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Tertius Iungens and creating entrepreneurial rents

Thursday 11 March 2010

I just re-read the 2005 paper by David Obstfeld entitled, “Social Networks, the Tertius Iungens Orientation, and Involvement in Innovation”, Administrative Science Quarterly, Vol. 50, No. 1  (Mar., 2005), pp. 100-130. The JSTOR stable URL is . He introduces tertius iungens as a network position that differs from the commonly cited tertius gaudens. The former is “the third who joins (the other two)” and the latter is “the third who rejoices”. The agent who is tertius gaudens gains economic advantage because the other two agents in the network are in conflict. The agent who is tertius iungens gains economic advantage from bringing the other two parties together — a market-making entrepreneur, perhaps.

I haven’t found much follow-up to Obstfeld (even by himself) in regard to how this agent is compensated. The other form, tertius gaudens, appropriates rents directly from the market by stepping into the conflict and creating value from other agents in the network. This is clearly an entrepreneurial act. Ronald Burt, in Structural Holes (Harvard University Press, 1992), identifies a second form of entrepreneurship associated with tertius gaudens: the broker/negotiator between the conflicting parties. He says that the rents can be captured directly from the negotiations (both parties, presumably) or “to add value, strengthening the relations for later profit” (page 34.) This latter entrepreneurial behavior is hard to distinguish from tertius iungens, save for Ostfeld’s specific claim that Georg Simmel’s original distinction was whether the intervening tertius agent maintained the separation between the conflicting dyad (gaudens) or mediated/unified the dyad (iungens). Implicit in Ostfeld’s definition is that Burt conflates the two.

I like Ostfeld’s distinction as the basis for research into entrepreneurial behavior. While Ostfeld and Burt cast the problem squarely within social network analysis, I think that these peculiar forms of  entrepreneurial opportunity can be examined by an agent-based model, wherein the social networks need not be structurally defined. The interesting question is whether the mediator can capture any value from “closing the space” between the dyadic parties. It strikes me that this should be modeled by imbuing agents with either active adversarial (close, but antagonistic) dyadic relationships or passive (distant, indifferent) dyadic relationships. The tertius agent can be characterized as  having  brokering or mediating attributes. Finally, there needs to be some characterization of available rent-earning mechanisms from single-period interactions and across time steps (Burt’s “later profits”).

Perhaps we can steal the necessary behavioral rules for agents and their interactions from ecology: amensalism, commensalism, mutualism.

Time to dust off the simulation software.

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