Status Signals

Status Signals: A Sociological Study of Market Competition

Joel M. Podolny
Copyright Date: 2005
Pages: 304
https://www.jstor.org/stable/j.ctt7sbsh
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  • Book Info
    Status Signals
    Book Description:

    Why are elite jewelers reluctant to sell turquoise, despite strong demand? Why did leading investment bankers shun junk bonds for years, despite potential profits?Status Signalsis the first major sociological examination of how concerns about status affect market competition. Starting from the basic premise that status pervades the ties producers form in the marketplace, Joel Podolny shows how anxieties about status influence whom a producer does (or does not) accept as a partner, the price a producer can charge, the ease with which a producer enters a market, how the producer's inventions are received, and, ultimately, the market segments the producer can (and should) enter. To achieve desired status, firms must offer more than strong past performance and product quality--they must also send out and manage social and cultural signals.

    Through detailed analyses of market competition across a broad array of industries--including investment banking, wine, semiconductors, shipping, and venture capital--Podolny demonstrates the pervasive impact of status. Along the way, he shows how corporate strategists, tempted by the profits of a market that would negatively affect their status, consider not only whether to enter the market but also whether they can alter the public's perception of the market. Podolny also examines the different ways in which a firm can have status. Wal-Mart, for example, has low status among the rich as a place to shop, but high status among the rich as a place to invest.

    Status Signalsprovides a systematic understanding of market dynamics that have--until now--not been fully appreciated.

    eISBN: 978-1-4008-3787-8
    Subjects: Sociology, Economics, Management & Organizational Behavior

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List Of Illustrations
    (pp. ix-x)
  4. List Of Tables
    (pp. xi-xii)
  5. ACKNOWLEDGMENTS
    (pp. xiii-xvi)
    Joel M. Podolny
  6. Introduction AN EMERGENT PERSPECTIVE FROM AN EMERGENT FIELD
    (pp. 1-9)

    We are all familiar with the popular image of the academic researcher, high atop an ivory tower in serene and sublime contemplation. While this image provides fodder for those who are critical of the alleged detachment of higher education from practical concerns, it also is probably one of the initial attractions for those who choose academia as a profession. Certainly, I found the image strongly appealing when I decided to pursue a Ph.D. more than fifteen years ago. However, in the intervening years, I have come to the conclusion that academic research has all the serenity and sublimity of a...

  7. Chapter One STATUS, REPUTATION, AND QUALITY
    (pp. 10-21)

    We have all had the experience of entering a room filled with unfamiliar people. Such experiences are especially likely to arise at key transition points in our lives—starting in a new school, beginning a new job, or entering a new community. Most of us find such moments to be fraught with anxiety. Questions—floating between the conscious and subconscious levels—form in our minds: With whom should I talk? Whom should I avoid? How will I be perceived if I spend too long without talking to anyone? How will I be perceived if I end up talking with the...

  8. Chapter Two THE MATTHEW EFFECT (UN)BOUNDED
    (pp. 22-39)

    The previous chapter underscored two features of status that are critical to understanding its relevance in markets. First, potential exchange partners regard an actor’s status as a signal of that actor’s underlying quality when there is uncertainty about the underlying quality and when reputation is only an imperfect indicator. Second, status “leaks” through relations. In this chapter, I discuss consequences of these two features for generating inequality in key valued outcomes—such as profits—and how such consequences, in turn, affect status hierarchies over time. For the purpose of elucidating some of the central dynamics underlying the generation of inequality,...

  9. Chapter Three GETTING MORE FOR LESS IN THE INVESTMENT BANKING INDUSTRY
    (pp. 40-75)

    The previous two chapters provided the initial theoretical foundation for this book. They elaborated the concept of status as a signal that is grounded in deference relations and leaks through exchange relations, and they developed some of the implications of this leaky signal for market outcomes. Though the first chapters contained passing references to different empirical contexts, this chapter—which examines the relevance of status in investment banking markets—will be the first detailed empirical examination of status in a particular market context.

    I focus first on the investment banking industry primarily because it offers an exceptional indicator of status...

