Intermediation, cohesion and brokerage

 The embeddedness of ties points to the duality of networks; they emerge from relations, and they enable and constrain relations

 Embedded ties have no inherent positive or negative quality; it is the way they are used which is of importance

 The outcome of a structure depends on the agency of actors

In spite of the recognition of agency as a determinant of network outcome, SNA tends to take the network as given, and to approach structure as the determinant of action (Uzzi 1997). However, the relation between structure and agency in network analysis is a circular phenomenon, and the two precondition each other (Van Den Bulte, Wuyts 2007).

This mutual constitution of structure and agency is compatible with a critical realist approach which assumes the world to pre-exist any individual actor, but also

acknowledges the potential of any actor to influence the present and future structure through conceptualizations and practices (Buch-Hansen 2005, Sayer 1992).

Consequently, the structure in terms of ties and positions sets the stage for action, and the restrictions on the actors by a specific structure can be severe, but structure cannot act on its own. It depends on the actors and their actions. Therefore, a comprehensive network approach has to consider the interplay of structure and agency, and how agency is expressed in actions and activities.

In SNA, the term triad is applied for the description of all possible combinations of three actors and their relationships; not exclusively for the closed group-like triads with mutual strong ties. A closed and an open triad illustrate the smallest possible examples of network structures which are characterized by cohesion and brokerage respectively, on the condition that the ties in the closed triad are strong ties. In triadic business relationships, characterized by strong and embedded ties, the coordination or governance mechanism is expected to include relational or cooperative elements along with competitive elements (Uzzi 1997). In comparison an open triad illustrates the brokerage potential for an actor who spans a structural hole between two otherwise disconnected actors (Burt 1992).

But the motives behind strong embedded ties are not unambiguous (Granovetter 1985).

They can be motivated by a desire to reduce competition (collusion), or increase information exchange (Ingram, Roberts 2000). The formation of closed triads can also be motivated by either clustering or countering. Clustering refers to the cooperative motivation for the formation of triads, aiming at combing resources from multiple partners. Clustering refers to a competitive motivation for the formation of triads, aiming at reducing the appropriation of value by another actor in the triad (Madhavan, Gnyawali

& Jinyu He 2004).

These studies point to a number of aspects to be observed in the analysis of business relationships in which all three actors have contact. It has to be established whether the ties are strong or weak, symmetric or not, and whether the three ties are similar or different. And if it is possible to establish the motivation for the specific character of each tie, and the specific constellation of ties, it will inform the understanding of a specific triadic constellation. Consequently, the fact that a triad is closed or open is not enough to establish and interpret the value potential of the structure. The character of the ties, the constellation and motives are also important for the interpretation of open triads.

In SNA open triads represents structural holes which offer brokerage potential. Brokerage is based on the phenomenon of the tertius gaudens, which signifies a third element who use his relatively superior position for purely egoistic interests (Simmel 1950). The rationale for the existence of a tertius gaudens is some degree of “mutual strangeness or qualitative dualism” (ibid p. 159). Thus,

“the favorable position of the tertius gaudens disappears quite generally the moment the two others become a unit” (ibid p. 160)

The tertius is an interesting concept for the analysis of intermediation in supplier-merchant-customer relationships. It implies that when the customer and the supplier know each other, the structural phenomenon of separation (mutual strangeness) which is the condition for the existence of a tertius gaudens, disappears. Thus, a genuine brokerage position can only exist to the extent that the broker can keep the two other actors apart. If not, it is no longer a brokering position, but something else.

However, an open triadic structure can be interpreted differently. A micro-economic approach defines the function of an intermediating actor as cost-economizing; he reduces the number of necessary links needed to connect multiple suppliers and multiple buyers for his connected parties (Gattorna 1978b). The supplier substitutes multiple direct links with a reduced number of indirect links. Intermediation is conceptualized as a cost-economizing coordination of market transactions through price signals (Spulber 1996). The existence of intermediating actors is also interpreted as an indication of the attractiveness of the services they offer for other parties (Bartels 1988). These conceptualizations result in a different understanding of the position of an actor who spans a structural hole. It is not a matter of brokerage, but of bridging the gaps of time, space, quantity and variety between production and consumption (Blois, Shaw & Ennis 2000). This alternative interpretation of an actor, who spans a structural hole in a social structure by playing an active coordinating role, has been conceptualized as the tertius iungens (Obstfeld 2005).

These alternative conceptualizations of the function and position of an intermediating actor, once again indicate that the motivation of actors is significant for the understanding of the value potential of a structure.

The fact that at triadic structure can be described as either open or closed, apparently does not offer sufficient information to understand the value potential of structure.

Motivation is a significant element, which must be included. Therefore, the review of the SNA approach point to the following research question:

What is the link between triadic structures and the actor’s motivation for participation?

One possible way to examine this question is to study the activities in ties. What is done by whom, and why? But as pointed out, SNA centres on the analysis of structures and how structures influence the outcome of the actors’ exercising of agency. SNA has little to say about the activities taking place within the ties. For that purpose the MAN approach offers better tools, and this is the subject of the following chapter.

CHAPTER 4: EMERGING STRUCTURES