Are Indirect Ties Always Helpful For Partnership Formation?

Abstract

Cohesion and structural equivalence arguments offer different predictions regarding the impact of indirect ties on new tie formation. The cohesion argument proposes a positive influence of indirect ties, while the structural equivalence perspective suggests a negative impact. Meanwhile, the empirical results are not consistent. This paper aims to reconcile the controversies in both theoretical and empirical fields by decomposing indirect ties into different types and investigating their impact on new tie formation in the context of multi-firm syndicates. Using Venture Capital (VC) syndication data 1985–2010, this paper finds that indirect ties through common third parties in the syndicate will facilitate new partnership formation, but indirect ties through common partners who are not syndicate participants will negatively influence new partnership formation.