Organizational Stigma

Conceptual Overview

In this era of corporate scrutiny, references to stigmatized organizations are commonplace; however, stigma research has occurred almost exclusively at the individual level of analysis. Thus, the preponderance of this work examines the stigmatization of people, including, but not limited to, minorities, convicts, the overweight, and the mentally ill. Some scholars do recognize group-level (e.g., minority or religious groups) and organization-level (e.g., bankruptcies) stigma. However, rather than examining the effects of stigmatization on groups or organizations, their empirical research occurs at the level of the person, investigating how individual members themselves are stigmatized by their association with stigmatized groups or organizations and the negative life consequences encountered as a result. Although prior research has provided a foundational understanding of the outcomes associated with individual stigmatization, the processes by which an organizational stigma develops and, in turn, affects an organization and its relationships with stakeholders remains unclear.

Stigma had its origins in ancient Greece, where it functioned as a mechanism of social control, in which a mark (e.g., a burn or a scar) was intentionally inflicted on individuals to represent their inferior moral status. In his seminal 1963 essay, Erving Goffman resurrected the construct, defining it as an attribute that spoils the social identities of bearers. Following Goffman, in 1984, Edward Jones, Amerigo Farina, Albert Hastorf, Hazel Markus, Dale Miller, and Robert Scott extended Goffman's definition by noting that stigmatization is more than an attribute—it is the relationship between an attribute and a negative stereotype that diminishes social status and leads others to ascribe undesirable characteristics to bearers. Bruce Link and Jo Phelen's 2001 comprehensive review of stigma research demonstrated that, at the individual level, stigmas impose devastating adverse effects on the distribution of social ties, economic success, and ultimately, survival. Stigmas pose a similar threat to organizations. Although organizational stigmatization shares some common aspects with individual stigmatization, the nature of the construct and the subsequent reactions vary at this higher level of analysis.

As with individual stigmatization, status is a seminal construct in organizational stigmatization. In their 2005 study, Marvin Washington and Edward Zajac conceptualized status as a socially constructed ordering that grants organizations social esteem and, in turn, the accrual of privileges. While high status leads to privileges, which are unearned, non-merit-based rewards, low status results in discrimination and [Page 1179]relationship disadvantages for organizations. An organization is stigmatized when its perceived membership in a category conveys a devalued status to other members of their social context. Thus, this condition can result in discrimination and negative economic and social consequences for the stigmatized organization.

The negative consequences of stigmatization take the form of enactment, in which stakeholders direct negative behaviors toward the afflicted organization. Robert Sutton and Anita Callahan provided one of the few studies of stigmatized organizations in their research of bankrupt computer firms. They identified two key types of negative behavioral enactment of organizational stigmas (due to bankruptcy). First, they found that even after suppliers were promised cash on delivery, once the bankruptcy became public, many suppliers stopped shipping parts to the bankrupt firms, while others shipped defective materials. Second, they found that many stakeholders subsequently denigrated the stigmatized organization, either informally via rumor or formally through direct confrontation. While enactment has the potential for severe economic and social harm, the nature of these reactions and the process of stigmatization in general have received very little attention in the organizational literature.

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