Defensive Practice Adoption in the Face of Organizational Stigma: Impression Management and the Diffusion of Stock Option Expensing

31 Pages Posted: 12 Oct 2012

Date Written: November 2012

Abstract

Although most diffusion research focuses on firms adopting new practices to maintain their legitimacy, this paper examines a setting in which firms adopted a controversial practice to defend themselves against challenges relating to corporate deviance. We argue that understanding defensive adoption requires attending to both the dynamics of organizational stigma and impression management, and test our theoretical claims by analysing the diffusion of an accounting practice, stock option expensing (SOPEX), following the Enron scandal. We first provide evidence that the media and shareholder activists transformed the practice into a defensive device by theorizing it as a solution to problems relating to corporate fraud and corporate governance. Using event history analysis, we then show that corporations that became targets of stigma‐inducing threats were more likely to adopt SOPEX and that the media were a key force channelling these threats.

Keywords: diffusion, impression management, scandal, stigma

Suggested Citation

King, Brayden, Defensive Practice Adoption in the Face of Organizational Stigma: Impression Management and the Diffusion of Stock Option Expensing (November 2012). Journal of Management Studies, Vol. 49, Issue 7, pp. 1137-1167, 2012. Available at SSRN: https://ssrn.com/abstract=2160670 or http://dx.doi.org/10.1111/j.1467-6486.2012.01075.x

Brayden King (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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