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(Ebook) The Emergence of Organizations and Markets by John F. Padgett Walter W. Powell ISBN 9781400845552 Complete Edition

The document is an ebook titled 'The Emergence of Organizations and Markets' by John F. Padgett and Walter W. Powell, published by Princeton University Press. It explores the development of organizations and markets through various historical and sociological lenses, featuring contributions from multiple authors. The ebook is available for instant download in PDF format and has received high ratings from readers.

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The Emergence of
Organizations and Markets
This page intentionally left blank
The Emergence of
Organizations and Markets

John F. Padgett and Walter W. Powell

Prin ceton U ni vers ity P r ess

Princeton & Oxford


Copyright © 2012 by Princeton University Press
Published by Princeton University Press,
41 William Street, Princeton, New Jersey 08540
In the United Kingdom: Princeton University Press,
6 Oxford Street, Woodstock, Oxfordshire OX20 1TW

press.princeton.edu

The cover displays a cross-section of fossilized stromato-


lites. These were bacterial colonies formed not long after
the earth cooled. Stromatolites are arguably the earliest
physical record we have of the origins of life. Composite
of photos by Paul Carrara/National Park Service and
Walter W. Powell.

All Rights Reserved

Library of Congress Cataloging-in-Publication Data

The emergence of organizations and markets / edited by


John F. Padgett and Walter W. Powell.
   p. cm.
Includes index.
ISBN 978-0-691-14867-0 (hbk.) —
ISBN 978-0-691-14887-8 (pbk.)
1. Organizational sociology. 2. Organization.
3. Industrial organization (Economic theory)
I. Padgett, John Frederick. II. Powell, Walter W.

HM786.E44 2012
302.3'5—dc23   2012004342

British Library Cataloging-in-Publication Data is


available

This book has been composed in Sabon and Din

Printed on acid-free paper. ∞

Printed in the United States of America

10 9 8 7 6 5 4 3 2 1
This volume is dedicated to

H a r r ison C . W h i t e ,
il maestro della bottega
Nihil ideo quoniam natumst in corpore, ut uti
possemus, sed quod natumst id procreat usum.

(Nothing is born in the body for us to use it,


but rather, having been born, it begets a use.)

—Lucretius, De Rerum Natura iv:


834–35 (first century B.C.)
Contents
Contributors ix Part III Communist Transitions 267
List of Illustrations xiii
Chapter 9 ■ The Politics of Communist
List of Tables xvii
Economic Reform: Soviet Union
Acknowledgments xix
and China
John F. Padgett 271
Chapter 1 ■ The Problem of Emergence
John F. Padgett and Walter W. Powell 1 Chapter 10 ■ Deviations from Design:
The Emergence of New Financial
Part I Autocatalysis 31 Markets and Organizations in
Yeltsin’s Russia
Chapter 2 ■ Autocatalysis in Chemistry
Andrew Spicer 316
and the Origin of Life
John F. Padgett 33 Chapter 11 ■ The Emergence of the
Russian Mobile Telecom Market:
Chapter 3 ■ Economic Production as
Local Technical Leadership and Global
Chemistry II
Investors in a Shadow of the State
John F. Padgett, Peter McMahan,
Valery Yakubovich and Stanislav
and Xing Zhong 70
Shekshnia 334
Chapter 4 ■ From Chemical to Social
Chapter 12 ■ Social Sequence Analysis:
Networks
Ownership Networks, Political Ties,
John F. Padgett 92
and Foreign Investment in Hungary
Part II Early Capitalism and State David Stark and Balázs Vedres 347
Formation 115
Part IV Contemporary Capitalism
Chapter 5 ■ The Emergence of Corporate and Science 375
Merchant-Banks in Dugento Tuscany
Chapter 13 ■ Chance, Nécessité, et
John F. Padgett 121
Naïveté: Ingredients to Create a New
Chapter 6 ■ Transposition and Organizational Form
Refunctionality: The Birth of Walter W. Powell and Kurt
Partnership Systems in Renaissance Sandholtz 379
Florence
Chapter 14 ■ Organizational and
John F. Padgett 168
Institutional Genesis: The Emergence
Chapter 7 ■ Country as Global Market: of High-Tech Clusters in the
Netherlands, Calvinism, and the Life Sciences
Joint-Stock Company Walter W. Powell, Kelley Packalen,
John F. Padgett 208 and Kjersten Whittington 434
Chapter 8 ■ Conflict Displacement and Chapter 15 ■ An Open Elite: Arbiters,
Dual Inclusion in the Construction Catalysts, or Gatekeepers in the
of Germany Dynamics of Industry Evolution?
Jonathan Obert and John F. Padgett 235 Walter W. Powell and Jason
Owen-Smith 466
viii ■ Contents

