Blog Post

Institutional Change: Social Capital and Data in the Cloud

“Nothing is possible without men, but nothing is lasting without institutions.” (Jean Monnet, The Beauty of Institutions).

Today, the most contested region for institutional change lies in the global and technological transition to cloud computing, the ability for all software to be downloaded, shared, and distributed over the internet.Institutions  and start-ups around the globe are now considering the benefits, saving money on transaction costs, and the risks, lack of control of data, when purchasing "cloud space" on Amazon, Microsoft and Google's hardware to process their business transactions. Ashlee Vance notes, that there is currently a "war" in the clouds; where "things (in this case business standards) are downright Darwinian right now...There hasn't been this type of Cambrian in corporate technology in 20 years"(1).



If all data is in the hands of a few in power, how will the owners of the information control that data? Putnam notes, "The same ties that bind also exclude" (Narayan 5). It is important that in the next 3-4 years cloud computing policymakers consider the way in which "vertical" structure of the cloud (based mainly from 3 market holds, Amazon, Google & Microsoft) effect cooperation and social exclusion of global society and business as a whole.

by Kelsey Brannan









The real fear is not technologic change, as Cloud computing is not much different than the Internet, the real fear is in the adaptation of scale. And as scale increases, so does risk and transaction costs -- factors that affect people's trust in the system.  Ashlee vance notes,“Some companies justifiably fear they will be subject to lawsuits if they’re not directly in charge of managing their own information" (2). If the cloud innovation will become a fully diffused technology, the most important factor to be communicated is, "observability," the visibility of the innovation to others (Rogers).

The question is, how will this global adaptation build trust and social capital amongst the users of the "cloud"? The creation of international standards and norms for data portability, will allow institutions to bridge "ties across businesses and between social groups and government policies" (Putnam 1). As a result of these ties,  the cloud business can create the social capital, "the norms and social relations..that [will] enable people to co-coordinate action and to achieve desired goals" (Narayan 6). However, if the institutions fail to create social capital, that is by maintaining a vertical structure, within this cloudian evolution, trust will breakdown. Amazon, Google, and Microsoft are all competing to gain more clients on the cloud, but within that competition they must also find  synergetic balance.






Narayan notes that synergy requires both complementarity, symbiotic relationship between public & private sectors, and embeddedness, "the ties that connect citizens and public officials" (11).To obtain synergetic balance and institutional success, cloud computing must maintain a horizontal structure across international borders (Putnam 176). According to the Computer & Communications Industry Association's  (CCIA) Public Policy for the Cloud Report (July 2011), it is recommended that the "Government should partner with private sector to..make the free flow of information [transparency] a top foreign policy and trade policy" (24) Due to the speed and connection of the web, blocking information will create trade barriers and block the growth of horizontal structure. Putnam notes, the more communication among the transactors, the "greater their mutual trust and the easier they will find it to cooperate" (174). As the Cloud grows, the network will become more dense, and the more dense the network of communication of civic engagement is, the easier it will be to "spot and punish the occasional "bad apple" so that defection is risker and less tempting." (178) As Institutions adapt to cloud computing,  policy makers must create international standards to create institutional flexibility, equal access, civic engagement, and coordination.


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