Organizations are complex social systems operating within equally complex economic and social environments (i.e., markets). My research in this area seeks to answer questions that are important within organizations - e.g., how should organizations allocate resources?, how can an organization structure itself so as to sustainably experience the benefits of interpersonal diversity? - between organizations and their evaluating audiences - e.g., how do organizations manage their identities?, how do audiences construct reference groups to evaluate organizational performance? - and in markets at large - e.g., how does the social structure of a market affect the way new information is incorporated into a firm's stock price?, how does social structure affect market evolution? Note: Links to papers may be inactive for papers currently under review or being revised.
Transmitters, Transformers, and Market Change: A Structural Explanation of Organizational Heterogeneity in the Hedge Fund Industry
Revise & Resubmit
This paper draws a distinction between two kinds of market brokers, transmitters and transformers, and analyzes their impact on stability and change in product markets. Both types of brokers contribute to markets by moving tangible resources, such as goods and capital, between transacting parties. Where they differ is in their potential to actively transform, versus merely transmit, the various intangible things—specifically, institutional norms and consumer expectations—upon which markets are constructed. Having limited power over their counterparties, transmitters are forced to pass along as output whatever they receive as input. Transformers, by contrast, may alter norms and expectations before passing them along or even block their transfer altogether. Two things follow: First, in the context of brokered markets it is important to understand how and why brokers shift between transmitter and transformer roles. Second, transformer's goals and preferences must be accounted for to identify their full impact on the markets in which they operate. In an empirical section, I apply the transmitter-transformer distinction to help explain growth and decline in organizational diversity in the global hedge fund industry from 1994 to the present.
The evaluator's option: Identity, performance, and endogenous reference group selection (with Heewon Chae)
Revise & Resubmit
Recent research shows that audiences respond to organizational performance in ways that seem anomalous according to prior theories. In this paper we propose that variations in the extent to which an organization conforms to a known market category affects the way audiences construct reference groups—whether broad or narrow, ex ante or ex post—and thus shapes their response to organizational performance. In an experiment on buying, selling, and evaluating the performance of a certain kind of financial instrument, we show that positive (negative) performance induces audiences to endogenously select broad (narrow) reference groups when evaluating atypical organizations. Audience's prior sentiment towards the organization they are evaluating—specifically their feelings of commitment—further moderate this relationship. Our results have several implications for theories related to organizational identity and identification, social comparison, and judgment and decision-making.
We do what we must, and call it by the best names': Can Deliberate Names Mitigate the Consequences of Organizational Nonconformity? (with Heewon Chae)
Forthcoming. Strategic Management Journal.
This article focuses on organizational naming as a strategic choice firms make to overcome liabilities of nonconformity. We argue that in markets presenting an "illegitimacy discount," non-conforming or atypical organizations may use deliberate names—by this we mean names that directly communicate the categories to which organizations claim membership—to offset the negative effects of their atypicality and prepare for threats to their legitimacy. Using data from the global hedge fund industry, we show that atypical hedge funds are indeed more likely than typical funds to have deliberate names. Furthermore, the selection of a deliberate name proves to be economically significant. An analysis of fund growth indicates that funds with deliberate names grow faster than funds without deliberate names and that this effect is particularly true among atypical funds. A third and final analysis of fund failure during the recent financial crisis highlights that while atypicality heightened a hedge fund’s likelihood of failure—even after controlling for fund performance—having a deliberate name mitigated this effect. We consider implications of our empirical findings for theories relating to organizational identity and impression management.
Redundant Heterogeneity and Group Performance (with Yuan Hou)
Forthcoming. Organization Science.
