How Employees’ Prior Affiliations Constrain Organizational Network Change

Abstract

This paper investigates how organizations’ reliance on employees’ prior educational and employment affiliations for both employment relationships and interorganizational relationships contributes to inertia in organizational networks. Analyses of data from U.S. venture capital and private equity firms support the theory I develop. First, increasing differences in educational prestige decrease both interpersonal co-employment rates and interorganizational co-investment rates. Second, two individuals who share a prior educational or a prior employment affiliation are more likely to be employed by the same organization than are two individuals who do not share such an affiliation. Third, the likelihood of two organizations forming a co-investment relationship increases with the number of prior educational or employment affiliations shared by their employees. I propose that these tendencies stabilize advantaged organizations’ positions and limit disadvantaged organizations’ positional mobility, thereby constraining change in interorganizational networks. Implications for studies of network evolution and socioeconomic inequality are discussed.