Chapter 16 ■ Academic Laboratories Chapter 18 ■ Managing the Boundaries


and the Reproduction of Proprietary of an “Open” Project
Science: Modeling Organizational Fabrizio Ferraro and Siobhán
Rules through Autocatalytic Networks O’Mahony 545
Jeannette A. Colyvas and Spiro Coda: Reflections on the Study of
Maroulis 496 Multiple Networks
Chapter 17 ■ Why the Valley Went Walter W. Powell and John F.
First: Aggregation and Emergence in Padgett 566
Regional Inventor Networks
Lee Fleming, Lyra Colfer, Alexandra Index of Authors 571
Marin, and Jonathan McPhie 520 Index of Subjects 573
Contributors
John F. Padgett is a social scientist at the Univer- effects of national context and national identity
sity of Chicago, with a primary appointment in on managers’ ethical evaluations in international
the Department of Political Science and courtesy business settings.
appointments in the Departments of Sociology Valery Yakubovich is an associate professor
and History. He is also a visiting professor in the of management at the ESSEC Business School
Faculty of Economics and Management at the in France. He received his Ph.D. in sociology
Universitá di Trento in Italy. He was an external from Stanford University and, prior to joining
faculty member at the Santa Fe Institute from ­ESSEC, taught at Chicago Booth and the Whar-
1996 to 1999 and from 2005 to 2009 and a re- ton School. His current projects explore organi-
search professor there from 2000 to 2004. zational innovations in virtual firms and regional
Walter W. Powell is a sociologist at Stanford high-tech clusters, the interplay between formal
University, with a primary appointment in the hierarchies and social networks in large Russian
School of Education and courtesy appointments firms, and the co-production of knowledge and
in the Schools of Business and Engineering, and social relations in organizations.
in Sociology, Communication, and Public Policy. Stanislav Shekshnia is an affiliate professor
He is co-director of Stanford’s Center on Phi- of entrepreneurship at INSEAD and a senior
lanthropy and Civil Society. He has been an ex- partner at Ward Howell/Zest Leadership talent
ternal faculty member at the Santa Fe Institute equity. His research concentrates on leadership,
since 2001. leadership development, and effective gover-
Peter McMahan is a Ph.D. student in the soci- nance in emerging markets and organizations.
ology department at the University of Chicago. David Stark is the Arthur Lehman Professor of
His research interests center on microsociologi- Sociology and International Affairs at Columbia
cal foundations of group processes, with a focus University where he directs the Center on Or-
on mathematical and statistical modeling. ganizational Innovation. His recent book, The
Xing Zhong is a research fellow at Duke Uni- Sense of Dissonance: Accounts of Worth in Eco­
versity, having received her Ph.D. from the soci- nomic Life (Princeton University Press, 2009),
ology department at the University of Chicago uses ethnographic methods to study the organi-
in 2009. Her research interests include the emer- zational structures that contribute to reflexivity.
gence and evolution of networks, the social con- With Balázs Vedres, he coauthored “Structural
texts and processes of technological innovation, Folds: Generative Disruption in Overlapping
and the development of organizational capabili- Groups” (American Journal of Sociology, 2010).
ties in emerging markets. Their current research on the historical network
Jonathan Obert is a Ph.D. student in the po- properties of creative teams is supported by the
litical science department at the University of National Science Foundation.
Chicago. His research interests include American Balázs Vedres is an associate professor of so-
political development and the creation of police ciology at the Central European University in
and internal security forces, as well as processes Budapest. His research furthers the agenda of
of state formation more generally. understanding historical dynamics in network
Andrew Spicer is an associate professor of systems, combining insights from historical so-
international business at the Moore School of ciology, social network analysis, and studies of
Business at the University of South Carolina. complex systems in physics and biology. His
His research has examined privatization policies work combines historical sensitivities to tempo-
and outcomes in post-communist countries; the ral processes with a network analytic sensitivity
role of Western ideas and international organiza- to patterns of connectedness cross-sectionally.
tions in shaping market reform policies; and the His article with David Stark (American Journal
x ■ Contributors

