Categories and Organizational Status: The Role of Industry Status in the Response to Organizational Deviance

Abstract

Extant research in organizational and economic sociology posits that organizations derive status from their prior demonstrations of quality, as well as their affiliations with high-status alters. Yet there are also indications that organizations may acquire status by virtue of their membership in salient social categories that are themselves status valued. In this article, the author explicitly theorizes and measure the concept of categorical status among organizations and test whether it influences the evaluation of organizational actions. More concretely, she develops a measure of industry status and test whether it affects the market reaction to U.S. firms announcing earnings restatements between 2000 and 2009. Results of the empirical analyses indicate that investors react less negatively to earnings restatements announced by firms from higher-status industries, supporting the argument that category status acts as a lens that shapes the extent to which an organization's actions are viewed favorably.

Classical Deviation: OrganizationalandIndividual Status as Antecedents of Conformity

“…However, legitimacy through conformity can be obtained in two distinct ways. Here, conforming pushes the organization to abide by categorical membership norms, or more broadly to follow a type, prototype, or code prevalent in its field or industry (Hsu et al, 2009;Sharkey, 2014). Here, conforming pushes the organization to abide by categorical membership norms, or more broadly to follow a type, prototype, or code prevalent in its field or industry (Hsu et al, 2009;Sharkey, 2014).…”

“…However, some actors find it easier to distance themselves from prototypical choices; the middle-status conformity hypothesis predicts that high-status actors can be misaligned without fearing sanctions, because of the stability of their position (Phillips & Zuckerman 2001;Sharkey, 2014) and because they benefit from greater control and visibility (Podolny, 2005;;Sauder, Lynn & Podolny, 2012). As a result, these actors can evade the normative constraints and differentiate themselves.…”

Do investors actually value sustainability indices? Replication, development, and new evidence on CSR visibility

“…Analysts and investors use frames and categories to first identify (screen) candidate firms for investment, and then evaluate these firms afterwards (Sharkey, 2014;Zuckerman, 2004). As CSR orientation becomes institutionalized and investors become more constrained (Hawn & Ioannou, 2016;Ioannou & Serafeim, 2015; see Appendix A in File S1 that provides evidence of the increasing attention from professional market participants to CSR-oriented firms), candidate firms' identification occurs more and more among equivalent peers.…”

Introduction: Into the Fourth Decade

“…How these organizations are able to do so is capturing much interest. Answers put forward include 'opacity' (e.g., Briscoe & Murphy, 2012), various forms of 'concealment' (e.g., Hudson & Okhuysen, 2009;Vergne, 2012), 'substitution' (Okhmatovskiy & David, 2012), 'dilution' (Carberry & King, 2012;Sharkey, 2014), 'distraction' (Grougiou, Dedoulis, & Leventis, 2016), 'asset divestment' (Durand & Vergne, 2015), or, paradoxically, even the deliberate 'use' of that stigma (Helms & Patterson, 2014;Tracey & Phillips, 2016). Put more simply, organizations respond to being stigmatized in one of three ways -they use it, lose it, or conceal it.…”