Sinziana Dorobantu is Assistant Professor of Management and Organizations at NYU Stern School of Business. This post is based on a forthcoming article by Professor Dorobantu; Witold Henisz, the Deloitte & Touche Professor of Management in Honor of Russell E. Palmer, former Managing Director at The Wharton School, The University of Pennsylvania; and Lite Nartey, Assistant Professor in the Sonoco International Business Department at the Darla Moore School of Business.
Why is it the case that apparently isolated events (e.g., a court decision or a negative report from an environmental organization) sometimes escalate into crises while other times they go almost unnoticed? In new research to be published in the Administrative Science Quarterly, entitled Not All Sparks Light a Fire: Stakeholder and Shareholder Reactions to Critical Events in Contested Markets, we argue that variations in stakeholders’ perceptions of an organization and in their reactions to the initial event explain why, in some instances, negative news spark a social movement opposing the organization escalating into a bigger crisis, while in others they pass almost unnoticed. We analyzed a dataset of more than 51,000 media-reported events describing the interactions between 2,293 diverse stakeholders (including local communities, government representatives, NGOs, suppliers, etc.) and 19 publicly-traded gold mining firms operating 26 mines around the world, to find that: