Interorganizational Relations and the Role of the Third Party

Two organizations are more likely to establish a connection if they have a pre-existing relationship with a common partner or intermediary—this is known as triadic closure and has long been of interest to scholars. However, all of the research up until this point has failed to take into account the importance of the intermediary in facilitating or even reversing this process. Indeed, existing research completely ignores the attitudes and motivations of the intermediary, and instead presumes it to be entirely selfless.

In response, a recent study by Pavel Zhelyazkov theorizes that two important factors could limit an intermediary’s willingness to introduce and endorse an exchange partner to its other contacts, thereby negating or reversing closure. First, collaboration outcomes can shape the intermediary’s assessment of its collaborator. For example, a failure in the relationship can result in negative feedback that might be passed on to other parties and subsequently decrease their willingness to work with the intermediary’s collaborator. Second, the competitive concerns of the intermediary might constrain its willingness to create connections for a collaborator with other partners if it might result in the intermediary being replaced. This could be especially true if the collaborator and intermediary are similar—and therefore easily replaceable—and when the collaborator is more attractive as an exchange partner than the intermediary.

To test his hypothesis, Zhelyazkov investigated the mechanisms of triadic closure by looking at the investment decisions of limited partners (LP) investing in venture capital (VC) firms. The study combined two major datasets, VentureXpert by Thompson Reuters and the Private Equity Intelligence (Preqin) database, then filtered the data in three ways. First, to ensure the uniformity of the institutional environment, the study used only US-based LPs and VCs. Second, due to data availability factors, the research focused on the period of January 1997 to December 2007. Finally, it ignored sectors such as real estate, hedge funds, natural resources, and mezzanine financing since they fell outside of the VC industry.

The study found that an open triad was less likely to close if the intermediary had experienced some form of failed collaboration with one of the indirectly connected parties; and if the intermediary had competitive concerns about whether it may lose future business to one of the parties. Zhelyazkov also showed that an intermediary’s competitive concerns about its reputation only had an effect when it had experienced successful collaboration. Furthermore, the intermediary’s concerns were determined to be well founded. When an evaluator established a connection with a higher-reputation evaluatee, the intermediary was more likely to lose the evaluator’s business.

Zhelyazkov’s research contributes to the existing literature in a number of ways. It shifts the focus back onto the intermediary in terms of explaining triadic closure, it enriches knowledge regarding the dynamics of competition and interorganizational information flow, and it helps explain the diversity of social connections. By highlighting the importance of the intermediaries’ motivations, Zhelyazkov hopes that his study “stimulates further research to elaborate the empirical findings, explore underlying mechanisms, and delineate boundary conditions”.


Assistant Professor