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Status-Aspirational Pricing: The “Chivas Regal” Strategy in U.S. Higher Education, 2006-2012*

Posted by admin in 2013 - (Comments Off on Status-Aspirational Pricing: The “Chivas Regal” Strategy in U.S. Higher Education, 2006-2012*)

Noah Askin and Matthew S. Bothner

This paper examines the effect of status loss on organizations’ price-setting behavior. We predict, counter to current status theory and aligned with performance feedback theory, that a status decline prompts certain organizations to charge higher prices and that there are two kinds of organizations most prone to make such price increases: those with broad appeal across disconnected types of customers and those whose most strategically similar rivals have charged high prices previously. Using panel data from U.S. News & World Report’s annual rankings of private colleges and universities from 2005 to 2012, we model the effect of drops in rank that take a school below an aspiration level. We find that schools set tuition higher after a sharp decline in rank, particularly those that appeal widely to college applicants and whose rivals are relatively more expensive. This study presents a dynamic conception of status that differs from the prevailing view of status as a stable asset that yields concrete benefits. In contrast to past work that has assumed that organizations passively experience negative effects when their status falls, our results show that organizations actively respond to status loss. Status is a performance related goal for such producers, who may increase prices as they work to recover lost ground after a status decline.

Administrative Science Quarterly (61) 2016: 217–253


Emergence of Stratification in Small Groups

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Noah Askin, Matthew S. Bothner, and Wonjae Lee

Stratification within small groups is virtually inevitable. Understanding the precise mechanisms by which it occurs and the nature of its consequences is an important sociological endeavor. Individuals’ pre-existing qualities, as well as advantages emerging from intra-group interactions, affect the flows of respect and deference accruing to each member of a group. Differences in these flows in turn create a hierarchy. In this article, we first discuss foundational research on the causes and consequences of stratification before turning to more current trends. We focus on the ways in which status, the primary determinant of one’s location in a group’s hierarchy, is created and maintained or lost. We discuss the Matthew Effect—a process by which high-status group members receive disproportionate credit for their contributions, and also more easily maintain their status. We also address the circumstances and activities that can curb the Matthew Effect. We then move to current research, which centers on two main concepts: first, we consider peer effects, discussing the various means by which an individual’s closest peers shape his or her status; second, we take a broader perspective by examining small groups as open systems. This section considers how a group’s external environment, including other nearby groups, affects the level and stability of within-group stratification. We emphasize key issues and implications for future research on these topics.

Emerging Trends in the Social and Behavioral Sciences (2015)

Primary Status, Complementary Status, and Organizational Survival in the U.S. Venture Capital Industry

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Matthew S. Bothner, Young-Kyu Kim, and Wonjae Lee

We introduce a distinction between two kinds of status and examine their effects on the exit rates of organizations investing in the U.S. venture capital industry. Extending past work on status-based competition, we start with a simple baseline: we describe primary status as a network-related signal of an organization’s quality in a leadership role, capturing primary status as a function of the degree to which an organization leads others that are themselves well regarded as lead-organizations in the context of investment syndicates. Combining Harary’s (1959) image of the elite consultant with Goffman’s (1956) concept of “capacity-esteem,” we then discuss complementary status as an affiliation-based signal of an organization’s quality in a supporting role. We measure complementary status as a function of the extent to which an organization is invited into syndicates by well-regarded lead-organizations—that is, by those possessing high levels of primary status. Findings show that, conditioning on primary status, complementary status reduces the rate at which venture capital organizations exit the industry. Consistent with the premise that these kinds of status correspond to different roles and market identities, we also find that complementary status attenuates (and ultimately reverses) the otherwise favorable effect of primary status on an organization’s life chances. Theoretically and methodologically oriented scope conditions, as well as implications for future research, are discussed.

Social Science Research 52 (2015) 588–601