ABSTRACT
This chapter examines the effect of inter-industrial dependency on the survival of Israeli firms. It presents the analytical research problem, using models of social capital and structural models of exchange. The chapter reviews the differences between two approaches to social capital, deriving several testable hypotheses considering the effect of industry's social capital. It estimates the structural determinants of industry's corporate instability. The chapter also discusses the findings and their implications for research on the relations between environments and business organizations. According to the paradigm of perfect competition, supply and demand are freely negotiated. Moreover, this theory holds that to the extent to which the market is perfect, buyers and sellers are numerous, small, and anonymous, and commodities can be divided infnitely. Market embeddedness provides benefits such as: trust, joint problem-solving arrangement, complex adaptation, reduced bargaining and monitoring costs. Rent is defined as an economic profit that is earned when competition is not free or markets are imperfect.
