High-Status Affiliations and the Success of Entrants: New Bands and the Market for Live Music Performances, 2000-2012

Abstract

Newcomers often have trouble being taken seriously, or even noticed in the first place. This challenge, often referred to as the “liability of newness” (Freeman et al. 1983, Stinchcombe 1965), underscores the idea that to survive and thrive, new entrants must be recognized as legitimate by their audiences — employees, investors, customers, analysts, or simply followers. One way for new entrants to gain legitimacy is by leveraging affiliations. Such connections can increase the likelihood that the new entrant will be recognized as legitimate because they can affect whether audiences notice the new entrant, thereby allowing for its evaluation, such that affiliations act as market signals (Kim and Jensen 2013, Spence 1974). In this regard, a sizeable literature has looked at whether and how affiliations can enhance a new entrant’s visibility, with a particular focus on prominent affiliates (Chen et al. 2008, Jensen 2003, Pollock et al. 2010). A recurring line of argument in this area draws from the literature on social capital (Adler and Kwon 2002, Coleman 1988) to suggest how affiliations are assumed to provide distinct advantages to new entrants by acting as attention filters (Benjamin and Podolny 1999), providing them with access to information or resources (Ingram and Baum 1997, Podolny 2001), and shielding them from failure (Fischer and Pollock 2004, Miner et al. 1990). Furthermore, prominent affiliates often have signaling value, functioning as endorsements to actors who need legitimacy such as newlyestablished organizations like startups (e.g. Stuart et al. 1999). In other words, an affiliation “between two market actors is an informational cue on which others rely to make inferences about the underlying quality of one or both of the market actors” (Podolny 2001: 34).