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We examine how entrepreneurs might build a viable, values-driven niche. Extant templates for niche creation typically employed in moral markets depend on instrumentally rational logics that privilege economic ends such as profitability and efficiency. Entrepreneurs seeking to construct a nascent niche whose purpose and objectives include the amelioration of social ills, however, may find such templates inadequate. Using the emergence of the U.S. bean-to-bar chocolate niche, through which entrepreneurs attempt to address the social and environmental shortcomings of conventional chocolate production, we demonstrate that constructing an alternative model for niche creation is feasible. Most bean-to-bar entrepreneurs deliberately opted out of extant private regulation initiatives, developing instead alternative encompassing, values-driven sourcing and cooperative relationships, which we term collaborative governance. This is enacted throughout the niche by promoting shared values, best practices, and transparency and is supported by strategic meaning-making work to cultivate customers. Together, these three values-driven strategies form a novel template of niche creation based not on cognitive repositioning or exploiting exogenous change within existing structures and institutions, but on a reconceptualization of how markets might work to support the implementation of nonmarket goals. Based on our mixed-methods analysis, we find that, instead of hoping to accomplish nonmarket goals through established market structures, entrepreneurs built a niche centered on the achievement of specific social goals. Our findings suggest that to understand the strategies supporting emergent socially oriented markets, researchers must explore the intersections of values, entrepreneurial motivations, and operational complexities.

Research in organizational theory suggests that category-spanning organizations typically suffer penalties in evaluations, as consumers downgrade producers they see as violating authenticity norms. We challenge this view by linking two heretofore separate insights: first, that categorical boundaries erode as categories become taken for granted and, second, that consumers in a given category tend to become more heterogeneous as their numbers increase. We argue that newer consumers employ diverse evaluative schemata and rely less on established conceptions of authenticity than do veterans, leading to more generous evaluations as the ranks of consumers grow. Using the canonical case of craft beer, we test the effect of audience growth on consumer evaluations, particularly when producers violate categorical authenticity norms. Our analysis of an original dataset of more than 1.2 million unique ratings of craft beers from a popular online forum finds both that overall beer ratings increase and that penalties to authenticity norm violations attenuate as the number of new reviewers participating in the evaluative process rises. These results refine our understanding of shifting demands for categorical purity, conceptions of authenticity, and consumer evaluations as functions of market growth.

We review the organizational literature on power in light of Bourdieu’s concept of capital to further a political capital perspective on power in organizations. In reviewing the literature, we find...

We explore how the Sarbanes–Oxley Act of 2002 created pressure for firms to take more visible and costly corrective action following the announcement of an earnings restatement. Building on theory about focusing events, the institutional effects of legislative change, and the agenda-setting role of the media, we propose that Sarbanes–Oxley created reactive normative pressure on firms that announce earnings restatements, increasing the likelihood of CEO replacement in their aftermath. We theorize that Sarbanes–Oxley changed the meaning—and therefore the impact—of media coverage of earnings restatements. Our findings show that firm behavior after Sarbanes–Oxley did change in ways that are consistent with the intent of the legislation: to increase executives’ accountability for the reliability of their firms’ financial statements. Moreover, we show this change is a result both of the direct effect of the legislation on increasing CEO accountability as well as through intensifying the effect of the media spotlight on misconduct.

We examine the unique challenges of entrepreneurs and organizations in nascent craft markets in which normative expectations are negotiated, navigated, and sometimes defied. In this collection of p...

This symposium invites consideration of the ways in which organizations interact with marginalized groups and to what effect. While such groups are, by definition, shunned by parts of society, ther...

Resource partitioning theory maintains that in markets in which anti-mass-production cultural sentiments make producer identity relevant, there should be no direct competition between generalists and specialists. Nevertheless, anecdotal evidence suggests that after initial partitioning, such competition, and hence de-partitioning, is in some cases possible. We refine received insights of resource partitioning theory regarding the stability of niche markets, particularly those driven by identity movements, by introducing the notion that partitioning is a dynamic and even reversible process. Previous research has offered an answer to the question of why identity movements create partitioning: because they increase the dimensionality of the resource space and engender sanctioning of visible violations of the specialists’ organizational form identity. In contrast, we offer an answer to the question of how and when markets may partition in a stable way: by generating sharply defined specialist form identities whose definitional code includes limits to organizational growth. Identity movements are underpinned with mechanisms that can facilitate or inhibit market partitioning, depending on their ability to generate sharp specialist form identities. We illustrate our argument through the case of organic farming in the United States, with reference to prior work on micro-brews and micro-radio, and discuss implications for resource partitioning theory.

