What’s in it for them? Advantages of higher status partners in exchange relationships

In addition to the overt and material exchange they engender, affiliations among firms are also a source of status through status transfer. Through the mechanism of status transfer, a focal actor that establishes relationships with higher status others will enhance his status and, subsequently, enjoy those benefits associated with higher status. However, if lower status actors gain in status and derive subsequent benefits by affiliating with higher status actors, what is in such affiliations for the higher status actors? Why do we observe affiliations between high and low status actors at all if high status actors face reduction of their status? The answer lies in the fact that while low status actors gain through the implicit status transfer, high status actors derive greater benefits in terms of the overt material exchange such relationships entail. In other words, low status actors gain in status and derive associated benefits in their future transactions whereas high status actors gain by being able to secure greater attendance and effort regarding the overt, material, exchange in the current relationship. Using longitudinal data from racing team and engine supplier relationships in Formula One Racing, we find support for the idea that actors higher in status are able to derive greater material benefits in relationships with those lower in status.