Authors:
Noah Askin – INSEAD
Matthew S. Bothner – ESMT

Interviewers:
Lei Xu – Texas Tech University
Hamid Vahidnia – Texas Tech University

Article link:
http://asq.sagepub.com/content/early/2016/01/29/0001839216629671.abstract

Question 1. This is a very interesting and counter intuitive article. Status literature assumes that status is a stable asset with positive performance implications for organizations. Contrary to this framework, your model suggests that status is rather dynamic. An organization’s status can decline and in turn prompt the organization to adopt the “Chivas Regal” strategy in order to regain the lost ground. In the responding process, organizations play an active agentic role rather than a passive recipient one—of status and its performance implications. What is the story behind this paper? What inspired you to look at status loss through a “non-traditional” and new theoretical lens?

We were interested in both the fact that status has been considered a largely static trait and the fact that organizations have often been portrayed as passive “receptors” of their positions in status hierarchies. Each of these felt insufficient to us, and not necessarily reflective of lived experience: anyone who has risen the ranks of an organization or watched a firm gradually ascend or descend from its station in public esteem would have a hard time arguing that status is static. Further, because of the benefits that accrue to those possessing status, it seemed logical that a loss of status should trigger some kind of behavior, whether reluctant acceptance (measurable in some lab contexts) or renewed resolve. Because of these intuitions and an interest in the particularly acute battles for rankings taking place in higher education on account of US News and World Report, we thought this would be a prime context in which to explore firm’s behavior vis-à-vis changes in the rankings (and, thus, changes in their status).

Question 2. The “Chivas Regal” strategy is the key concept in your study. The assumption is that high price is a symbol of prestige and quality. Thus, when an organization experiences status loss, setting a high price can actually attract the market audience (e.g., consumers, applicants, and other stakeholders) rather than repel them. This is certainly a very provocative and useful lens to understand in terms of the effects of status loss on price-setting behavior. In the meantime, it seems to us that the framework also implicitly assumes that the market audience is homogeneous and will respond to a price increase in a similar way. However, is it possible that the market audience may form sub-groups with different, even competing demands (e.g., competitors, applicants, and other state-holders)? Is it possible that such differences may lead each sub-group to interpret the price-signals differently?

Yes, it is definitely possible—likely, in fact—that different groups interpret tuition levels differently. And it is not necessary to assume that the market audience is homogenous in order to deem the Chivas Regal strategy an effective option for a school or any other organization. In fact, in the paper, we show that schools that bridge disparate groups (i.e., have a higher betweenness centrality) in the annual network of college applicants actually utilize the Chivas Regal strategy more aggressively, increasing tuition at even greater rates in the wake of a status loss. We postulate that this is due to a built-in hedge conferred by having a heterogeneous audience: the likelihood of alienating all groups of disparate buyers by substantially raising tuition levels is relatively low compared to that possibility if buyers are a homogenous group. Moreover, we suggest that schools that have access to heterogeneous audience groups are more credible market players because of the diversity of their support. Armed with both this additional credibility and the natural hedge against backlash, schools have more leeway to raise prices.

Taking your question to its logical next step, it is likely that groups of applicants (and other stakeholders) will also react differently to price increases in the wake of a status loss. Some will respond negatively, believing the increases to be unwarranted or unfair; others will see it as a necessary competitive response, with a school trying to collect the resources needed to re-engage in status competition; and still others will view the new, higher price as a snapshot reflective of the school’s status. We do not know the breakdown of these (and other) types of audience members specifically, but do believe that all exist in this context. In so far as they do, the Chivas Regal strategy remains a viable one.

Question 3. In your paper, you suggest that your study can be re-conducted in contexts such as wine and restaurant markets. It seems that one of the similarities that these markets share with the market/industry you studied is the level of uncertainty. We know that context really matters for the performance implications of the same intangible assets such as status. For example, prior research suggests that organization reputation may exert different effects in various contexts (e.g., high uncertainty vs. low uncertainty). Thus, the level of uncertainty, as one of the differentiators between contexts, may significantly shape the market audience’s perceptions. In that case, what would you expect if similar research like yours is conducted in these highly uncertain contexts such as IPO markets, compared with higher education markets? How can others use your research to better understand the dynamics that underlie status given the uniqueness of other contexts?

We cannot claim to be experts on IPO pricing, but our sense is that investment banks are, at least to some extent, using their target price for an IPO as a signal. Scholars could zero in on firms that experienced setbacks or received negative publicity in the lead up to their IPOs as those experiencing a loss of status, and then—with the appropriate insight into changes in target IPO price—explore the use of aspirational pricing. We would need to know more about the ins-and-outs of this context to be more precise in our predictions and expectations, but it does appear to be an interesting potential site for future research.

Further, your intuitions around uncertainty are well founded: if buyers have a very clear sense of the value of a product or experience, it will be nearly impossible for a producer to try to signal a status level misaligned with that value. That is why we suggest that experience goods (like universities, wines, and restaurants), whose exact value may be ambiguous until after they are personally experienced, and luxury goods, whose value is predicated largely on exclusivity and other externally-derived signals, would be the most interesting and obvious contexts in which to explore our effects. We believe that scholars would find evidence of similar dynamics and reactions, especially among the most status anxious/conscious, yet still credible, producers in these contexts.

