Contagion risk: How stakeholders mediate the impact of rivals’ misfortunes on firms

AbstractThis study aims to investigate the dynamics of contagion and its impact on firms, specifically focusing on how a rival’s failure to control an event can have adverse consequences for other firms. Through a comprehensive analysis of relevant theories, literature, and real-world cases, the study identifies key factors that contribute to the contagion process and proposes a framework for assessing the associated risk. The research highlights the crucial role of stakeholders in mediating the effects of rivals’ misfortunes on other firms and emphasizes how stakeholders’ identities shape their risk evaluations, thereby affecting the occurrence of contagion. This study contributes to the existing literature by providing a conceptualization of the contagion process and introducing the concept of “stakeholder identity” within the context of organizational and operational risk management. The findings offer practical insights to firms by emphasizing the significance of contagion risk, which is often overlooked in operational risk management strategies. Additionally, the study provides valuable guidance on how firms can effectively assess their vulnerability to contagion, enabling them to proactively manage and mitigate their risk.