Organizational Failure and Intraprofessional Status Loss

Abstract

We examine variation in intraprofessional status changes for employees displaced by organizational failure. We propose that failure-related reductions in bargaining power are moderated by individual status characteristics that influence potential employers’ evaluations of job candidates and, therefore, individuals’ status loss risks. Treating a prominent law firm’s failure as a quasi-experiment, we test our arguments by analyzing 224 firm partners’ transitions to subsequent employers. Most partners regained employment at firms of lower status than the failed firm. But, independent of their demonstrated productivity, a partner’s likelihood of status loss increased with tenure in the failed firm’s partnership and decreased with educational prestige. These results suggest not only that organizational failure can diminish cumulative career advantages but also that status characteristics that enable attainment, such as education, can protect individuals against status loss.