Date Added: Sep 2009
This paper proposes that organizations leverage members' prior education and employment networks to identify and select new partners. Mechanisms related to embeddedness, homophily and focus theory imply that the likelihood of two organizations forming a new relationship increases with the number of prior education and/or employment affiliations shared by the organizations' members. Analyses of U.S. private equity co-investments demonstrate that shared prior affiliations increase the likelihood of relationship formation. Consistent with embeddedness theory, this effect is strongest for organizations that previously formed few or no relationships.