Managing Ongoing Interorganizational Relationships: Power Asymmetry, Shared Third Party, and Reciprocity Between Loan Guarantee Partners
Organizational theorists have extensively documented the role of shared third party in strengthening the ongoing relationship between a pair of organizations but paid little attention to the relative power between the focal partners. This paper examines how dyadic power difference impacts the role of shared third party in the unfolding of interorganizational relationships. I theorize that having a shared third party gives high-power actor flexibility in terms of arranging cooperation with its partner but pulls low-power actor closer to its partner. Using a longitudinal dataset of inter-firm loan guarantees between Chinese publicly listed firms in the period 2008-2016, I find that a high-power firm is less likely to directly reciprocate its partner when they have a shared third party. Rather, the high-power firm uses the shared third party as a bridge and is more likely to indirectly reciprocate its partner. By contrast, a low-power firm is more likely to stick to direct reciprocity with its partner and to a less extent uses indirect reciprocity when there is a shared third party. My findings highlight power as a crucial contingency on whether and how organizations use shared third parties as a leverage in managing dyadic relationships with their partners.