of Sociology, 2010) analyzes generative tensions application and its ramifications for careers,
in the historical evolution of business groups. identities, and public science.
The article won the 2011 Viviana Zelizer Award Spiro Maroulis is an assistant professor in the
for best article in economic sociology, as well as School of Public Affairs at Arizona State Univer-
the 2011 Roger V. Gould Prize. sity, and Associate Director for Policy Informat-
Kurt Sandholtz is a doctoral candidate at Stan- ics at the ASU Decision Theater. His research
ford’s Center for Work, Technology, and Organi- addresses problems involved with understand-
zation, and a visiting instructor at BYU Marriott ing the relationship between individual and
School of Management. His work has appeared collective behavior, particularly why strategic
in Organization Studies and Strategic Entrepre­ initiatives and change efforts so often provoke
neurship Journal. resistance and unanticipated responses inside or-
Kelley Packalen is an associate professor of ganizations. Spiro received his B.S.E. from Duke
entrepreneurship in the School of Business at University, M.P.P. from Harvard University, and
Queen’s University in Kingston, Ontario. Her Ph.D. from Northwestern University.
research is at the intersection of entrepreneur- Lee Fleming is the director of the Coleman
ship and organization theory. She is broadly Fung Institute of Engineering Leadership in the
interested in the connection between the career UC–Berkeley College of Engineering. Previously
biographies of founders and the networks they he was the Albert Whitehead III Professor of
develop for their nascent firms. Kelley received Business Administration at the Harvard Busi-
her Ph.D. in industrial engineering from Stan- ness School. Working with large databases, he
ford University. has empirically modeled invention as a process
Kjersten Whittington is an assistant profes- of recombinant search, the social networks of
sor of sociology at Reed College. In addition to inventors, and the emergence of leadership in
regional dynamics, her research addresses how open innovation communities. He is currently in-
the structural and network organization of firms vestigating how non-compete contracts influence
influences scientists’ career trajectories and inno- inventor mobility, firm strategy, and regional
vative output. Her work on this topic focuses on dynamics.
sex disparities in productivity in light of inventor Lyra Colfer holds a Ph.D. in information, tech-
collaborations across academic and industrial nology, and management from Harvard Uni-
science contexts. She is also studying gender and versity. Her research examines the relationship
motherhood dynamics among science profes- between organizational structure and product
sionals and, with collaborators, gendered deci- architecture. She has applied multiple methods to
sion making in venture capital contexts. evaluate the mirroring hypothesis, which posits
Jason Owen-Smith is an associate professor of that the structure of a development organization
sociology and organizational studies at the Uni- “mirrors” the design of the product it develops.
versity of Michigan. He examines how science, She is currently working in the commercial soft-
commerce, and the law cohere and conflict in ware industry as a strategic consultant.
contemporary societies and economies. Together Alexandra Marin is an assistant professor of
with collaborators, Jason works on projects sociology at the University of Toronto. Her re-
that examine the dynamics of high-technology search examines how social networks operate in
industries, the commercialization of academic the labor market, focusing on how information
research, and the science and politics of human holders make choices to share or withhold infor-
embryonic stem cell research. mation. She is currently examining occupation
Jeannette A. Colyvas is an assistant professor closure and its effects on status attainment and
in the School of Education and Social Policy network-based job search in the Canadian labor
and (by courtesy) Sociology and the Institute market.
for Policy Research at Northwestern Univer- Jonathan McPhie is currently a product man-
sity. She holds a Ph.D. from Stanford University. ager at Google, Inc. While there, he has worked
Her published work has appeared in Manage­ on a variety of projects covering online commu-
ment Science, Research Policy, Minerva, Socio­ nications, web search, location services, and so-
logical Theory, and Research in Organizational cial networking. Jonathan previously worked as
Behavior. Jeannette’s current research examines a research associate at Harvard Business School,
university-industry interfaces, focusing on the where he conducted analyses of collaboration
translation of basic science into commercial patterns in the U.S. patent database. Jonathan
Contributors ■ xi

