Matthew Bidwell, Isabel Fernandez-Mateo
While much research shows that individuals and organizations that bridge previously unconnected actors obtain superior economic advantages, little work has addressed how such benefits from brokerage evolve over time. Existing theory assumes that the returns to brokerage should be short-lived. We argue by contrast that, in markets with high information asymmetry, the returns to brokerage may actually increase over time. We use fieldwork and quantitative data from the staffing sector to examine how the duration of the relationship between market brokers and the brokered parties, as well as between the brokered parties themselves, affects the returns to brokerage. We test our hypotheses using information on relationships, bill rates, and margins from a broker in this market - a specialized temporary help agency. Our results show that long term relationships between the agency and the workers (i.e., the "brokered party") increase both bill rate and percentage commission. Long term ties between the worker and the client firms, however, reduce the bill rate and commission. These findings demonstrate the importance of long-term relationships in brokerage, and have more general implications for the understanding of how positional advantages are sustained over time.
INSEAD, Singapore 138676, 1 Ayer Rajah Avenue, Singapore; London Business School, United Kingdom