  10. Chapter Four TO MINGLE OR NOT TO MINGLE WITH THE HOI POLLOI: THAT IS THE QUESTION
    (pp. 76-102)

    The first two chapters elaborated a two-sided conception of status. Status is (1) a signal of quality that (2) leaks through exchange relations. Drawing on data from the investment banking industry, the previous chapter documented cost and revenue consequences that follow from the fact that status is a signal. Drawing on data from the same industry, this chapter documents implications of the leakiness of status.

    In saying that status leaks through exchange relations, I obviously have been somewhat loose in my use of language. A more precise way of articulating the same observation would be to say that there is...

  11. Chapter Five THE MEDIUM, THE MESSAGE, AND THE SIGNAL
    (pp. 103-131)

    A common saying in politics and marketing is that “the medium is the message.” The saying denotes the belief that people are simply unable to filter out the broader context within which a message is situated. As a consequence, it is not possible to decouple the content of a message from the form in which the message is conveyed. The status-based model of market competition implies a similar idea. Insofar as the message that producers are trying to convey is a message about quality, the status ordering is the medium in which these messages are situated, and any claims regarding...

  12. Chapter Six STATUS AND INVENTION
    (pp. 132-174)

    In his work on markets, Harrison White (2002b) draws on the metaphor of a “pump” to characterize the way in which producer identities can serve as an interface between the dispersed inputs that go into market products and the consumers desiring those products. Such a metaphor is compatible with the status-based model of market competition as elaborated in the previous five chapters. Whether the focus is on a service like investment banking or a product like wine, the differentiated status ordering of producers acts as a sorting mechanism, enabling previously dispersed activities and materials to congeal into differentiable products whose...

  13. Chapter Seven EMBEDDEDNESS AND ENTRY
    (pp. 175-198)

    The previous chapter provided evidence as to how status in one domain—the technological arena—can spill over and affect market outcomes; this chapter focuses on how status distinctions in the social domain can have a similar spillover effect. Insofar as this chapter highlights the relevance of status distinctions in the social arena to market outcomes, it necessarily connects to the sociological literature on embeddedness. This term, which Mark Granovetter bequeathed to the field of economic sociology in a 1985American Journal of Sociologyarticle, is probably the most frequently utilized term to emerge out of economic sociology in the...

  14. Chapter Eight AN EVOLUTIONARY PERSPECTIVE ON STATUS SEGREGATION
    (pp. 199-226)

    In chapter four, we focused on the extent of status segregation as one of the defining characteristics of a status ordering. We observed that the greater the uncertainty that market actors confront regarding the quality of their potential exchange partners, the greater the extent of status-based homophily in exchange relations. While this tendency toward status homophily is one way in which status segregation can be realized, it is not the only one. Another is in terms of divides in the status ordering, in which those below a threshold have little or no contact with those above the threshold. In other...

  15. Chapter Nine UNCERTAINTY RECONSIDERED
    (pp. 227-248)

    As we have investigated the significance of status as a signal, the concept of uncertainty has been central. In the first two chapters, I essentially argued that market uncertainty is the raison d’être of status as a signal; in the empirical chapters that followed, we observed that the market consequences of status are contingent on the underlying level of uncertainty.

    In drawing out these implications of market uncertainty, I have—at least until this chapter—adopted a conception of uncertainty that can be largely reduced to the asymmetry between information known by an actor taking on the role of an...

  16. Chapter Ten CONCLUSION
    (pp. 249-266)

    Every discipline has fundamental images on which its practitioners rely to make sense of the world. These fundamental images shape the questions that are asked and accordingly the paths of inquiry that are followed. Given the neoclassical imagery of a market as defined by intersecting supply and demand curves in a price-quantity trade-off plane, the fundamental questions center on how modifications to those supply and demand curves affect the location of the intersecting point relative to where that point would be under idealized conditions of perfect competition. So, for example, the impact of monopoly or a minimum wage is explored...

  17. BIBLIOGRAPHY
    (pp. 267-278)
  18. CREDITS
    (pp. 279-280)
  19. INDEX
    (pp. 281-287)