Social Movements, Risk Perceptions, and Economic Outcomes: The Effect of Primary and Secondary Stakeholder Activism on Firms' Perceived Environmental Risk and Financial Performance

Ion Bogdan Vasi, Brayden G. King

Research output: Contribution to journalArticlepeer-review

114 Scopus citations

Abstract

Although risk assessments are critical inputs to economic and organizational decision-making, we lack a good understanding of the social and political causes of shifts in risk perceptions and the consequences of those changes. This article uses social movement theory to explain the effect of environmental activism on corporations' perceived environmental risk and actual financial performance. We define environmental risk as audiences' perceptions that a firm's practices or policies will lead to greater potential for an environmental failure or crisis that would expose it to financial decline. Using data on environmental activism targeting U.S. firms between 2004 and 2008, we examine variation in the effectiveness of secondary and primary stakeholder activism in shaping perceptions about environmental risk. Our empirical analysis demonstrates that primary stakeholder activism against a firm affects its perceived environmental risk, which subsequently has a negative effect on the firm's financial performance.

Original languageEnglish (US)
Pages (from-to)573-596
Number of pages24
JournalAmerican Sociological Review
Volume77
Issue number4
DOIs
StatePublished - Aug 8 2012

Keywords

  • environment
  • organizations
  • risk
  • social movements

ASJC Scopus subject areas

  • Sociology and Political Science

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