Social capital and power networks within transaction cost management: the case of the

construction sector in southern France.

Pisano Marina

Affiliations: Lab Corhis (Paul Valéry University of Montpellier, France) - Project manager

(sustainable development in the construction sector)

Thesis Directors: F. Noguera & B. Prévost

Email address: marina.anna.pisano@gmail.com

Sub-theme 24: Innovating towards Sustainable Organizations: The Role of Power,

Dependence and Stakeholder Expectations

Introduction

This PhD in Management takes place in Science Research Lab CORHIS in

Montpellier (France) with a CIFRE contract in an engineering firm, located in the south of

France, since September 2013. The field of research we are studying is the construction

sector. We study this area from the following angle: "how do actors in the building sector get

organized when it comes to management, coordination and project management?". We seek

to identify how to operate the transaction cost management. This sector is characterized by

many coordination and communication issues, due to that many actors must coordinate their

efforts within the framework of ephemeral networks and highly differentiated business logics,

while facing a very uncertain environment as well as the changes related to the emergence of

sustainable development principle, a real challenge for the construction industry. Networks

can participate to the formation of a social capital stock. Bourdieu (1986) defines social

capital as "all current or potential resources which are linked to owning a durable network of

more or less institutionalized inter acquaintanceship and inter recognition; or, in other

words, to belong to a group (...) of agents (...) who have similar properties (...) also united by

permanent and helpful links." We start from the premise that competition is neither pure nor

perfect as emphasized in the work of the founding father of the theory of transaction costs

Coase R. (1937). We cannot understand the governance of this sector as one of the firm since

both modes of governance coexist (hierarchy and market or company). Our reflection brings

us to look closer at Williamson’s work which structures Coase's theory and to try to develop it

from the basis proposed by the founding father of this theory from the different factors that

will make it possible to arbitrate between market and hierarchy. We observed a reality in the

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field: the recurrent formation of a power game that takes place between players who fit into

informal relationship networks whom we consider as leaders and individuals who do not use

these networks, followers. In order to illustrate this, we conducted a qualitative field survey

based on a sample of 40 individuals.

Part 1: Thesis context and theoretical framework

1. Our research’s lead

After our immersion in the technical design office and our strong "field" dimension, we

have formulated four hypotheses to conduct our research:

1.1. Actors and modes of governance identification within the

construction sector

Following our researches and our findings, we noted that in this sector, associations

Act 1901 and business circles develop cooperation networks relying on the social network.

These organizations include actors who represent an increased range of occupations belonging

to this sector. We noticed a dichotomy between these organizations’ formal objectives and

informal objectives. The formal objectives are both to issue reflections and proposals for the

public best interest and to search for professional quality within a framework of friendship

and solidarity. Informal goals rely on building and developing a professional network that we

call "social capital"; on adopting and developing a collective lobbying strategy; on developing

and acquiring knowledge and skills related to the sustainable development principle; on the

willingness to connect to the market leaders’ networks "world". To grow, these "networks"

rely on means such as informal communication and participate to the construction of entities

which are constituted of all networks. By joining the network, an individual can then build its

own social capital. According to Lin (2001), to have social capital is to be able to mobilize

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social relations to one’s advantage. The fact that these networks are deployed locally makes it

possible to raise the construction and organization of small communities whose members

maintain relations with each other (Barnes, 1954). “What is then the strategy deployed by this

network and what kind of leadership (leadership power vs spiritual leadership) is used by its

members?” We figured out that actors increasingly seek to deploy a collective strategy based

on lobbying. As Farnel, (1994), we define lobbying as " an activity which consists in

conducing interventions that directly or indirectly influence the development process, the

application or the interpretation of legislation, of standards, of regulations and more

generally, of any intervention or government decision. " If we push our reflection further, this

would mean that leading networks seek to convince and persuade project leaders (clients) to

follow their interests by encouraging them to develop projects by putting the emphasis on the

principle related to sustainable development, which is an option for 60% of companies in this

sector to emerge from the crisis in construction, (AFP, 2013). However, with the network

concept the idea of common good is problematic since belonging or not to a network is

largely undetermined. In the networked society there is a correlation between social capital

and knowledge capital. One has to choose between disinterested friendly relations and useful

professional relationships. One must always pass tests. The end of a project marks the

beginning of another. In the network professional existence is a relational attribute. In other

words, those who are depreciating lose all visibility and therefore all existence since they are

excluded from the "world", judged "bad", Boltanski and Chiapello, 2004.