Another key point in the paper is that these effects are taking place in a context where there is a single, highly attended to “arbiter” of status. A higher number of such judges of status, as Elsbach and Kramer (1996) and Sauder and Espeland (2006) show in the context of business schools, allows producers and audience members alike to react differently to changes in status. More specifically, they may focus their attention on the rankings which best suit their goals. In such instances, we believe a Chivas Regal-like reaction to status loss would be less likely. For example, while premier restaurants vying exclusively for Michelin stars may engage in aspirational pricing, more locally-focused restaurants that can attend to reviews on Yelp.com, in the local papers, and on food blogs may be less inclined to do so. In particular, if the locally-focused restaurateur does receive a bad review from a critic, he or she can anchor on the Yelp rating: while there may be the sting of some new status inconsistency, there’s not the same pain of a loss in status in a single, dominant ranking system. We think this remains an interesting feature that differs across contexts and would be worthy of future exploration.

Question 4. From a practitioner’s perspective, what would you see, in terms of your own research, as some of the most unique challenges faced by those managing higher education institutions in today’s higher education marketplace and some of the major ways to tackle these challenges? For example, we know that ranking systems are an important aspect of managing an institution’s status and its performance implications. Please elaborate on your thoughts on the ranking systems in general and then the implications of your research for policy makers, university applicants, and those managing these institutions.

On one hand, it is of course clear that ranking systems play a role in holding producers accountable. They bring discipline, and they synthesize an abundance of information for consumers and producers alike. On the other hand, as we often see in higher education and in other contexts where rankings reign, this can be reductionist—leaving out key factors of consumers’ experiences—with adverse consequences. More generally, as an analogy, just as some law schools seem to make the mistake of “teaching to the bar,” and thus rob students of the richness of a broad legal education, a jugular problem in ranking systems is that those ranked can play to the measures that appear to be most integral to driving the rankings, often at the expense of other metrics that matter or even at the expense of their stated missions.

In the context of higher education, we think that applicants to undergraduate institutions as well as professional schools will continue to benefit from considering the increasingly wide range of rankings that are now more widely available and attended to. While we would potentially consider advocating that schools opt out of the rankings, we also know that the formation of status hierarchies is an inevitable dynamic in any context (Askin, Bothner, and Lee 2015), whether or not rankings fulfill that role. As such, organizations and people alike will continue to find themselves ranked, meaning that even if a formal arbiter of status does not exist, an informal one likely does, and will almost surely lead to some level of competition for positioning.

Question 5. You are a scholar early in your career, and yet have been conducting very interesting projects from the start. Reflecting on your path, could you share with doctoral students your insights and experiences on how to find a niche area of research and to be highly productive in that niche? What are the factors that have contributed to your own success the most?

Firstly, thank you. Secondly, I think it comes down to a handful of things:

1) An openness to lots of different concepts and contexts, especially relatively early in your doctoral program. I came into graduate school with an interest in music and the music industry—something I’m continuing to pursue now—but with an openness to other areas. I had spent some time working in an educational services company, and so knew a bit about the higher education space and the influence of the US News rankings. So when Matt approached me with an interest in exploring this area, I was intrigued and we pursued it together.

2) Not going too far down any rabbit holes until you are really ready to write a paper. It is easy as a doctoral student to feel like “I just need to read more about X, and then a topic for a paper will become clear.” The problem is that doing that can be a never ending series of rabbit holes and/or you end up thinking that other people have already done what you might want to do. This is not to say that you should not have both a strong foundational knowledge of whatever area you’re studying as well as a working knowledge of where the field is currently, but there is a difference between those and trying to be exhaustive or encyclopedic. Once you have a sense of where you want to go, that will help guide your reading much more. Having said all that, it is really about finding a balance, which is probably more personal and idiosyncratic than anything.

3) Having great co-authors/advisors. I was fortunate to meet Matt during my first year in Booth’s PhD program, and he played an integral role in my training. While our relationship has transitioned from an advisory one to more of a collaborative, co-authorship one, his remains an important influence on my career. I would also be remiss if I did not mention another close collaborator and co-author, Michael Mauskapf, who is one of the ASQ blog’s co-organizers. We have a similarly fantastic collaborative relationship. Finding a handful of people that you trust and that you can effectively work with not only makes this career substantially more enjoyable, but I think it’s becoming increasingly essential for success.

4) Realizing that most people also don’t really have it all figured out. It is easy to look around at conferences and see everyone from other PhD students to senior faculty members and freak yourself out about “being behind.” There will (almost) always be someone—likely many people—who are putting out more and better papers than you are. It can be quite liberating to realize that a) that’s OK, b) those are good people to look to for motivation and inspiration, but not necessarily for competitive comparison, and c) the majority of people (I can speak for doctoral students and junior faculty) are similarly concerned about not doing enough. Keep yourself and your projects moving forward and do good work in an area you’re interested in, and that should serve you well.