Thursday, April 14, 2016

Look at Me: Overt Status-seeking Behavior and Competitive Emergence among Securities Analysts

BOWERS Anne H., GREVE Henrich, MITSUHASHI Hitoshi
Look at Me: Overt Status-seeking Behavior and Competitive Emergence among Securities Analysts Research in the Sociology of Organizations (forthcoming)

Although status seeking behavior and market behaviors are often equated in studies of competition, there is no reason to assume that choices made in a competition for status necessarily reflect the same choices that improve positioning for customers. An important possibility that still has seen little investigation is that actors might seek status for its own sake, and in so doing shape competition, even though doing so may be detrimental to the market.
In this study, the authors examine the emergence of competition by articulating a model of competitive response among boundedly rational actors aware of the importance of status as well as some of the dimensions on which it may be gained. The setting is securities analysts, who issue recommendations and earnings estimates on publicly traded stocks. Some analysts are awarded status by Institutional Investor magazine’s prestigious All-star Awards, which, each year, rank a few top analysts as All-stars, leaving most analysts as non-All-stars. We estimate the likelihood of analysts’ initiating or exiting coverage of stocks in response to other analysts entering stock they cover. The authors show that competition can emerge not because of attention to customer needs or the pursuit of quality and efficiency, but because of status seeking behavior, with compelling, and potentially negative, market implications for overt status seeking.