Elizabeth G. Pontikes

Two Sides of the Same Coin: How Ambiguous Classification Affects Multiple Audiences’ Evaluations

This paper questions findings indicating that when organizations are hard to classify they will suffer in terms of external evaluations. Here, I suggest this depends on the audience evaluating the organization. Audiences that are “market-takers” consume or evaluate goods and use market labels to find and assess organizations; for them, ambiguous labels make organizations unclear and therefore less appealing. “Market-makers” are interested in redefining the market structure, and as a result, this type of audience sees the same ambiguity as flexible and therefore more appealing. I tested these ideas in a longitudinal analysis of U.S. software organizations between 1990 and 2002. As predicted, organizations that claim ambiguous labels are less appealing to consumers, an audience of market-takers, but more appealing to venture capitalists, who are market-makers. Further, when labels are ambiguous, aversion to or preference for ambiguity arises from the label itself. Identifying with multiple ambiguous labels does not make an organization even less appealing to a consumer or more appealing to a venture capitalist. Finally, all types of venture capitalists are not alike in how they react to a label’s ambiguity. Independent venture capitalists act as market-makers and prefer organizations with ambiguous labels, while corporate venture capitalists act as market-takers and avoid them.

Stained Red A Study of Stigma by Association to Blacklisted Artists during the “Red Scare” in Hollywood, 1945 to 1960

We suggest that moral panics exert spillover effects through stigma by mere association. Individuals are harmed even if their ties to stigmatized affiliates are heterophilous, and high-status individuals can also suffer. This creates a broadcast effect that increases the scale of the moral panic. Analyzing the U.S. film industry from 1945 to 1960, we examine how artists’ employment in feature films was influenced by their associations with co-workers who were blacklisted as communists after working with the focal artist. Mere association reduces an artist’s chances of working again, and one exposure is enough to impair work prospects. Furthermore, actors’ careers are impaired when writers with whom they worked are blacklisted. Moreover, the negative effects of stigma by mere association hold even when the focal artist has received public acclaim. These findings have broad implications. When a few individuals or organizations are engaged in wrongdoing and publicly targeted, stigma by association can lead to false positives and harm many innocents.

The Persistence of Lenient Market Categories

Research across disciplines presumes that market categories will have strong boundaries. Categories without well-defined boundaries typically are not useful and so are expected to fade away. We suggest many contexts contain lenient market categories, or less-constraining market categories, that persist and become important. We argue that this fact can be explained by looking at market categories from the producer perspective. Lenient market categories have more flexibility and allow for a wider range of fit. As a result, we expect to see high rates of entry into lenient categories. At the same time, lenient market categories have drawbacks: they do not clearly convey what an organization does and do not identify specific sets of potential consumers. This means organizations are more likely to exit. When entry rates are higher than exit rates, lenient market categories will endure over time. We also predict that organizations exiting lenient categories will enter other lenient categories, further fueling the persistence of such categories. Finally, this trend is exaggerated when influential external agents favor leniency. We find support for these ideas in a longitudinal analysis of organizational entry into and exit from market categories in the software industry.

THE RED QUEEN: HISTORY-DEPENDENT COMPETITION AMONG ORGANIZATIONS

Abstract We argue that competition among organizations is history-dependent, so that each organization’s competitiveness at a given point in time hinges on the organization’s historical experience leading up to that point. Specifically, we summarize the theory of “Red Queen” competition, where competition de-selects weak organizations and stimulates organizational learning, which in turn further increases the intensity of competition and so further strengthens survivors in an ongoing dynamic of reciprocal causality. Empirical evidence of Red Queen competition is summarized from various analyses of two organizational populations. We conclude that theories and empirical models of competition may be seriously mis-specified, and that the analytic tools of the field of strategic management may lead to incorrect conclusions, if they do not explicitly allow for this form of history dependence in competition.

The Non-consensus Entrepreneur Organizational Responses to Vital Events

Salient successes and failures, such as spectacular venture capital investments or agonizing bankruptcies, affect collective beliefs about the viability of particular markets. Using data on software start-ups from 1990 to 2002, we show that collective sense-making in the wake of such vital events can result in consensus behavior among entrepreneurs. Market search is a critical part of the entrepreneurial process, as entrepreneurs frequently enter new markets to find high-growth areas. When spectacular financings result in a collective overstatement of the attractiveness of a market, a consensus emerges that the market is resource-rich, and the path is cleared for many entries, including those that do not have a clear fit. When notorious failures render a market unpopular, only the most viable entrants will overcome exaggerated skepticism and enter, taking the non-consensus route. Venture capitalists likewise exhibit herding behavior, following other VCs into hot markets. We theorize that vital events effectively change the selection threshold for market entries, which changes the average viability of new entrants. We find that consensus entrants are less viable, while non-consensus entrants are more likely to prosper. Non-consensus entrepreneurs who buck the trends are most likely to stay in the market, receive funding, and ultimately go public.