Article: "Social Movements, Risk Perceptions, and Economic Outcomes"

Environmental activism leads to corporations´ growing interest in responsible practices, but not directly, suggest Ion Bogdan Vasi, an assistant professor of international and public affairs at SIPA, and co-author Brayden G. King of the Kellogg School of Management at Northwestern University.

In a recent study published in the American Sociological Review, sociologists Vasi and King show how activists´ efforts are mediated by analysts´ and investors´perceptions of environmental risk, rather than by actual or potential environmental harm, or by the level of activism with which organizations are targeted.

Vasi and King trace the 700 largest companies in the U.S. between 2004 and 2008, examining their levels of environmental risk, their financial performance, and activism targeting them from both internal and outside actors. They find that environmental activism shapes perceptions of environmental risk, especially the assessments made by professional risk managers who in turn shape the interests of investors and others in the business community. Consequently, higher perceptions of environmental risk can lead to weaker financial performance, leading to an organization´s interest in changing its practices.

One important caveat, the authors note, is that activism that is led by a firm´s own shareholders is more effective in shaping perceptions of risk than activism led by protestors and other organizational outsiders. The study provides a key insight into how organizations make decisions, generally, and how social movements can affect change in particular, by showing how risk is perceived and processed.

The article, “Social Movements, Risk Perceptions, and Economic Outcomes: The Effect of Primary and Secondary Stakeholder Activism on Firms’ Perceived Environmental Risk and Financial Performance,” will appear in the August issue of the American Sociological Review, and is available online now.