specialization within a network, may operate as a power-balancing mechanism, since it can result in changes in the distribution of power in a network through modifications in the distribution of resources and the nature of the structural arrangements. For example, two suppliers of the same resource who have been competitors may decide to specialize and offer different services in a way that makes them no longer competitive with each other in a particular network. Network extension also can alter the balance of power in a network as new exchange partners become available. In addition, when other strategies are not available, actors can devalue what they obtain from a more powerful actor as a way to reduce their dependence on the relationship. This strategy may be a precursor to an exit from the relation in many instances. Various theorists have continued this line of work, specifying the principles that predict the distribution of power in different exchange structures and the processes that modify it (e.g., Cook et al. 1983, 1986; Bonacich 1986; Yamaguchi 1996).

Other extensions of the exchange theory originally developed by Emerson have focused on the links between structure and process and on other bases of power. In a major research program that extended over a ten-year period, Molm (1997) investigated the role of coercive power in social exchange. Emerson’s work and that of most of the exchange theorists had focused almost exclusively on reward power, or the control over positively valued goods and services. Coercive power is the ability to control negative events (e.g., to withhold rewards) or to inflict punishment on another in an exchange relation. Unlike reward power, coercive power is used less often in exchange relations, especially by those in power-advantaged positions, who seem to understand that it may be viewed as unjustified in many circumstances. The fear of retaliation is also a deterrent to the use of coercive power. The use of coercive power is more costly since it imposes losses on the exchange partner in addition to the opportunity costs involved. Molm’s (1989, 1997) major accomplishment was to expand the treatment of power in the classic powerdependence formulation to include forms of coercion. Since exchange relations often involve control over both things people value and things people wish to avoid, this is a significant extension of the theory.

Alternative theoretical formulations have been developed for investigating power processes in exchange networks. They include the ‘‘elementary theory’’ developed by Willer and his collaborators (e.g., Willer and Anderson 1981; Markovsky et al. 1988), Friedkin’s (1992) ‘‘expected value model’’ of social exchange, and game theory, which has been applied to the analysis of exchange networks by Bienenstock and Bonacich (1992). While some of these formulations have an affinity with the original power-dependence framework developed by Emerson (1972a, 1972b), most have explored other bases of power. For example, Willer and his collaborators have developed a different terminology for specifying the nature of the relations in an exchange network. They define three types of relations: null (no connection), inclusion (when someone has to be involved in an exchange for it to take place) and exclusion (when someone may be involved in an exchange but is in competition with others and thus may be excluded from the exchange at any time). These theorists go on to develop different principles for the distribution of power in networks characterized by different types of relations. Exclusion is viewed as the main determinant of power. The ability to exclude others from exchange is thus the key source of power in this theory.

Bienenstock and Bonacich (1992, 1997) analyze exchange networks by using a game theory perspective. They attempt to understand the efforts of actors to maximize certain well-defined interests by adopting strategies that can be analyzed usefully with the tools of game theory. Based on different solution concepts (e.g., the core, the kernel), they make predictions concerning the outcomes of the exchanges in various types of network structures. In addition, this application of game theory provides predictions about the role of information in exchange processes. Building on the early contributions of Blau, Coleman, Emerson, and Cook, Yamaguchi (1996) works out a rational choice model for predicting the distribution of power and the effects of network centrality in what he terms substitutable and complementary exchange relations.

Further developments in the theory of exchange include the formulation of explicit propositions concerning the use of power in different types of exchange network structures and the specification of some of the determinants of power use. These factors include concern over the fairness of the distribution of outcomes, the commitments that emerge between actors (e.g., Lawler and Yoon 1996), the formation of coalitions, particular strategies of action, and whether the power is reward power or punishment power. More recent developments focus more on methodologies for specifying the distribution of power in complex network structures (see, for example, Markovsky’s work). Interest in this topic is in part driven by the potential for synthesizing exchange theoretic conceptions of power with network models of social structure (see Cook 1987; Cook and Whitmeyer 1992). Another arena of current theoretical and empirical work is the specification of dynamic models of power use and structural change that include a more sophisticated model of the actors involved and the strategies they adopt in their attempts to obtain resources and services that are of value to them. These general theoretical and empirical efforts will be important if exchange theory is to fulfill its promise of providing an approach to linking micro-level theories of action and interaction with macro-level explanations of structure and processes of social change,
an agenda that was originally set by Homans, Blau, and Emerson.

The application of exchange theory to understanding a variety of social phenomena has grown over the last two decades. Early applications focused on the explanation of the initiation and termination of social relations in work settings and families and then in the domain of romantic relationships and dating. Topics of interest to researchers included the conception of fairness in social exchange relations and its link to relational satisfaction and dissolution, the use of power in social relations based on control of both rewards and costs, and the abuse of power as well as the role of coalitions in altering the balance of power among actors in a network of individuals or organizations. Beyond the application to family and work settings, exchange theory has been applied in many different contexts to the study of organizations and interorganizational relations. Since organizations typically require resources from other entities much of their time is devoted to the strategic management of those dependencies. The resource dependence perspective (Pfeffer and Salancik 1978) in the field of organizations represents a straightforward application of exchange reasoning to the strategic actions of organizations and their subunits (e.g., at the divisional level). The developing field of economic sociology is now drawing to some extent on ideas derived from exchange theory to explain the emergence of network forms of organization and the nature of the power processes that emerge in those networks. Network effects on labor practices, informal influence among organizations, the organization of business groups, and the formation of international linkages that cross traditional national boundaries of economic and productive activity are central topics of inquiry in economic sociology. Some of these efforts involve understanding the effects of network location on outcomes and the various strategies actors use to enhance their bargaining power and influence. These efforts derive in part from the power-dependence reasoning first introduced by Emerson and Blau into exchange theorizing.

Other applications of exchange theory include broader efforts to investigate the balance of power in the health care industry, the strategic role of insurance companies in an era of managed care, and the response of physicians to the loss of power and autonomy. Several researchers have attempted to analyze the nature of physician referrals in network exchange terms and to characterize the nature of physician–patient interaction as an exchange relation in which power is asymmetrical (or imbalanced) and trust plays a key role in ‘‘balancing’’ that power differential. The patient must place his or her fate in the hands of a more competent, more informed actor and trust that the physician will do no harm. Future applications of the exchange model of interaction and of network exchange in other domains will help clarify and extend the underlying theoretical framework.

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