[Best Paper Proceedings, 2014 Academy of Management]
This paper identifies three performance issues that naturally result from diversity and suggests a potential solution for each of them. First, the positive effects associated with diversity often decay over time, in part because heterogeneous people may homogenize with repeated exposure. Second, diverse groups are fragile and experience higher turnover than nondiverse groups. Recruiting similar (redundant) pairs within a heterogeneous group can solve these two problems but also gives rise to a third: fault-line fragmentation. We propose a structural solution: redundant heterogeneity (RH), in which not only are team members heterogeneous within a hierarchical level of a group or organization but their diversity is matched by similar critical team member characteristics at other hierarchical levels. Analyses of 23 years of panel data from the National Basketball Association provided a first test of the effectiveness of this solution. We focused on professional players’ experience with a particular style of play in their college careers as the critical dimension of diversity within these teams. Our findings indicate that RH led to better performance, for three reasons. First, the positive effect of heterogeneity among teams’ core players on team performance decays more slowly for teams with RH; second, teams with RH are less negatively affected by turnover among core players; and third, teams with RH exhibited more coordination and cooperation
Identities as Lenses: How Organizational Identity Affects Audiences’ Evaluation of Organizational Performance
2011. Administrative Science Quarterly, 56(1), 61-94.
[Best Published Paper Award, 2012 Academy of Management]
This study calls into question the completeness of the argument that economic actors who fail to conform to certain identity-based logics—such as the categorical structure of markets—garner less attention and perform poorly, beginning with the observation that some nonconforming actors seem to elicit considerable attention and thrive. By reconceptualizing organizational identity as not just a signal of organizational legitimacy but also a lens used by evaluating audiences to make sense of emerging information, I explore the micro, decision-making foundations on which both conformist and nonconformist organizations may come to be favored. Analyzing the association between organizational conformity and return on investment and capital flows in the global hedge fund industry, 1994–2008, I find that investors allocate capital more readily to nonconforming hedge funds following periods of short-term positive performance. Contrary to prediction, nonconforming funds are also less severely penalized for recent poor performance. Both “amplification” and “buffering” effects persist for funds with non-conformist identities despite steady-state normative pressure toward conformity. I explore the asymmetry of this outcome, and what it means for theories related to organizational identity and legitimacy, in the discussion section.
From role conflict to evaluation discordance: How do conflicting performance evaluations affect risk taking in multiple audience contexts?
2014. Research in Organizational Sciences.
A rich but checkered literature in sociology presumes that maintaining multiple and conflicting social roles—for instance, having a high level of education and low level of occupational prestige—produces anxiety. Due to many theoretical and methodological difficulties involved with identifying the source and consequences of these "role conflicts," however, such theories have been largely neglected in contemporary discourse. In this chapter I revisit this influential but discredited line of research in order to combine its most basic intuition—social life involves living in multiple contexts simultaneously—with several insights gleaned from more enduring research on the sociology and social psychology of identity. Ultimately, I propose an alternative to earlier role conflict theories: anxiety, and certain behavioral responses intended to alleviate that anxiety, are not the product of conflicting roles, per se, but of conflicting evaluations by two or more discrete and relevant audiences of a single role performance. I evaluate this hypothesis using panel data from the Professional Golf Association (PGA). Results show that golfers are more likely to adopt risky playing strategies when a discontinuity exists between their internally- (players) and externally- (media) derived evaluations. Implications for social comparison and performance feedback theories under conditions of multiple audiences are highlighted.
How Does Status Affect Performance? Status as an Asset vs. Status as a Liability in the PGA and NASCAR (with Matthew Bothner & Young-Kyu Kim)
2012. Organization Science, 23(2): 416-433.
Two competing predictions about the effect of status on performance appear in the organizational theory and sociological literatures. On one hand, various researchers have asserted that status improves performance. This line of work emphasizes tangible and intangible resources that accrue to occupants of high-status positions and therefore pictures status as an asset. On the other hand, a second stream of research argues that status instead diminishes performance. This alter- native line of work emphasizes complacency and distraction as deleterious processes that plague occupants of high-status positions and thus portrays status as a liability. Which of these two perspectives best characterizes the actual performance of individuals in a competitive setting? And are they in any way reconcilable? In this paper, we summarize these two perspectives and test them in two empirical settings: the Professional Golf Association (PGA) and the National Association for Stock Car Auto Racing (NASCAR). Using panel data on the PGA Tour, we model golfers’ strokes from par in each competition as a function of their status in the sport. Using similar data on NASCAR’s Winston Cup Series, we model drivers’ speed in the qualifying round as a function of their status in the sport. We find curvilinear effects of status in both contexts. Performance improves with status until a very high level of status is reached, after which performance wanes. This result not only concurs with the view that status brings tangible and intangible resources but also provides empirical support for the contention that status fosters dispositions and behaviors that ultimately erode performance.
