UC Irvine

How do emotions influence economic action? Current literature recognizes the importance of emotions for economy because they either help individuals perform economic roles through emotion management or enhancement of emotional intelligence, or because they aid rationality through their influence on preference formation. All these strands of research investigate the link between emotions and economy from an atomistic/individualistic perspective. I argue for a different approach, one that adopts a relational perspective, focuses on emotional embeddedness and examines how emotions matter in economic interactions. Emotional embeddedness research starts with a premise that emotions result from and are influenced by interactions between economic actors during the economic process where emotional currents and their visceral and physical manifestations come to the fore. This increases the uncertainty in economic transactions and complicates the given means-ends logic of rational economic decision making, yielding economic action principles different from utility maximization. I propose two types of such creative economic action in this paper: improvisation and situational adaptation. Improvisation characterizes situations where ends (goals) and means are unclear at the beginning of a transaction process and get articulated as a consequence of emotional embeddedness experienced during a process. Situational adaptation characterizes situations in which means or ends of action change because of interaction-induced emotions that prompt actors to choose new means/ends. The article concludes with a call for empirical research that explicates further the influence of emotions not merely for rational economic action but also creative economic interactions.