Brokerage evolution in innovation contexts: Formal structure, network neighborhoods and knowledge

Abstract

Research in a number of fields has shown that brokerage is typically fragile while creating consequential outcomes. However, little work has examined the conditions under which brokerage ends, and furthermore, whether and when it terminates with closure in a closed triad that includes the broker, or in a dyad that connects the previously-disconnected alters but disintermediates the broker. We employ a comprehensive theoretical framework drawing on constrained agency to study these questions in a context of organizational innovation. Specifically, we investigate the role of hierarchy, inventors’ network neighborhoods and knowledge differences in shaping the evolution of brokerage. We test our ideas in the a setting of co-patenting in 41 large Chinese research-intensive organizations over the period 1996-2008, with a dataset of 36,338 patents applied for by these organizations. We first show that the type of brokerage ending matters for innovation outcomes by demonstrating that disintermediation creates more subsequent innovativeness than closure. Thereafter, we use a two-step model to first model the termination of brokerage and in the second step to predict the type of closing: disintermediation or closure. Our results show that the broker's and alters’ hierarchical rank similarity promotes disintermediation, as does alters’ connectedness in network neighborhoods, while knowledge differences among the broker and alters encourage the evolution of brokerage toward closure. We spell out the implications of our findings for organizational innovation and the management of R&D.