Status Transfer across Borders: The Mediating Role of Common Partners in First Entry

Abstract

Recent studies on organizational status and international business (IB) have found evidence for the transferability of status to new markets by showing that, at least under certain circumstances, network status in the home market affects a firm's entry into and performance in new foreign markets; however, the status transfer mechanisms in these studies have thus far been inferred and not directly tested. We focus on this black box of how status transfers, or more plainly, how high network status in one market leads to high network status in another market. We posit that an important underlying mechanism is the mediating role of the status of common partners in partner selection. Firms with high home-country status are more likely to have high-status common partners facilitating tie formation with prospective high-status local partners in the new market. We argue that through this mechanism, foreign firms with a higher status in their home country are more likely to partner with firms of higher local status in the entered market, thereby transferring their status to the new market. The hypotheses receive support from mediation effect analyses of global venture capital (VC) investments, contributing to an improved understanding of the stratus transfer mechanisms in international settings.