Status and Risk Taking in Core-Periphery Networks

Organizations in the core of organizational fields access exchange relationships that provide resources critical for survival. However, organizations maintain access to these relationships and resources through following the core’s conventions, which presents a barrier to pursuing novelty in the core. Even in fields where the inter-firm network is designed to encourage novelty, being in the core can limit novelty. Although organizations in the core are similar, there remains differentiation in terms of social influence. Core organizations higher in social status are able to justify actions that do not follow conventions and mobilize support for novel ideas. The interaction of being in the core and high status allows organizations to leverage their influence to pursue novelty while maintaining access to exchange relationships and resources, providing an ideal social position for pursuing novelty. Empirical analysis of the venture capital industry finds that investment firms in the core of the co-investment syndication network accumulate more resources, but make less novel investments. High-status firms in the core exhibit the most novelty and also more success in their investments. Contrary to conventional wisdom about the widespread pursuit of novelty in the venture capital industry, novelty is driven largely by a smaller group of high-status firms in the core.