Status, change, and performance in Formula One racing

This research examines the effect of status on both the likelihood and the consequences of change. Following the line of reasoning of two theoretical points of departure, the Matthew effect and the behavioral theory of the firm, predictions on the effect of status on both the likelihood and the consequences of change are developed. The Matthew Effect tends to imply a positive effect of status on both the likelihood and the consequences of change. The behavioral theory of the firm tends to imply a negative effect of status on both the likelihood and the consequences of change. The opposing sets of predictions are tested on data on the Formula One racing industry from 1992 to 1999. Maximum likelihood logistic regressions are used to test claims of the effect of status on changing either engine design or engine design and engine supplier. Partial adjustment models, which control for regression towards the mean, are used to test the effect of such changes on the performance of Formula One firms. The results show that: (1) controlling for performance, high-status firms are more likely to make a change than low-status firms; (2) the firms that are most likely to adopt a new engine are low-performing/high-status teams; and (3) high-status firms are much less able to engage in efficacious search than low-status ones. The conclusions discuss the different effect of status on the likelihood and the performance consequences of change. High-status firms are not insulated from competition when engaging in problemistic search. Nevertheless, their enhanced access to resources prevents them from successfully interpret environmental feedback. It is argued that the loose coupling between performance and status produces these effects. Implications for organizational theories and limitations are discussed.