holds bachelor’s and master’s degrees in com- Siobhán O’Mahony is an associate professor
puter science from Harvard University. at the Boston University School of Manage-
Fabrizio Ferraro is an associate professor of ment. Her research explores how technical and
strategic management at IESE Business School. creative projects organize. She has examined
He holds a Ph.D. in management from Stan- high-­technology contractors, open source pro-
ford University. He has studied the emergence grammers, artists, music producers, Internet
of novel organizational forms and institutions, start-ups, and corporate consortiums. She is
including open-source software communities interested in how people create organizations
and sustainability reporting. He is now study- that promote innovation, creativity, and growth
ing the emergence of the socially responsible without replicating the bureaucratic structures
investing field in finance and, more broadly, the they strive to avoid. Her work has appeared in
relationship between social values and financial Administrative Science Quarterly, Organiza­
investing. He has published in the Academy of tion Science, Academy of Management Journal,
Management Journal, Academy of Management Research in Organizational Behavior, Research
Review, and Organization Science. His article Policy, Research in the Sociology of Organiza­
“Economics Language and Assumptions: How tions, Industry and Innovation, and the Journal
Theories Can Become Self-fulfilling” won the of Management and Governance.
2006 Best Paper Award from the Academy of
Management Review.
This page intentionally left blank
Illustrations
1.1. Multiple-network ensemble in 3.1. Representative 5-skill hypercycles
Renaissance Florence 6 at equilibrium 77
1.2a. Partnership systems in Renaissance 3.2. Survival of autocatalytic networks:
Florence: genesis 13 hypercycle chemistry 78
1.2b. Partnership systems in Renaissance 3.3. Survival of autocatalytic networks:
Florence: catalysis 13 ALL chemistry 82
1.3a. Dedicated Biotechnology Firms 3.4. Survival of autocatalytic networks:
(DBFs): genesis 14 ALL chemistry, 3+ cycles 82
1.3b. Dedicated Biotechnology Firms 3.5. Population of cells: ALL chemistry 83
(DBFs): catalysis 14 3.6. Rule complexity: ALL chemistry 84
1.4a. Medieval corporations in Dugento 3.7. Subsystem complexity: ALL
Tuscany: genesis 17 chemistry 85
1.4b. Medieval corporations in Dugento 3.8. Free riding: ALL chemistry 87
Tuscany: catalysis 17 4.1. Hypercycles linked through
1.5a. Joint-stock companies in early “International Trade” 100
modern Netherlands: genesis 18 4.2. Hypercycles linked through
1.5b. Joint-stock companies in early “Reciprocity” 106
modern Netherlands: catalysis 19 4.3. Cellular autocatalysis or “Families” 107
1.6a. Nineteenth-century Germany: 4.4. Functional aggregation of linked
genesis through conflict displacement 20 hypercycles 112
1.6b. Nineteenth-century Germany: 5.1. Sequence of emergence of Dugento
catalysis 21 Tuscan merchant-banks 128
1.7a. Soviet Central Command economy: 5.2. Total number of papal letters,
genesis 22 1243–68 131
1.7b. Soviet Central Command economy: 5.3. Number of papal letters
catalysis 23 mentioning Italian bankers 131
1.8a. Chinese market economy: genesis 24 5.4. Italian bankers in extract from
1.8b. Mao’s communist economy and liberate rolls of king of England 134
party: catalysis 25 6.1. Multiple-network ensemble in
2.1. Examples of catalytic and Renaissance Florence 171
autocatalytic chemical cycles 35 6.2. Number of cambio bankers, by
2.2. The chemoton 37 social class, in the fourteenth century 196
2.3. Simplified chemistry of life 38 7.1. Migration and homology: the birth
2.4. Reductive citric-acid cycle 42 of Netherlands and the joint-stock
2.5. Changes in understanding of the tree company 210
of early life 45 8.1. Late nineteenth-century Germany
2.6. The hypercycle model of Eigen as dual inclusion 237
and Schuster 47 8.2. Conflict displacement 238
2.7. Full-blown genetic autocatalytic 8.3. Hieratic authority 240
machinery 48 8.4A and B. War with Austria (1866) 242
2.8. Autocatalysis of polymers 52 8.4C. War with Austria: conflict
2.9. Jain and Krishna’s ecological model displacement at political party level 243
of autocatalysis 54 8.5. Kulturkampf (1871–75) 250
2.10. Fontana’s λ-calculus model of 8.6A–C. Antisocialism and protectionism
autocatalysis 55 (1878–1989) 253
xiv ■ Illustrations

