Intermediaries, Mediators, and Market Change

67 Pages Posted: 22 Jul 2010 Last revised: 12 May 2011

Date Written: July 21, 2010


One of the core beliefs of organizational and economic sociology is that audience-held expectations for certain kinds of organizational behavior shape actual organizational behavior. As a result, deviations from such expectations - for example, organizational nonconformity and market heterogeneity when considered in aggregate - that cannot be explained by forces of competition alone are often attributed to a fundamental change in audience expectations. This article explores an alternative, structural mechanism: Audience expectations are applied differentially as a function of the way they travel through the market. Organizational (and market) heterogeneity is possible so long as expectations for conformity never flow from audience to organization. Central to the proposed framework is a distinction between two kinds of brokers, the intermediary and the mediator. Both facilitate markets by transferring material resources from one party to the other. Where they differ is in their capacity to transmit market intangibles - meaning here, expectations or “codes of conduct” - between transacting parties. Having limited power, intermediaries must transmit expectations largely intact or else forego the transaction. Having more power, mediators may significantly alter the nature of what is being transmitted or even refuse transmission altogether. An application of the framework to the hedge fund industry offers an explanation of rapidly increasing heterogeneity among funds that complements technology- and resource-based alternatives. The shift from homogeneity to heterogeneity among fund products was facilitated in part by a contemporaneous role-shift of a set of market brokers - funds of funds - from intermediaries to mediators. As mediators, funds of funds were effective in attenuating the constraints posed by investor expectations and, in turn, put in motion the beginnings of a dramatic market change.

Keywords: hedge funds, information, economic sociology, categories

Suggested Citation

Smith, Edward Bishop, Intermediaries, Mediators, and Market Change (July 21, 2010). Available at SSRN: or

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics