Background

Status is a salient factor for social entities including individuals and firms. Previous research has indicated that firms tend to ally with partners of similar status. Nonetheless, whether status similarity can ease or hinder alliances has not been thoroughly examined.

Status Differentials and Unplanned Alliance Dissolutions

In our study, which is recently published in Journal of Management Studies, we contend that while status may serve as a signal in the alliance formation stage (i.e., firms find their partner), the effect of status could be different in the alliance process (i.e., participants start to work). Specifically, we maintain that status differentials, or the extent to which firms in an alliance have unequal positions in a social hierarchy, can operate to endure and bolster the alliance. On the one hand, the greater the difference between two firms’ status, the more likely that the higher status firm can have more insight and expertise to contribute to the collaboration. This can enrich the resources and assets available for the alliance to use. On the other hand, in an alliance with a relatively large status differential, there will be a less prominent firm. In such a collaboration, the lower status firm will be dedicated to the collaboration in order to enjoy the status transfer. We thus predict that alliances with greater status differentials will be less likely to end suddenly and prematurely.

            We additionally examine two boundary conditions that may alter the effect of status differentials. Specifically, we suggest that the main effect will be more pronounced when the higher status firm has better performance than the lower status counterpart. This is because favorable relative performance validates the status differential, encouraging the two firms to behave in accordance with their respective social ranks. Meanwhile, the impact of status differential will be strengthened when the higher and lower status firms are in related industries. To the extent that related industries have shared foundations, assumptions, and norms, firms in related industries will follow their social positions in determining their behaviors in alliances. Results based on two high-tech industries in the U.S. support our predictions.

Managerial Implications

This study suggests that the degree to which two firms have dissimilar status can affect the longevity of an alliance. Unlike the conventional wisdom that assumes similar status can support an alliance, a more clear status differential can better support the collaboration, allowing firms to achieve their strategic goals. Hence, managers are encouraged to incorporate interfirm status into their alliance plans. More specifically, managers should not presume that status similarity can give their projects the best chance because these collaborations can be surprisingly fragile, unstable, and vulnerable.