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In markets, individuals use three main evaluation modes to categorize and subsequently value organizations based on received organizational cues: prototype-based, exemplar-based, and goal-based evaluation. Starting with the premise that individual audience members use prototype-based evaluation as a default evaluation mode when receiving expected organizational cues, this paper derives a theory that connects unexpected organizational cues with an individual audience member's likelihood of switching from prototype-based evaluation to either exemplar-based or goal-based evaluation. Individual audience members' switches between modes, which we refer to as evaluation-mode heterogeneity, lead to changes in their valuation of typical organizations relative to atypical organizations. Our proposed theory has important consequences for research on valuation in markets accounting for apparently conflicting findings in prior studies, and on optimal distinctiveness. [ABSTRACT FROM AUTHOR]

Organizations need to both differentiate themselves while conforming to their audiences' expectations. To meet this demand, organizations may span different categories. However, valuing spanners is challenging for audiences. We contend that spanners' valuation depends on category nesting, as the congruence of informational cues varies between basic categories and subcategories. Furthermore, we expect that more expert audiences find spanners to be more congruent (and hence, more valuable) at a subordinate level than at a basic level of categorization. We test our hypotheses using a mixed-methods design in the context of venture capital investments. We analyze observational data on more than 29,000 venture capital deals and develop two experimental studies. Our findings support our hypotheses that subcategory spanning lowers valuation, and that this effect is attenuated as investors' expertise increases. Our experimental studies further show that congruence is a causal mechanism explaining these effects. Our findings have important implications for research on organizational conformity and optimal distinctiveness, categorization in markets from an information processing perspective, and the impact of expertise on valuation. [ABSTRACT FROM AUTHOR]

Research Summary: We examine whether impact investing is more effective in fostering business venture success and social impact when investments are directed toward ventures in disadvantaged urban areas compared to similar investments directed toward ventures outside these areas. We explore this question in the context of loans made to business ventures in French "banlieues" versus "non‐banlieues." We find that, following the loan issuance, banlieue ventures achieve greater improvements in financial performance and greater social impact in terms of the creation of local employment opportunities, quality jobs, and gender‐equitable jobs. This suggests that impact investors are able to contract with ventures of greater unrealized potential in banlieues, as banlieue ventures tend to be discriminated on the traditional loan market. The latter is corroborated in a controlled lab experiment. Managerial Summary: We shed light on the unrealized potential of business ventures in economically disadvantaged urban areas, known as "banlieues" in France. Our results show that, after receiving loans from an impact investor, banlieue ventures achieve greater financial performance compared to non‐banlieue ventures. What is more, banlieue ventures achieve greater social impact by creating more jobs that benefit the local community. Why are traditional investors missing out on these opportunities? Our results point toward discrimination of banlieue ventures on the traditional loan market. This is confirmed in a controlled lab experiment, in which participants are less likely to approve loans to banlieue ventures compared to identical non‐banlieue ventures. These insights can guide managers and investors seeking sustainable, socially impactful, and financially viable investment opportunities. [ABSTRACT FROM AUTHOR]

We develop and test a theory of howunintended audiences create reaction costs for firms that use corporate social responsibility (CSR) as a signal. We introduce and define reaction costs as costs that signal senders incur when unintended audiences react negatively to a true signal that was intended for another audience. We argue that activist hedge funds--an unintended audience--treat CSR as a signal that firms have wasteful intentions and capabilities, which prevent firms from maximizing shareholder value in the short term. On that basis, we hypothesize that activist hedge funds are more likely to target firms with higher levels of CSR, thus imposing reaction costs on these firms. We further argue that this relationship is weaker when firms operate in industries with high levels of CSR, and strongerwhen firms' financial communication is vague. Using data on activist hedge fund campaigns in the U.S. between 2000 and 2016, we find supporting results. Our study shows that CSR signals may be costlier than previously assumed and contributes to research on CSR, signaling, and corporate governance. [ABSTRACT FROM AUTHOR]

