Stabilizing brokerage

Abstract

A variety of social and economic arrangements exist to facilitate the exchange of goods, services, and information over gaps in social structure. Each of these arrangements bears some relationship to the idea of brokerage, but this brokerage is rarely like the pure and formal economic intermediation seen in some modern markets. Indeed, for reasons illuminated by existing sociological and economic models, brokerage is a fragile relationship. In this paper, we review the causes of instability in brokerage and identify three social mechanisms that can stabilize fragile brokerage relationships: social isolation, broker capture, and organizational grafting. Each of these mechanisms rests on the emergence or existence of supporting institutions. We suggest that organizational grafting may be the most stable and effective resolution to the tensions inherent in brokerage, but it is also the most institutionally demanding.networks | trade | brokers B rokers frequently play a critical role in facilitating the movement of goods and information. Demand for brokers who connect otherwise unconnected parties is particularly strong in settings where information is scarce or difficult to interpret, transactions are rare or complex, or the institutional environment supporting exchange is poorly developed. However, the broker's position is inherently weak, because the relational and informational conditions that stimulate demand for brokerage may simultaneously undermine other actors' confidence in the broker. Hence, brokerage is a fragile relation. Based on the empirical literature in a wide variety of fields, we observe that, despite brokers' structural liabilities, brokerage relationships can be stabilized in durable forms that encourage trade even when generalized trust is low or property rights are poorly enforced. The general solution to stabilizing brokerage is the recruitment of supporting social institutions that, in one way or another, enhance actors' confidence in the broker's future behavior. The first aim of this paper is to review the economic and sociological sources of brokers' weakness. We then identify and discuss three analytically distinct social arrangements that can stabilize brokerage relationships into more durable institutions: social isolation, broker capture, and organizational grafting. Each of these mechanisms depends on the emergence or existence of institutions that reduce uncertainty. What Is a Broker?Before reviewing why brokerage is a fragile relation, we must ask, what is a broker? The simple answer is that brokers trade over gaps in social structure (1-3). Unlike patrons, true brokers do not put their own resources at risk; rather, they have access to resources that are embedded in other persons, positions, or groups (4).* More formally, we can define brokers as intermediary links in systems of social, economic, or political relations who facilitate trade or transmission of valued resources that would otherwise be substantially more difficult. The crucial characteristics of brokers are that they...

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