8.6D. Hieratic authority during 15.3. Distributional features of the elite,


antisocialism and protectionism 1988–2004 475
(1878–95) 254 15.4. New elite ties, 1990, 1996, 2002 477
8.7. Hieratic authority during 15.5. Main component with an
post-Bismarck rise of mass interest embedded 2-core in 1984, all ties 480
groups (1890s) 259 15.6. The elite (4-core) in 1990, new
9.1. Communist dual hierarchy 273 and continuing ties 481
9.2. Production autocatalysis in the 15.7. The elite (5-core) in 1996, new
Soviet heavy-industry sector 281 and continuing ties 483
9.3. Chinese state ownership of 15.8. The elite (5-core) in 2002, new
economic enterprises after Great and continuing ties 485
Leap Forward 287 16.1. Schematic representation of
9.4. The politics of Deng Xiaoping’s scientific knowledge production 510
economic reform 292 16.2. Evolution of agent-based model
9.5. Soviet dual hierarchy, including over time 512
Gorbachev’s extension to soviets 304 16.3. Multilevel scientific production
10.1. Interaction between national, networks 512
market, and organizational levels 16.4. Distribution of patentability
of activity 317 thresholds 513
10.2. Number of licensed financial 16.5. Transaction types over time with
brokers and voucher investment preemptive adaptation on and off 514
funds, October 1992–October 1995 322 16.6. Final patentability thresholds
10.3. Unlicensed financial companies in (50 runs) even reward structure 515
Moscow, 1993–94 323 16.7. Final patentability thresholds
12.1. Schematic of a political tie between (50 runs) favor patents reward
a firm and a party 356 structure 515
12.2. Area chart of large firm 16.8. Final patentability thresholds
capitalization 357 (50 runs) favor patents reward
12.3. An example of a firm’s network structure 516
sequence 360 16.9. Final patentability thresholds by
13.1. The intersection of science, alpha and reward structure (50 runs) 516
finance, and commerce—three 17.1. Box plots of the size of the largest
models 401 connected component relative to the
14.1. Location of U.S. biotechnology entire network of patented inventor
companies, 1980 443 collaborations by U.S. Metropolitan
14.2. Location of U.S. biotechnology Statistical Area 522
companies, 2002 443 17.2. Time series of histograms of
14.3. Boston local network, 1988 445 component size frequency of Boston
14.4. Boston local network, 1998 446 and Silicon Valley 523
14.5. Boston, Bay Area, and San Diego, 17.3. Largest component of Boston,
1990, 1996, and 2002 448 1986–90, by assignee and importance
14.6. New York, New Jersey, and of inventions 524
Philadelphia, 1990, 1996, and 2002 452 17.4. Largest component of Boston,
14.7. Washington-Baltimore, Research 1986–90, by technology type and
Triangle, NC, and Houston, 1990, usage of scientific literature 525
1996, and 2002 453 17.5. Largest component of Silicon
14.8. Seattle and Los Angeles, 1990, Valley, 1986–90, by assignee and
1996, and 2002 454 importance of inventions 527
14.9. Anchor tenant vs. 800-lb. gorilla 455 17.6. Largest component of Silicon
14.10. Transposition 456 Valley, 1986–90, by technology type
14.11. Sample selection on networks? 458 and usage of scientific literature 528
15.1. Trends in collaborative activity, 17.7. Applied Materials component,
1985–2004 473 Silicon Valley’s fifth largest
15.2. Annual counts of newly formed component in 1989, by assignee and
and concluding ties, 1988–2004 474 importance of inventions 531
Illustrations ■ xv

