But even in countries with larger third parties, they're seldom major parts of government.
In Belgium we have the Christian Democrats, the Liberals, the Socialists, the Nationalists (two types, even), the Greens, and those are just the major parties of the north. I count 13 parties with seats in the federal government after the most recent election, and a coalition usually includes at least two northern parties and two southern parties, but often more.
The make-up of the government can change significantly, as well. For example, the big winner in the north of the country, the nationalist NVA party, didn't exist 15 years ago and now they've got the most seats of all parties (22%). Government negotiations this year are going to be a real pain because the Nationalists and the Northern Christian Democrats are at loggerheads with the Socialists and the Southern Christian Democrats, with the Liberals of both north and south are caught in between.
So far it doesn't seem to have led to a lot of radical change in outcomes other than making the election results take a couple of extra days due to the calculations involved when there's a dozen candidates.
If you want a laugh, look up the Belgian political crisis of 2010-11. It took the government 541 days of negotiations to form a coalition. I believe that's a modern world record.
We just started using ranked choice voting for elections in Minneapolis, which in theory eliminates the "lost vote" problem by allowing you to make third parties your first choice but still vote "defensively" by making some other candidate a secondary choice.
I support such voting systems, in the hope they will bring candidates to the center.