We have read with interest Hart-Brinson’s critical comment. We are disappointed that his comment is almost exclusively concerned with our analysis of application filing and success rates, and that he only fleetingly mentions our analysis of the cultural impact of low-power FM radio stations. A major thrust of our article was to show that a cultural social movement generates organizational density and diversity, and these products in turn alter the consumption of cultural goods. Hart-Brinson’s comment rests on the premise that we have not accounted for the regulatory power of the state, and thus our findings are flawed. This premise is iterated and reiterated as he argues that our findings are doubtful or spurious with a confidence that is inversely proportional to the evidence available to him. We are not sure why the role of the state should exclude a role for the social movement, as Hart-Brinson seems to assume. We are willing to treat it as an empirical question, however, and therefore subject his concerns to empirical tests. Tables 1– 3 (below) provide the results of our additional analyses and show that his concerns are unfounded. Hart-Brinson offers the following: (i) FCC rules severely limited opportunities to found LPFM radio stations in the largest metropolitan areas, making our findings on the applications rates spurious, (ii) the change in FCC rules between application rounds 2 and 3 makes our findings on applications and success rates spurious, and (iii) our data are contaminated by amended applications. He also raises two objections to our interpretation: (iv) applicant diversity was never a formal criterion of the FCC and could not have had any effects on success rates, and (v )L PFM applicants are not social movement participants, so discourse must be a consequence and not a cause of organization building. We start with his claims about our empirical findings and then turn to Hart-Brinson’s claims regarding interpretation.

Social evaluations are highly consequential for organizations and are thus of central interest to management scholars in a variety of traditions. In examining social evaluations primarily as intang...

We examine why entrepreneurs in the emerging bean-to-bar chocolate market segment fail to adopt socially-oriented certification schemes such as Fair Trade, Rainforest Alliance, and USDA Organic. De...

We use a reputational approach to create a theory of martyrdom that synthesizes scholarship on the body politic, cultural symbols, and collective memory. The making of a martyr, a contested social process, depends on both the resources of the martyr's supporters and the cultural context into which the martyr's image is introduced. Our approach is well suited to analyzing how martyrs are used `on the ground' and given cultural and material utility. We highlight the attention paid to the conception and reception of the martyr's corporeal body, in particular, as a source of identity and meaning, giving emotional weight to social ideas about death and sacrifice. Control over martyrs' bodies derives from the cultural and political intricacies of reputational entrepreneurship, thus employing the body as a medium of culture. To examine this concept of embodied martyrdom, we examine the cases of Joan of Arc, John Brown, and Che Guevara.

In this article, I address the question of the apportionment of the consequences of organizational misconduct to individual members of the organizational elite. I argue that this process can be best understood by marrying the behavioral aspects of stigma theory to the economic mechanisms of ex post settling up. Viewed in conjunction with stigmatization, ex post settling up following organizational misconduct can be seen as the result of attempts to avoid stigma by association. Efforts at stigma avoidance on the parts of various stakeholders produce the diminished social interaction associated with ex post settling up: departure from the focal firm, and loss of seats on other boards. This also suggests that the process of stigmatization, and hence ex post settling up, can be influenced by characteristics of social interaction unrelated to the misconduct itself.

One of the big questions following the enactment of new corporate legislation is whether it is effective in altering firm behavior. In this paper, we push this question further to investigate how legislation might be effective in altering firm behavior, independent of the coercive nature of legislation and enforcement. We study the impact of the Sarbanes - Oxley Act of 2002 on the behavior of publicly traded firms restating earnings. We find that Sarbanes - Oxley does generate a change in behavior, such that firms are much more likely to take costly remedial action – in the form of firing the Chief Executive Officer or Chief Financial Officer – in the wake of a restatement after the legislation was enacted than they were before. We also find that Sarbanes - Oxley redirects media attention to the problem of restatement, and that this media attention is itself associated with more costly remedial action. Finally, we find that media attention partially mediates the effects of the legislation on firm response, suggesting that it is the redirection of attention, rather than the legislation itself, that changes organizational behavior. This conclusion is further supported by a regression discontinuity analysis, which reveals a change in firm behavior even for those organizations not yet subject to the terms of the legislation.

Research on social movements has emphasized the origins of cultural movements, but has said little about how they impact popular culture through the creation of new organizations. The production of culture perspective asserts that market concentration in cultural industries inhibits diversity, but is silent about how social movements challenging corporate capitalism spur organizational birth. Organizational ecology describes how market concentration triggers anti–mass production movements, but has not examined whether the diversity of new organizations alters consumer behavior. The authors integrate these literatures to analyze how low‐power FM (LPFM) radio stations arose in response to the domination of radio by corporate chains and investigate the impact of LPFM stations on radio listening. Implications for the study of social movements, organizational ecology, and the production of culture are outlined.

Challenges emerge as countries take increased steps to control their borders. In this session we seek to address particular concerns for our varied students– undergraduate, graduate, doctoral and e...

In this paper, we investigate the role of pre-scandal media reputation on firms’ post-scandal reputational recovery. Building on the concept of media reputation as a strategic resource, we evaluate...