In this chapter we develop a new approach, based on the identification of strategy classes, to study how firms face multiple demands. The procedure that we propose (called Relational Class Analysis) stems from an analysis of the similarity of associative patterns across multiple observable outcomes, which reflect the underlying set of choices firms make to similarly address demands. Empirically, the study of 18 financial and extra-financial performance outcomes for 3,655 firms shows the existence of three main strategic classes. Drawing on our analysis, we redefine strategy as the set of committed decisions undertaken to resolve trade-offs between multiple concurrent objectives and discuss the implications of our approach for eight core questions for strategy and organizational theory. [ABSTRACT FROM AUTHOR]

We explore the way validity and propriety cues contribute to legitimacy judgments about a practice and to explaining whether the subunit of a large firm increases or decreases the implementation of this practice. Empirically, we examine the extent to which 65 subsidiaries of a multinational enterprise implemented three corporate social responsibility practices. Adopting a set-theoretic approach, we find that both validity and propriety cues are extremely relevant to the understanding of subunits' implementation of practices over time. The endorsement of a practice in a subunit's environment plays a particularly crucial role in the extent to which it is implemented, relative to authorization by the parent firm. Furthermore, subunits strongly rely on the active evaluation of the practice's propriety, such that the consonance between the two propriety dimensions (strategic importance and value compatibility) is central to implementation increase, while dissonance between them can favor implementation decrease. By advancing our understanding of legitimacy judgment formation and practice implementation patterns, our study enriches explanations of organizational conformity and decoupling, and contributes to our understanding of how firms respond to multiple institutional demands. [ABSTRACT FROM AUTHOR]

Research Summary: We offer a rivalry‐based perspective of gender diversity as a form of competitive action. We theorize that a firm adjusts its senior‐level female representation when they identify business opportunities that may be seized by demonstrating alignment to gender parity expectations. Examining U.S. corporate law firms and potential buyers of their services, we theorize and find that when the buyers of rivals of the focal firm increase their gender diversity, the focal firm responds by increasing its female partner representation. Reinforcing the strategic approach to managing gender diversity, we also show that a focal firm reduces its gender‐related response to rivals' buyers as the opportunity to attract those buyers decreases, and when the focal firm can use racial diversity as a credible substitute for gender diversity. Managerial Summary: Do firms increase senior level gender diversity for normative or competitive reasons? We examine this question and test whether firms adjust their gender diversity to align with the gender diversity values of their competitors' clients. Our study shows that U.S. corporate law firms increase their level of female partners when the clients of their stronger competitors increase gender diversity in their executive rank. We also show that firms' gender diversity response weakens when there is a lower probability of luring those clients and when firms can offer racial diversity as a credible alternative signal of pro‐diversity values. Our competitive‐based view of gender diversity encourages managers to consider how and when proactive gender diversity improvement can be a mechanism for improving their firms' market position. [ABSTRACT FROM AUTHOR]

We develop a conceptual understanding of when and how organizations respond to normative pressures. More precisely, we examine two main factors underlying the willingness and ability of organizations to respond to an issue: issue salience and the cost-benefit analysis of resource mobilization. We suggest that decision makers' interpretation of issue salience in conjunction with their perception of the costs and benefits of taking action to address the issue generates five potential responses: symbolic compliance and symbolic conformity, substantive compliance and substantive conformity, and inaction. We extend the baseline model by examining a number of boundary conditions. By focusing on the willingness and ability of organizations to respond to normative pressures, and by adopting the issue as the unit of analysis, our model helps explain intraorganizational as well as interorganizational response heterogeneity to institutional complexity. We contribute to the institutional research tradition and offer useful implications for managerial practice, from strategic management to policy making. [ABSTRACT FROM AUTHOR]

Corporate sustainability has gone mainstream, and many companies have taken meaningful steps to improve their own environmental performance. But while corporate political actions such as lobbying can have a greater impact on environmental quality, they are ignored in most current sustainability metrics. It is time for these metrics to be expanded to critically assess firms based on the sustainability impacts of their public policy positions. To enable such assessments, firms must become as transparent about their corporate political responsibility (CPR) as their corporate social responsibility (CSR). For their part, rating systems must demand such information from firms and include evaluations of corporate political activity in their assessments of corporate environmental responsibility. [ABSTRACT FROM AUTHOR]