17.8. Xerox PARC and Hewlett Packard nodes, for Boston and Silicon Valley’s
component, Silicon Valley’s fourth largest components in 1989 541
largest component in 1989, by assig­- 17.12. Size of component after removal
nee and importance of inventions 532 of specified proportion of component’s
17.9. Raychem component, Silicon nodes, for Boston and Silicon Valley’s
Valley’s third largest component in second largest components 541
1989, by assignee and importance of 18.1. Media citations of Debian GNU/
inventions 534 Linux, 1997–2002 553
17.10. Boston’s largest component in 18.2. Degree distribution of the Debian
1989, by assignee and importance of network, 1997–2002 560
inventions 538 18.3. Log-log plot of the cumulative
17.11. Size of component after removal degree distribution of the Debian
of specified proportion of component’s network, 1997–2002 561
This page intentionally left blank
Tables
3.1. Distribution of cycle lengths (ALL 6.8. Relative experience of nonfamily
chemistry) 86 cambio banking partners 197
5A.1. Bonsignori company members 6.9. Family types of cambio banking
and their transactions, 1250–56 146 partnerships 199
5A.2. Bonsignori company members 10.1. Banks and the loans-for-
and their transactions, 1261–63 147 shares deal 326
5A.3. Bonsignori company members 10.2. From design to emergence 329
and their transactions, 1265 148 11.1. Relative market share of cellular
5A.4. Bonsignori company members operators in Moscow and
and their transactions, 1266–67 149 St. Petersburg 335
5A.5. Bonsignori company partners 11.2. Ownership of the cellular
and their capital, 1289 149 operators in Moscow and
5B.1. Scali company members and their St. Petersburg 337
transactions, 1229–59 150 11.3. Cellular telephony penetration
5B.2. Scali company members and their rates in Moscow and St. Petersburg,
transactions, 1261–69 152 1993–2000 338
5B.3. Scali company members, 1282–84 153 12.1. Scenario 1: domestic networks
5C.1. Tolomei company members crowding out foreign capital 350
and their transactions, 1223–60 154 12.2. Scenario 2: foreign eradication
5C.2. Tolomei company members of networks directly and by
and their transactions, 1262–79 156 demonstration effects 351
5C.3. Scotti and Tolomei company 12.3. Scenario 3: a radically
members and their transactions, dual-segregated economy 351
1255–62 157 12.4. Distribution of large-firm
5D.1. Ricciardi company members capitalization by type, Hungary,
and their transactions, 122?–1266 158 2001 351
5D.2. Ricciardi company members 12.5. Local network positions 359
and their transactions, 1272–86 160 12.6. Pathways’ typical sequences of
5D.3. Ricciardi company members, network positions 361
doing business with Pope Martin IV 162 12.7. Sizable foreign ownership in 2001 363
6.1. Industrial composition of 1385–99 12.8. Capitalization in firms with
partnership systems 175 political ties in 2001 368
6.2. Social and political embedding of 12.9. Network sequence pathways,
businessmen in multiple companies 176 political ties, and foreign ownership 369
6.3. Political mobilization of cambio 13.1. Prominent early biotech firms 388
bankers and international merchants 181 13.2. Distinctive features of early
6.4. Political and social embedding of biotech firms 390
cambio bankers 183 13.3. Science vs. commerce:
6.5. Political and social embedding of a continuum 394
merchant-bankers 184 13.4. Two variants of a new form 398
6.6. Political and social embedding of 13.5. Publication and citation counts
cambio banking partnerships 189 for ten-year period post-IPO 399
6.7. Political and social embedding of 13.6. The creation of novelty, step-
merchant-banker partnerships 190 by-step 405
xviii ■ Tables

13.7. What happened to the first 18.1. Growth in the Debian keyring
generation? 407 network 550
14.1. Trends in biomedical patenting, 18.2. Descriptive statistics of Debian
by metropolitan region 437 developers, 2001–2 550
16.1. Laboratory approaches to 18.3. Correlation coefficients in 2001 551
commercializing research, 1970–82 502 18.4. Correlation coefficients in 2002 551
16.2. Recombined laboratory 18.5. Logistic regression coefficients
approaches to commercializing for the regression of New
research, 1970–82 505 Maintainer Committee membership
16.3. Empirical claims about science on selected independent variables
production and ABM mechanisms 508 in 2001 557
17.1. Summary of reasons for 18.6. Logistic regression coefficients
aggregation and non-aggregation for the regression of New
in Silicon Valley and Boston 526 Maintainer Committee membership
17.2. Patent analysis of component on selected independent variables
robustness 542 in 2002 557
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