Social Movements, Risk Perceptions, and Economic Outcomes

Abstract

Although risk assessments are critical inputs to economic and organizational decision-making, we lack a good understanding of the social and political causes of shifts in risk perceptions and the consequences of those changes. This article uses social movement theory to explain the effect of environmental activism on corporations’ perceived environmental risk and actual financial performance. We define environmental risk as audiences’ perceptions that a firm’s practices or policies will lead to greater potential for an environmental failure or crisis that would expose it to financial decline. Using data on environmental activism targeting U.S. firms between 2004 and 2008, we examine variation in the effectiveness of secondary and primary stakeholder activism in shaping perceptions about environmental risk. Our empirical analysis demonstrates that primary stakeholder activism against a firm affects its perceived environmental risk, which subsequently has a negative effect on the firm’s financial performance.

Secondary stakeholder pressures and organizational adoption of sustainable operations practices: The mediating role of primary stakeholders

“…This paper makes two important contributions: firstly, it establishes the existence of heterogeneity among different stakeholder groups (Buysse & Verbeke, 2003;Clarkson, 1995;Eesley & Lenox, 2006;Henriques & Sharma, 2005;Mitchell, Agle, & Wood, 1997;Vasi & King, 2012) and secondly, it empirical supports the argument of direct and indirect influence of primary and secondary stakeholders, respectively, in emerging economies.…”

“…These media of influence are limited to actors who engage in economic transactions with the corporation. In addition, any actor whose financial position is directly related to an organization's performance is also regarded as a primary stakeholder group, for example shareholders, employees, customers, suppliers or creditors (Vasi & King, 2012). Secondary stakeholders, by contrast, do not engage in direct economic transactions with corporations, and thus do not have any formal contractual authority over them (Eesley & Lenox, 2006).…”

“…This may be because secondary stakeholder activities such as public demonstrations have a relatively weak impact on organizations. This may also be true because public demonstrations or boycotts are generally organized by consumer groups or environmental nongovernmental organizations (NGOs) that may be dismissed by organization as radical or marginal (Vasi & King, 2012).…”

“…As suggested, secondary stakeholders through primary stakeholders can influence corporations. For instance, consumer and environmental interest groups can influence consumers' buying preferences or the attractiveness of a business to prospective investors or employees (Vasi & King, 2012). Thus, primary stakeholders mediate their influence on organizations.…”

The consequences of social movements: taking stock and looking forward

“…For instance, they recognized that policies are not only adopted by state authorities, but also by businesses, and there is a growing research field on how social movements influence change of corporate practices and policies (see King and Pearce 2010 for a review). This scholarship also suggests that the impact of social movements is often conditional on movement controlled factors, such as stakeholders' activism, and contextual factors such as the type of enterprises (Bartley and Child 2011;King 2008;Vasi and King 2012).…”