See who I know! Addressing the liabilities of outsidership through status signaling

Abstract

Status is an important intangible asset, yet when firms enter new countries, they lack standing in new social hierarchies as outsiders. Conventional wisdom suggests embeddedness in host-country networks can alleviate newcomers’ liability of outsidership. We complement this with insights from status signaling theory: Newcomers in host countries can address their liability of outsidership through the visual display of social affiliations. We utilize a novel visual qualitative research approach that analyzes annual report photographs of an emerging-market family business, depicting the firm’s leaders with high-status alters. Complementing the international business literature, which emphasizes strong ties to host-country business partners, we identify three signaling mechanisms that are more circuitous: bypass (host-country affiliations beyond the firm’s industry), allusion (global affiliations beyond the host country and industry, often celebrities), and aspiration (global industry affiliations). We also suggest that such diffuse status signaling mechanisms may be especially salient in emerging-market family firms investing in developed markets, which are accorded low status in many developed markets. These firms feature firm/owner identity overlaps, long leader tenures, and a tendency to build reputation through prosocial behavior, facilitating the activation of status signaling tactics through ephemeral affiliations with high-status actors situated in world society.