In this symposium we present five papers focused on how the judgments of external stakeholders affect the apportionment of the consequences of misconduct. The papers included attack the question in various settings and across levels of analysis, ranging from teachers’ personal comportment to members’ of Parliament misspending to corporate fraud. Yet each paper investigates how social control agents - including the media, institutional investors, stock analysts, and other audiences - draw inferences about the seriousness and severity of infractions, and how these inferences affect the punishments that are assigned to various actors involved. This symposium will generate conversation about both theoretical and empirical questions related to misconduct and ethics, stakeholder relationships, and governance. Pragmatic or Moral Legitimacy: Effect of Director Capabilities versus Nonprofit Ties on Punishment Presenter: Daphne Teh; INSEAD Repeat Offenders: How The Consequences of Firm Misconduct Abate Across Incidents Presenter: Celia Moore; London Business School Presenter: Aharon Yehuda Cohen Mohliver; London Business School Presenter: Jo-Ellen Pozner; Santa Clara U. The Process of Scandal Formation and the Role of Social Control Agents Presenter: Timothy R. Hannigan; U. of Alberta Presenter: James B. Wade; George Washington U. Presenter: Joseph Porac; New York U. The Professional Consequences of Misconduct Presenter: Jacob Model; Stanford U. Corporate Misconduct and Heterogeneity in the Reputational Penalties to Managers and Directors Presenter: Ivana Naumovska; INSEAD Presenter: Georg Wernicke; Copenhagen Business School

Can status generate a halo effect that creates spillover consequences for similar others? In this paper, we ask if it is possible for status to spill over to one’s peers, improving the outcomes of actors whose identities might be diminished by a connection to organizational misconduct. We unpack the consequences of misconduct for corporate directors by studying the change in the prominence of directors’ affiliations following revelations of misconduct on one of the boards on which they serve. Using a sample of U.S. companies restating earnings between 1996 and 2003, we find that one’s status, as well as the status of others actors who have the same relationship to the misconduct firm, can moderate the negative effect of association with misconduct on the status a director’s subsequent affiliations. Our findings suggest that the collective status of a group of similar actors buffers the focal actor’s social position. Thus, we find evidence of a halo spillover effect created by the collective status of a gr...

One of the lessons learned from the recent financial-sector crisis is that institutions may sometimes sow the seeds of their own destruction. We offer a two-tiered analysis of how the diffusion of innovative practices – in this case, issuing and securitizing subprime mortgages – can lead to an unanticipated breakdown of established institutions. At the institutional level, we demonstrate that the lack of effective external regulatory presence, the emergence of new norms through the introduction of a new institutional logic, and intense mimetic and competitive pressures may lead organizational actors to exploit a suboptimal innovation. At the organizational level, we argue that over-embeddedness of central actors within relatively closed networks and superstitious learning processes can exacerbate the biases to which decision makers are susceptible, leading to the institutionalization of a suboptimal organizational practice. These two parallel sets of processes led to severe consequences at the institutional level, which we label “terminal isomorphism.” We end by discussing consequences for institutional theory, future research directions, and recommendations for policy makers.

Reputation is central to the study of individuals, firms and markets. However, while scholars recognize its importance as a construct, they have also acknowledged the proliferation of different con...

The concept of authenticity - a set of expectations about codes, categories, meanings and intentions to which people, products and organizations ought to conform – has become the focus of increased...

In this paper, we explore the conditions under which organizations that compete in both market and non-market domains might engage in collective strategy. We study low-power FM radio activists in the U.S., who employed a collective strategy both within and across geographic communities to gain the right to broadcast in low-power broadcast spectra. By comparing and contrasting two stages of the micro-radio movement, we argue that, under certain conditions, for collective strategy to be viable, organizations competing on the dimensions of both ideology and resources must recognize themselves as members of an identity group, based on their common struggle against a stronger, more salient enemy. We highlight the role of collective strategies in the processes of organizational ecology, and discuss the generalizability of our argument.

While the linkage between firms’ announcement of corporate quarterly earnings and stakeholder reactions has been widely studied, much less is known about the possible impact of adding specific language to those earnings numbers. We draw on research in organization theory and behavioral finance to advance an original perspective on the nature of the financial market response to language use. Specifically, we analyze theoretically and empirically how financial market participants are likely to respond to the use of positive tone, causal attribution and time orientation in corporate quarterly earnings announcements. We highlight markets’ differential response to language relative to both organizational performance and overall market sentiment. We test and find general support for our predictions on the value of language using extensive data on 648 quarterly earnings announcements from NASDAQ- listed firms in bull and bear markets (1999 and 2002).

Following revelations of financial misconduct, those sitting on the board of directors typically lose seats on other boards. A growing body of literature seeks to understand the factors that impact individual outcomes following revelations of misconduct. One such factor is director departure from the misconduct firm, an ambiguous signal that can be seen as either pro-active distancing on the part of the director or scapegoating on the part of the firm. I argue that the market interpretation of departure from the misconduct firm is moderated by the status of both the individual director and the fraud firm. Using a sample of U.S. corporations that restated earnings between 1997 and 2003, I find that high-status directors fare significantly better on the market for directors than do their lower-status peers when they dissociate from the restating firm. In addition, those departing high-status boards fare worse than others when they dissolve ties before their terms expire. Taken together, my results suggest t...