Referral Triads

Third parties who refer clients to expert service providers help clients navigate market uncertainty by curating well-tailored matches between clients and experts and by facilitating post-match trust. We argue that these two functions often entail trade-offs because they require referrers to activate network relationships with different experts. While strong ties between referrers and experts promote trust between clients and experts, the presence of such ties reduces the likelihood that intermediaries refer clients to socially distal experts who may be better suited to serve clients’ needs. We examine this central and unexplored tension by using full population medical claims data for the state of Massachusetts. We find that when primary care physicians (PCPs) refer patients to specialists with whom the PCPs have strong ties, patients demonstrate more confidence in the specialists’ recommendations. However, a strong tie between the PCP and specialist also reduces the expertise match between a patient’s health condition and a specialist’s clinical experience. These findings suggest that the two central means by which referrers add value may be at odds with one another because they are maximized by the activation of different network ties.