Status rigidity and quality efforts
I study the effect of status rigidity, that is, the ability to acquire or lose valuable status, on producer’s quality efforts. An empirical study in two wine-producing areas in Bordeaux yields a surprising result: Despite the ability to acquire valuable status in one of the areas but not in the other, wine quality moves in perfect lockstep in both areas. This motivates a model of producers' quality efforts under flexible and rigid status hierarchies. Based on stylized facts of status research, the model identifies conditions under which producers exert high effort to produce high quality under either hierarchy and identifies conditions under which producers in both hierarchies produce the same expected level of quality. The model also predicts that to incentivize high effort toward quality the market i.) would not pay a premium for low-quality products from high-status producers and ii.) might endow a subset of producers with status permanently to ascertain the supply of high-quality products. Re-assessing the empirical evidence against the backdrop of the model suggests that quality was sufficiently highly rewarded in Bordeaux over the period of study such that the status order was not the limiting factor of producers’ quality efforts.
Psychological underpinnings of status spillovers: The need for uniqueness
This article investigates psychological underpinnings of status spillovers, that is, an audience's attribution of quality to a social actor based on the status positions of that actor's affiliations. I show that status spillovers depend on the audience's taste for uniqueness. Absent uncertainty about the social actor's quality, audiences with a strong taste for uniqueness penalize and audiences with a weak taste for uniqueness reward a social actor for high-status affiliations, with the value of high-status affiliations being zero on average. Under uncertainty about the social actor's quality, the effects become curvilinear. High-status affiliations are valued on average, but audiences with a strong need for uniqueness prefer extreme levels (low or high) whereas audiences with a weak need for uniqueness prefer a moderate level of high-status affiliations. Studies of the Nordlie/Newcomb (1958, 1961) fraternity and of junior faculty in management show a u-shaped effect, consistent with conformity-seeking audiences under high uncertainty. This work highlights the influence of pure audience taste on the potential for status spillovers and suggests that extant studies of status spillovers might rely on implicit assumptions about audience taste.
Confounded identities: when high-status affiliations impede resource acquisition
I propose that an organization might impair its ability to acquire resources if its identity is confounded with the identities of high-status organizations with which it collaborates and competes. The theory is tested with data on U.S. venture capital firm syndication between 1995 and 2009. Controlling for the firm’s own status, a venture capital firm whose identity is more strongly confounded with the identities of high-status firms is less likely to raise a new fund and invests less in the future. Analyses of moderators provide evidence consistent with the mechanism claim that this is an identity effect. The positive status and the negative confoundedness effects are amplified along margins of greater firm legitimacy, market uncertainty, and interfirm competition. Further robustness tests reassure that these effects are unlikely to be attributable to differences in firm quality, other benefits of structural position, or functional form assumptions. An exploratory analysis of firms’ ego networks suggests a simple way to concomitantly increase firm’s status and decrease its confoundedness. The study highlights previously neglected identity costs a firm incurs for confounding its identity with the identities of high-status firms with which it collaborates in projects but competes for resources. In status-based market competition a firm benefits from distinguishing its identity from the established elite.
Chateau Pontet-Canet (2016)
Harvard Business School Case [Teaching]
This case discusses the situation of Chateau Pontet-Canet in early 2000. Alfred Tesseron was the director and son of the owner of Chateau Pontet-Canet, a red wine producing estate in Pauillac (Bordeaux, France) and member of the fifth class of the ancient grand cru classification of the Medoc of 1855. International competition was mounting and revenues were declining even though Chateau Pontet-Canet delivered higher quality than equally classed peers. Moreover, despite receiving praise for its recent quality efforts, the chateau received criticism from the world's leading critic for being old-fashioned. Tesseron wondered whether he produced the right level of quality, whether he should follow his young winemaker's unconventional ideas for the work in the vineyard, whether he should modernize Pontet-Canet's style, and whether the institutions of Bordeaux were helping Pontet-Canet or holding it back. Consequently, Tesseron wondered how to best align his choices along these dimensions and secure Pontet-Canet's prosperity in the new millennium.
On the Causality and Cause of Returns to Organizational Status: Evidence from the Grands Crus Classés of the Médoc (2014)
Administrative Science Quarterly
This paper identifies the causal symbolic effect of status on the prices organizations charge for their products. I exploit the classification of the châteaux of the Médoc, which sorted 61 wine producers into five growth classes in 1855, as a fixed hierarchical symbol of class status. The classification has defied attempts at revision for more than 150 years. This means that a château’s rank in the classification cannot be reversely affected by the quality or price of its wine, which greatly facilitates the estimation of the causal effect of status. To determine whether status serves as a signal of quality under uncertainty or satisfies the motive of conspicuous consumption, I study a period of time during which the uncertainty about quality has arguably declined because the Internet has made wine ratings ubiquitously available. I identify a symbolic effect of status on prices that increases in a time of decreasing uncertainty, which suggests the motive of conspicuous consumption as a driver of the effect. But the results caution that we might commonly overestimate the symbolic value of status if we underestimate the disproportional value that markets place on the pinnacle of quality, the enduring nature of reputation, and the effect of endogenous quality choices on estimates of status effects.
Essays on high-status fallacies (2012) Doctoral Dissertation. University of Maryland
This dissertation comprises three essays. Each essay challenges some of the commonly held beliefs about and provides novel insights into the role of status in markets. In essay 1, I study the causal effect of producer status on the price premiums producers are able to charge for their products, the underlying cause for this premium, and producers' incentives to invest in quality under a fixed status hierarchy. In essays 2 and 3, I investigate on the organizational and individual level, respectively, how high-status affiliations affect an audience's evaluation of a social actor's identity. The contribution of these papers lies in highlighting reasons for, mechanisms through, and conditions under which high-status affiliations become a liability.