Status Heterophily, Market Entry and Market Performance

Abstract

Drawing on the status and market entry literature, we propose and empirically test hypotheses that dynamic changes in the size of different status groups in the target market influence the focal firm’s market entry decisions and post-entry performance. Our research utilizes operational data at the project level of China’s listed real estate enterprises to explore how the relationships among members of different status groups in the submarket affects the probability of firms’ market entry and subsequent market performance, as well as the moderating effect of the degree of multimarket contact. This study shows that, as the size of the status-heterophilous group in the submarket continuously increases, the consequences of forming ties with incumbents of different status have shifted from more advantages to more disadvantages. There is an inverted U-shaped curve between the status-heterophilous group’s size and the probability of the firm’s market entry and post-entry submarket performance. Moreover, the degree of multimarket contact between status groups weakens the two relationships. Specifically, the greater the degree of multimarket contact between two status groups in the market is, the smaller effect on market entry possibility and submarket performance the status-heterophilous group’s size has.