What if conformity is risky? the effect of contact status on new venture acquisition

Prior studies focus on the relationship between entrepreneurial networking approaches and entrepreneurial outcomes but paid little attention to the role of contacts in facilitating that process. This study investigates the role of contacts in the acquisition of new ventures. Drawing on middle-status conformity theory, we posit that since middle-status managers are more risk averse than high- or low-status managers, when being approached by new ventures, their tendency to facilitate acquiring new ventures will be lower, given the liability of new ventures. Thus, the status of contacts in potential acquiring companies will have a U-shaped effect on the probability of new ventures to be acquired. We further hypothesize that this U-shaped effect will be more pronounced when the risk of status loss is higher, and the effect can be attenuated by industry norms that encourage risk taking. The results based on a sample of 19,507 venture-acquirer dyads on acquisitions in China rendered sufficient support to our hypotheses. The findings contribute to both social network research and middle-status conformity theory, and provide important implications for “whom” entrepreneurs should approach to achieve acquisition success.