Organizing Contests for Status: The Matthew Effect versus the Mark Effect (with Matthew Bothner & Joel Podolny)
2011. Management Science, 57(3), 439-57.
[Best Paper Proceedings, 2009 Academy of Management – OMT Division]
What is the best way to design tournaments for status, in which individuals labor primarily for the esteem of their peers? What process, in other words, should organizers of status-based contests impose upon those who covet peer recognition? We propose a formal model of status-based competition that contrasts two competing alternatives. The first, following Merton, is the “Matthew Effect,” according to which a tournament’s architect directs slack resources to elite actors and thus widens the distribution of rewards by favoring cumulative advantage. The second is the “Mark Effect,” under which a tournament’s designer instead pushes slack resources to marginal actors and thus tightens the distribution of rewards. Our results suggest that although the Mark Effect is better for the social welfare of most tournaments, the Matthew Effect is preferable in two distinct contexts: in small tournaments where variation in underlying ability translates into acute advantages for the most capable contestants; and in large tournaments whose contestants face constant, rather than rising, marginal costs—a condition we relate to contestants’ perception of their work as intrinsically valuable. Our contributions are twofold: We find, counter to the thrust of Merton’s work, that cumulative advantage is not invariably optimal for the functioning of status contests; and we identify circumstances in which the production of superstars is likely to make contests for status better off in aggregate. Implications for future research on status and management are discussed.
When do Matthew Effects Occur? (with Matthew Bothner, Richard Haynes, Wonjae Lee)
2010. The Journal of Mathematical Sociology, 33(2), 80-114.
What are the boundary conditions of the Matthew Effect? In other words, under what circumstances do initial status differences result in highly skewed reward distributions over the long run, and when, conversely, is the accumulation of status-based advantages constrained? Using a formal model, we investigate the fates of actors in a contest who start off as status-equivalents, produce at different levels of quality, and thus come to occupy distinct locations in a status ordering. We build from a set of equations in which failing to observe cumulative advantage seems implausible and then demonstrate that, despite initial conditions designed to lead inevitably to status monopolization, circumstances still exist that rein in the Matthew Effect. Our results highlight the importance of a single factor governing whether the Matthew Effect operates freely or is circumscribed. This factor is the degree to which status diffuses through social relations. When actors’ status levels are strongly influenced by the status levels of those dispensing recognition to them, then eventually the top-ranked actor is nearly matched in status by the lower-ranked actor she endorses. In contrast, when actors’ status levels are unaffected by the status levels of those giving them recognition, the top- ranked actor amasses virtually all status available in the system. Our primary contribution is the intuition that elites may unwittingly and paradoxically destroy their cumulative advantage beneath the weight of their endorsements of others. Consequently, we find that the Matthew Effect is curtailed by a process that, at least in some social settings, is a property of status itself—its propensity to diffuse through social relations. Implications for future research are discussed.
A Model of Robust Positions in Social Networks (with Matthew Bothner & Harrison White)
2010. American Journal of Sociology, 116(3), 943-92.
This article introduces a network model that pictures occupants of robust positions as recipients of diversified support from durably located others and portrays occupants of fragile positions as dependents on tenuously situated others. The model extends Herfindahl’s index of concentration by bringing in the recursiveness of Bonacich’s method. Using Newcomb’s study of a college fraternity, we find empirical support for the contention that fragility reduces future growth in status. Applications of the model to input-output networks among industries in the U.S. economy and to hiring networks among academic departments are also presented. Implications for future research are discussed.