The formation of economic networks: a proximity approach

Over the last two decades, scholars from different scientific fields have increasingly acknowledged that network structures play a crucial role in economic activities (Granovetter, 1985; Powell et al., 2005; Cowan et al., 2007; Jackson, 2008). Network structures refer to the particular way relations are organized, which is crucial for the exchange of resources that do not circulate easily through the market, like strategic information, tacit knowledge and trust. Therefore, considerable attention has been given to the analysis of structural properties of networks that favour entrepreneurship, innovation processes, technological change or employment dynamics. A major research concern is to understand how these structures are formed. Since networks are a crucial determinant of economic performance, it is important to understand where this set of relations comes from. This means there is a need to investigate the underlying mechanisms of network formation, i.e. the driving forces behind network structures. Two different, although complementary, perspectives can be adopted to explain relational dynamics. The first driver operates at a 'structural' level and refers to the endogenous mechanisms of network formation (Glückler, 2007; Rivera et al., 2010). Network theory explains how the organization of relationships influences the creation of further relations. The second driver focuses on the 'individual' level and analyses the unequal embeddedness of actors in networks. In this view, it is argued that the tendency to create relations is related to individual characteristics of actors (Cassiman and Veugelers, 2002).