Status similarity, managers’ mobility and alliance formation: a study of venture capital syndication in China

While status has long been recognised as a key driver of alliance formation, how relative status between a pair of firms shape their willingness to collaborate remains scant. We argue that when two firms possess similar status, competition for dominance may trigger a power struggle, whereas a large status difference may evoke concerns of a power grab. The interplay of these opposing forces leads to an optimal level of status similarity that facilitates alliance formation. Using investment data from 1,015 venture capital (VC) firms in China, we find empirical evidence that status similarity exhibits an inverted U-shaped relationship with the likelihood of syndication between a pair of VC firms. Moreover, the mobility of managers between VC firms attenuates this curvilinear relationship by bridging relational boundaries and mitigating power concerns. Our study advances the status and alliance formation literature by revealing how the joint effects of power struggle and power grab mechanisms, triggered by relative status differences, shape interfirm collaboration and by highlighting the central role of managers in mitigating these concerns.