1.1.1. Power leadership VS spiritual leadership in the social capital

construction process

We rely on leadership-related theories because originally the traditional leadership is a

form of unilateral leadership in which the leader commands and controls others, using

coercive power, sometimes playing on the fear exerted on teammates who are not consulted

regarding decisions, people who are not much skilled. Nowadays, the influence is an

important register within leadership. We initially focus on theories related to power leadership

since these two concepts are highly related. Etzioni, defined in 1971, power as "the potential

of a person to influence the behavior of other people or resist the influence of others" . We see

in this definition that power is assimilated to the notion of influence.

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Some authors, such as French and Raven (1959), have attempted to identify the

bases of social power. According to them there are 5:

Power and influence may to some seem negative, as associated with deception,

underground and Machiavellian behaviors. However, spirituality can help expunging the

negative dimension in order to help individuals to focus on the positive influence

mechanisms, (Voynnet - Fourboul, 2014). We are seeing little by little a shift from a formal to

an informal power that mainly affects the relational universe. On the other hand, spiritual

leadership requires a high confidence level, in particular when it comes to members’ ability to

collectively solve problems and make decisions in the best interest of the organization.

Communication is crucial, it helps members make sense compared to what is

happening and to share information; free flow of information and decisions are made as a

team. We direct the concept of leadership by defining it as a set of mutual influences

processes between the group members and their leaders. We add Balkuhndi and Kilduff

thoughts to our reflection. They put forward the idea that leadership is related to the emerging

social networks theory (2005). According to these authors, leadership is not so much in the

qualities of the actor as in relationships that connect people thanks to whom an individual will

find the resources necessary to satisfy their needs (2005). Fredricks (2003) establishes a link

between an individual’s leadership and their social capital by pointing out an interdependent

relationship with the leadership concept that is built thanks to a synergy that is created by

using the "social network". Lin’s work (1995) also highlighted that "social capital results

from the investment of an individual in his relations with others." In Coleman’s approach

(1988), the social context is characterized by the organization of relations between actors that

is social structures. These structures provide the resources which constitute social capital and

Coleman defines it in a resolutely functional logic as the structure’s characteristics which

facilitate individuals’ actions. Contrary to Coleman, social capital is to Bourdieu an

instrument which individuals have access to because they acquired in one way or another, a

position granting them access, and the actors are distinct in a social space fundamentally

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stratified by power inequalities that involve several forms of capital. Based on literature about

the power, we see it as the ability of the individual actor or group to control the terms of an

exchange relationship so that it is favorable to them (Mr. Crozier, 1977). Neither attribute nor

possession, power unfolds in interactions. Dominant, this relational concept is illustrated by

the classic formula of Weber: "power is any chance of triumph in a social relationship, our

own will, even against resistances; no matter what is this chance based on", (Weber). For

Parsons (1969), power is together with money and influence, one of the means an actor has to

achieve its goals in any interaction. However, what about the social capital at collective level?

If it can be beneficial to the actor who holds it, can it not also induce perverse effects such as

collusion which for example can foster corruption, incentives decrease, dumbing down and

can limitate potential trading gains (Portes and Landolt, 1996). These effects are related to the

fact that individuals’ economic actions are embedded, "embeddedness" (Polanyi, 1944,

Granovetter, 1973) in specific industrial relations systems which can be analyzed in terms of

networks (Granovetter, 1973).

