The Contingent Effects of Prior Ties on Network Dynamics: Essays on the Formation and Dissolution of Interorganizational Relationships in the Venture Capital Industry
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CitationZhelyazkov, Pavel. 2015. The Contingent Effects of Prior Ties on Network Dynamics: Essays on the Formation and Dissolution of Interorganizational Relationships in the Venture Capital Industry. Doctoral dissertation, Harvard University, Graduate School of Arts & Sciences.
AbstractThis dissertation comprises three empirical chapters that investigate the limits of prior interorganizational ties in explaining patterns of tie formation and tie dissolution of interorganizational relationships in the context of the venture capital (VC) industry.
Existing empirical work has demonstrated that two actors have an increased likelihood of forming a direct relationship if both are connected indirectly via ties to the same third party, in part due to the introductions and referrals provided by the shared partner. In contrast, I propose that indirect ties via third parties can either facilitate or hinder the formation of direct relationships depending on the information that the third party provides. The first two chapters substantiate this claim in two empirical settings. In the first chapter, I examine how the success or failure of a VC firm’s syndication affects the likelihood of securing funding from the Limited Partners of its syndication partners. In the second chapter (joint with Ranjay Gulati), I examine how a VC firm that has withdrawn from a syndicate is not only likely to be shunned in the future by its abandoned coinvestors, but is less likely to syndicate with third parties that are connected in some way to the abandoned coinvestors. In other words, withdrawals not only have dyadic repercussions, but have reputational consequences that ripple across interorganizational ties and have long-term implications on tie formation with third parties. Overall, those two chapters make the case that we cannot fully understand the effects of interorganizational ties on future tie formation without knowing the content of the information flowing through those ties.
Whereas the first two chapters focus on elucidating the role of prior ties in tie formation, the final chapter examines the effects of prior ties on tie dissolutions. Prior research has highlighted that a history of collaborative relationships between two parties—also known as embeddedness—creates relational capital that increases the costs of tie termination and thus reduces the likelihood that either of party will withdraw from the relationship. Different theories have conflicting predictions, however, as to how economic shocks affecting the collaboration will affect the stabilizing role of embeddedness. To resolve this puzzle, I differentiate between general performance shocks (which affect all collaborations in a given domain) from specific performance shocks (which apply only to the focal collaboration). Drawing on the idea that actors are more likely to discount ambiguous signals when they have the psychological motivation to do so, I propose that general performance shocks will increase, and specific performance shocks will attenuate, the effects of embeddedness on collaboration stability. I empirically verify my argument in the context of VC firm withdrawals from syndicates, and demonstrate how these effects are shaped by prior ties with the syndication partners, the valuations of the focal industry (i.e., the general performance signals), and the valuation of the focal portfolio company (i.e., specific performance signals). This third study highlights that while social factors are indeed important for predicting tie dissolutions, we can only truly appreciate their role in the context of the economic forces buffeting the collaboration.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:17467369
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