Falling Fortunes: The Contingent and Asymmetric Effect of Rankings on Organizational Outcomes

Abstract

As rankings of organizations have proliferated in recent decades, much research has focused on organizational efforts to maintain a high position in rankings. A common theme in this literature is that changes in rank affect evaluations by external audiences and, consequently, organizational outcomes. Yet, accumulating evidence suggests that rankings sometimes have little effect on audience assessments and organizational outcomes, a finding that calls into question the power of rankings. Instead of asking whether rankings matter, this study adopts a contingency approach and investigates when rankings matter. I develop theory about contextual and organizational factors that shape the salience and information value of shifts in rankings: the direction of the change, the availability of information from other intermediaries, the sophistication of the audience, and the focal organization’s previous ranking position. Panel data analysis and a natural experiment focused on the Fortune 500 rankings support this theory. This article provides a framework to help scholars understand the contingent and asymmetric consequences of rankings on organizational outcomes, with implications for research on evaluation systems.