Research Summary: This article asks how distinct communication frames used by corporate social initiatives (CSIs) affect beneficiary engagement, specifically their reach vis‐à‐vis disadvantaged groups. Through a unique randomized field experiment in France, we assess the effectiveness of a series of communication frames on beneficiaries' decisions to enroll and use the social goods provided. Our results show that empathy‐ and simplicity‐oriented frames significantly increase program enrollment and utilization rates relative to other strategies, notably the widely used charity frame. We find that none of the tested communication frames raised take‐up by nonnative French beneficiaries, and only the empathy frame augmented the response of the very poor. Our work opens new research directions for strategic management studies on CSIs, communication frames, inclusion and social outcomes. Managerial Summary: Many corporate social initiatives (CSIs) launch large information campaigns to raise awareness about the social goods they provide. Findings from a field experiment reveal that the communication frames that CSIs deploy matters. Communication that expresses empathy (how the CSI understands and cares about its target beneficiaries) or presents simple information (what the CSI does) is far more effective at raising take‐up than communication frames that emphasize what for (why) and the charitable identity (who) about the CSI. However, results also reveal that foreigners and the economically most disadvantaged beneficiaries responded the least to these communication frames. This suggests that more is needed to effectively raise take‐up by these subgroups. Our work speaks to strategy researchers and practitioners interested in CSIs, communication frames, and social inclusion. [ABSTRACT FROM AUTHOR]

What happens in the aftermath of the introduction of a new status ranking? In this study, we exploit the unique empirical opportunity generated by the release of the first edition of the Michelin Guide for Washington, DC, in the fall of 2016. We build on prior work on rankings as insecurity-inducing devices by suggesting that newly awarded high-status actors modify their self-presentation attributes to fit with what they believe audiences expect from the elite. Our results show that, depending on their standing prior to Michelin's entry, restaurants acted upon different attributes of their self-presentation. Restaurants with high prior standing emphasized attributes that channeled authenticity and exclusivity, which may imply that their Michelin designation triggered operational changes. Actors with low prior standing, on the other hand, acted on descriptive attributes that did not necessarily imply operational changes and could be easily manipulated to signal their belonging among the elite. We contribute to research on status and conformity by disentangling the sources and types of conformity behaviors that newly awarded high-status actors deploy. This paper was accepted by Lamar Pierce, organizations. [ABSTRACT FROM AUTHOR]

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-6486.2010.00913.x Byline: Jean-Philippe Vergne (1), Rodolphe Durand (1) Abstract: abstract Path dependence is a central construct in organizational research, used to describe a mechanism that connects the past and the future in an abstract way. However, across institutional, technology, and strategy literatures, it remains unclear why path dependence sometimes occurs and sometimes not, why it sometimes lead to inefficient outcomes and sometimes not, how it differs from mere increasing returns, and how scholars can empirically support their claims on path dependence. Hence, path dependence is not yet a theory since it does not causally relate identified variables in a systematized manner. Instead, the existing literature tends to conflate path dependence as a process (i.e. history unfolding in a self-reinforcing manner) and as an outcome (i.e. a persisting state of the world with specific properties, called 'lock-in'). This paper contributes theoretically and methodologically to tackling these issues by: (1) providing a formal definition of path dependence that disentangles process and outcome, and identifies the necessary conditions for path dependence; (2) distinguishing clearly between path dependence and other 'history matters' kinds of mechanisms; and (3) specifying the missing link between theoretical and empirical path dependence. In particular, we suggest moving away from historical case studies of supposedly path-dependent processes to focus on more controlled research designs such as simulations, experiments, and counterfactual investigation. Author Affiliation: (1)HEC Paris Article note: Jean-Philippe Vergne, HEC Paris, Business Policy and Strategy Department, 1 rue de la Liberation, 78 351 Jouy-en-Josas Cedex, France (jean-philippe.vergne@mailhec.net).