Matthew Effect in Market Competition: Causal Effect of Status and Implications for Strategy

TIAN, YUAN

doi:https://doi.org/10.21985/n2-bk3x-wq95

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Matthew Effect in Market Competition: Causal Effect of Status and Implications for Strategy

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In this dissertation, I combine quasi-experiments and computational tools with large-scale data in new ways to address questions that revolve around the Matthew Effect of status. My dissertation is a collection of four empirical papers on status at both the organizational and the individual levels. I employ two distinct empirical settings that include both large public corporations and the market for professional labor in academia. First, a long line of research on status has focused on product market competition. My dissertation departs from that by studying the market for input factors, and the labor market in particular. Additionally, past research has focused on how status can bring unearned benefit and cumulative advantage to actors. I am to advance this line of research by looking at how we might challenge and limit the Matthew effect of status, which has far reaching implications for the persistence of inequality. Empirically speaking, I aim to identify the causal effect of status in ways that prior research has been unable, by exploiting artificial breakpoints in status hierarchies produced by influential third parties like the media. In the first chapter, I provide empirical evidence that one factor shaping firms’ employment-related corporate social responsibility (CSR) is organizational status, this is due to benefits of employee engagement that come with both organizational status and CSR. To causally identify the effect of organizational status, I use a regression discontinuity design (RDD) in the context of Fortune 1000 rankings. Specifically, I argue that the construction and evolution of the ranking makes the 500th rank position an artificial breakpoint in status when quality follows a smooth distribution near the cut-off. Implementing RDD in this context, I find that firms just failing to make it into the high-status Fortune 500 category have significantly better performance in employment-related social responsibility, as compared to firms just in the high-status category. One implication of this study is to establish the labor market benefit of organizational status. In the second chapter, I argue that actors may manage the implications of status by managing their information environments proactively. Specifically, as information asymmetry is a key enabling condition for the Matthew Effect of status, I argue that enabling (or disabling) information asymmetry may be one way whereby actors may manage the consequences stemming from their status positions. Implementing RDD in the Fortune 1000 context, I test this hypothesis by investigating companies’ financial information environment and how they communicate their earnings information. In the third chapter, I study how actors respond to multiple status hierarchies in the context of academia, where past research has theorized a poignant paradox between intra-professional status and public status for scientists. Combining large scale data with an instrumental variable estimator, my findings suggest that public status conferred by the media increases scientists’ commitment to the topics covered by the media. And the effect is more pronounced among scientists who are of relatively low intra-professional status. My findings also have implications for the broader research on the use of non-pecuniary incentives in motivating professionals and scientific development. Despite much organization effort that aims to remedy for inequality, the persistence of racial inequality has sparked recent scholarship on the unintended consequences of these efforts. In the fourth chapter, I theorize a paradox of diversity promotion whereby minorities are more likely to be allocated to positions that help embody diversity for the organizations. This may have inadvertent effects on minorities’ career development. I investigate this paradox in the context of academia by constructing rich personnel data for faculty from a public university. The results demonstrate that efforts to increase the representation of minorities leads to an increased prevalence of hiring minority assistant professors as joint appointments. This outcome is important as we further find that joint appointments overexpose new faculty members to a set of risks that can negatively affect their research productivity and career advancement. Together, the results extend research on allocative sources of inequality and highlight an unintended cost of diversity efforts related to the hiring process.

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