Financial Implications of Local and Nonlocal Rival Isomorphism: A Signaling Paradox

Stewart Robert Miller, Daniel C. Indro, Malika Richards, Daniel Han Ming Chng

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

We develop an isomorphism-signaling framework to explain the likelihood of isomorphic behavior (and nonconformity) by a focal firm toward local rivals and nonlocal rivals and then predict financial performance associated with the action. In the presence of asymmetric information, we predict a causal relationship between rival isomorphism and financial performance that reveals a paradox-that is, we theorize and show conditions in which "conforming" reflected by rival isomorphic behavior is a signal that "separates" high-quality from low-quality firms. We consider a firm's costs and benefits of local and nonlocal rival isomorphism and assert that a firm can signal its quality, which affects financial performance of the equity offering. We test and find support for our hypotheses using a sample of firms raising capital abroad from 1994 to 2005.

Original languageEnglish (US)
Pages (from-to)1979-2008
Number of pages30
JournalJournal of Management
Volume39
Issue number7
DOIs
StatePublished - Nov 1 2013

All Science Journal Classification (ASJC) codes

  • Finance
  • Strategy and Management

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