The Cost of Status: When Social and Economic Interests Collide

Although researchers have devoted considerable attention to assessing howorganizations benefit from ascriptions of high status, relatively little research has analyzedthefinancial costs that organizations may incur in actively managing such ascriptions. Inthis study, we analyze how and why organizations may pay a relatively steep economicprice for the attainment and/or maintenance of social status. Specifically, we advance anoriginal theoretical perspective, which suggests thatfirms engaged in economic compe-tition are simultaneously engaged in social ceremony and that these dual processes cangenerate a combination of social gains (in terms of status) and economic losses (in terms ofprofitability). We theorize and test our perspective in the context of competitive biddingceremonies using a unique, decade-long data set on repeated competitive market inter-actions amongfirms in the U.S. construction industry. Wefind support for our predictionthatfirms’participation in bidding ceremonies can generate divergent outcomes, that is,higher social statusanddiminished economic performance. We discuss the implicationsof our theoretical and empirical analysis for the existing literature on social status,competitive bidding, and—more generally—on the role social forces play in competitivemarket behaviors and outcomes.