The Boundaries of Brokerage-Based Knowledge Transfer

This paper analyzes the theoretical boundaries of brokerage-based knowledge transfer, a model based on Burt’s (1992) structural hole theory. To this end, this paper specifies three theoretical assumptions underlying brokerage-based knowledge transfer and examines whether the violations of those assumptions facilitate or hinder brokerage-based knowledge transfer. In doing so, this paper seeks to identify which assumption is fundamental to brokerage-based knowledge transfer. The following are the three basic assumptions concerning brokerage positions: 1) actors hold knowledge different from one another. 2) the cost of having a tie or forming a relationship is nontrivial. 3) there is no information loss when transferring information from one actor to another. To further examine these assumptions, this paper proposes a model for a tolerable level of information loss that leads to brokerage-based information benefits. In particular, this paper derives two different types of brokerage and shows that brokerage with substitution is preferred to brokerage with minimum direct ties as the ratio of networking cost to information value increases. Moreover, this study shows that the tolerable level of information loss that facilitates brokerage-based knowledge transfer is matched with the cost of having a tie and the ex ante value of knowledge held by partners. In this regard, the working of the third basic assumption is contingent upon that of the first and the second basic assumptions. Finally, it shows that the optimal mix of redundant and non-redundant ties depends again on information loss.