Gain initial endorsement from the core: market entry, initial partners, and embeddedness in the venture capital market

Abstract

This study draws attention to the embedding process of market entrants, by examining the initial and subsequent partnerships of de alio entrants versus de novo entrants. Although de alio entrants have access to superior resources from their parents, they may encounter more resistance from the market as they project impure identity, introduce different logics, and pose greater competitive threats. Analyzing a sample of new entrants in the venture capital market, we find that while de alio entrants are less likely to establish initial partnerships with mainstream incumbents (i.e. receiving an overall initial resistance from the market), they are more likely than de novo entrants to establish ties with high-status incumbents (i.e. gaining more initial endorsement from the core). Results also show that initial network positions allow de alio entrants to sustain gaining prestigious endorsement in the later period, and at the same time to offset the overall resistance from mainstream incumbents. Our findings contribute to the literature on market entry and corporate demography.