We distinguish four embeddedness types (Zukin and DiMaggio, 1990; Caillé,

1993), as follows:

Part 2 : Research methodology

2. Choosing the methodology research

We wish to explain the casual links and to relate them to actual interventions which

are too complex to be addressed by a survey or an experiment. This is why we chose to

immerse us in the technical design office. The goal is to observe as well as to directly

participate to projects while reaching for both internal and external actors. The objective is to

validate the hypothesis according to which actors maintain permanent links between them but

also to determine the causes and consequences of this link; to identify networks typology and

the possible consequences across the sector. The network is so wide it requires defining an

accurate quantitative and qualitative frame of the studied network as well as measuring the

various network dimensions. An important issue both theoretically and technically is the

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delimitation of the network which we want to study (Angot and Josserand, 2003). Two main

approaches are opposed: comprehensive network studies and those of the personal network.

A more detailed analysis of the network and therefore of the social capital

highlights three dimensions ( Nahapiet and Ghoshal , 1998) to describe it:

Our researches purpose being directly correlated to a sector organization’s complexity,

and which offers a constructivist kind of tool (Le Moigne, 1990). We chose to go for an intra

and inter organizational analysis. We selected qualitative study as methodological choice for

our research since it allows us to meet our problematic. To conduct this study, we selected a

sample of actors and an interview guide.

2.2. Presentation of the interview guide and sample

The guide includes 5 major themes which unfold into sub-themes to mention and deepen.

The sample was determined so as to meet the objective of our study. It includes 40

individuals who have diverse backgrounds; in order to develop an as complete as possible

picture of the issue to be investigated. Please find bellow a representation of our sample

through a segmentation of the population studied. The actors of the experimental basis

primarily belong to SMEs and very small businesses. To respect their privacy, we have

designated by the letters A, E, C and LA.

Segmentation was effected by defining four categories of actors for a total of 40

individuals:

The analysis of the qualitative data gathered is known as "Content analysis"

(Krippendorff, 2003). Before starting the analysis, the first step was to take stock of the

information gathered, then to write them down by selecting the transcripts which seemed the

most relevant. Transcripts are the raw data of the survey. We processed the data using the

computer software for text analysis: NVIVO. The information was computer coded and must

be treated quantitatively. Encoding data is a way for us to describe, to classify and to

transform raw qualitative data from the analytical framework. We then carried out an initial

interpretation of our results for a total of 20 interviews.

2.2.2. Synthesis of the first results

Conclusion and summary of results

In our research, we identified a real dichotomy between actors who belong to networks and

those who do not. We can therefore put the emphasis on the fact that some players can be

intensely linked and develop mutual support, an informal exchange of information and others

are freer. Belonging to a network, for example shows that one can get a greater access to

projects, to information (positive effects of social capital) which participates in the transaction

cost management, but also a potential limitation of trading gains, race to the bottom and

sometimes collision, which brings us back to the perverse effects of social capital. Networks

we could identify fall into the category of circles of influence which have a great power in the

informal society. Access to these networks takes place mainly through the co-option in order

to preserve the "privilege" of belonging to these networks. Access is therefore restricted and

the sustainability process is carried out by privileging regular meetings of their members.

However we notice that belonging to a network is not all in the sense that it actually allows

members to access projects, for example to access information but individuals tend to value

more and more actors’ competence to avoid encountering difficulties in the operational

process. As part of our work, we could observe that networks present in the construction

sector are associations, business circles, influence circles, trade unions, clubs, and

associations, Freemason. These networks operate in within the same territory, sometimes

using strategy based on lobbying and putting the emphasis on how important is it for projects

to be thought in approaches applying and respecting the principle of sustainable development

(certifications, labels). In addition, the network allows actors who belong to it to favor

transaction costs reduction when driving projects, to access projects and information. The aim

of our research is to eventually exceed the first and immediate results of our investigation and

provide recommendations or develop theoretical models but above all the will to determine

what may be the nature of the most influential power networks of this sector and to establish

the connections between them at local, regional or national scale.

Through our initial results we could validate our four research hypotheses and were also able

to identify the following three new research areas:

A1: building social capital could take place thanks to the links created by the religion which

would bring us to establish a relation between social capital and spirituality.

A2: we observed that each network seems to have its own codes, codes that we wish to

identify.

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A3: there seems to be a link between the local network and cities such as Lyon, Marseille and

Paris.

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