Eclipsed and Confounded Identities: When High-Status Affiliations Impede Organizational Growth

Abstract

I propose that an organization’s growth potential may suffer if its identity is eclipsed by or confounded with the organizations with which it collaborates and competes. Using status as a salient feature of identity, I devise two network measures to capture the degree to which organizations’ identities are eclipsed and confounded. The theory is tested with data on U.S. venture capital firm syndication between 1995 and 2009. Venture capital firms with eclipsed and confounded identities are less likely to raise a new fund, and occupying a high-status position exacerbates the penalty for having an eclipsed or confounded identity. These findings highlight the previously neglected identity costs that high-status firms impose on their partners. In status-based market competition organizations need to justify their identity claims by distinguishing themselves from the established elite.

Keywords: Identity, distinctiveness, status, networks, resource acquisition, growth, venture capital