Status Update: How Do Organizations Respond to a Dip in Status?

800px-CornellpictureStatus has the potential to return concrete benefits for organizations, but status is subject to change over time, which begs the question, what happens when the status of a business changes? In their paper, “Status-Aspirational Pricing: The ‘Chivas Regal’ Strategy in U.S. Higher Education, 2006-2012,” published in Administrative Science Quarterly, authors Noah Askin of INSEAD and Matthew S. Bothner of ESMT European School of Management and Technology look to private colleges and universities to understand how organizations respond to changes in status.

The abstract from their paper:

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 ASQ Coverthat 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.

You can read “Status-Aspirational Pricing: The ‘Chivas Regal’ Strategy in U.S. Higher Education, 2006-2012” from Administrative Science Quarterly free for the next two weeks by clicking here. Want to know all about the latest research from Administrative Science QuarterlyClick here to sign up for e-alerts!

This entry was posted in Business, Competition, Decision making, Performance and tagged , , , , , , , , by Cynthia Nalevanko, Editor, Management INK. Bookmark the permalink.

About Cynthia Nalevanko, Editor, Management INK

Founded in 1965, SAGE is the world’s leading independent academic and professional publisher. Known for our commitment to quality and innovation, SAGE has helped inform and educate a global community of scholars, practitioners, researchers, and students across a broad range of subject areas. With over 900 employees globally from principal offices in Los Angeles, London, New Delhi, Singapore, and Washington DC, our publishing programme includes more than 560 journals and over 800 books, reference works and databases a year in business, humanities, social sciences, science, technology and medicine. Believing passionately that engaged scholarship lies at the heart of any healthy society and that education is intrinsically valuable, SAGE aims to be the world’s leading independent academic and professional publisher. This means playing a creative role in society by disseminating teaching and research on a global scale, the cornerstones of which are good, long-term relationships, a focus on our markets, and an ability to combine quality and innovation. Leading authors, editors and societies should feel that SAGE is their natural home: we believe in meeting the range of their needs, and in publishing the best of their work. We are a growing company, and our financial success comes from thinking creatively about our markets and actively responding to the needs of our customers.

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