Unmixed Signals: How Reputation and Status Affect Alliance Formation

The authors analyze how incumbents in technology-driven industries are influenced by founders' reputation and status when considering strategic alliances with newly emerging firms. The authors theorize that reputation and status represent two distinct components of perceived quality that exert independent and interdependent effects on alliance formation. Using literature on impression formation processes to derive predictions of signal congruence, the authors argue that the independent effects of reputation and status are amplified when the two are congruent, and that the effect of negative congruence (both reputation and status are low) is stronger than positive congruence (both are high). The authors find support for our arguments based on panel data on alliances between pharma and biotech firms, using data on biotech scientists' research output (reputation) and university attended (status).