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The misuse of prescription drugs is a pressing public health crisis in the United States that is fueled by high-risk prescribing. We show that high-risk prescribing comprises two distinct practices: (1) routinely overprescribing to patients whose prescription -fill patterns are consistent with misuse or abuse, which conforms to the definition of deviance in sociology, and (2) routinely overprescribing to patients whose prescription-fill patterns are within possible bounds of medical use, which does not. We call the second practice “liminal prescribing,” a term that indicates it is legally and morally ambiguous. Using 213.9 million prescriptions to construct a four-year panel of the patient-sharing networks of 500,472 physicians, we find that deviant and liminal prescribers have starkly different social network structures and social influence processes; larger and more cohesive networks among prescribers are associated with more deviance but less liminality. Physicians’ ties to liminal prescribers increase liminal prescribing but do not increase deviance. Our results suggest that liminal prescribing is distinct from deviant prescribing and is not a milder form of deviant prescribing. Liminal prescribing is far more prevalent than deviance and accounts for most of the oversupplied benzodiazepines in our dataset (55.8 versus 8.7 percent, respectively). Our study highlights that the social structures supporting liminal practices differ from those that support either rule-abiding practices or deviance.

Research Summary Whilst existing research generally assumes corporate social responsibility (CSR) is seen as universally positive, firms increasingly adopt practices, and take stands, on highly polarizing social issues (e.g., gun-control, LGBTQ rights, abortion). To better understand this phenomenon, we develop a theory about when firms will emulate, ignore, or oppose each other's CSR efforts, based on attributes of the underlying social issue (its salience and polarization), the level of market competition, and the substantiveness of CSR. Our theory predicts several distinct equilibrium outcomes, including the potential for social counter-positioning, whereby rival firms take advantage of socio-political polarization to horizontally differentiate by taking opposing stances on a polarizing issue. Counterpositioning is more likely when salience is high, but agreement is low, when markets are competitive, and when CSR is largely symbolic. Managerial Summary Firms increasingly find themselves drawn, willingly or not, to taking stances on a controversial social issue (e.g., gun rights, abortion), though doing so risks alienating (some) stakeholders. In this paper, we develop a theory of why, when, and how firms should take a stance on a polarizing issue. We argue that firms profit from doing so when (1) the issue is salient, (2) markets are competitive, and (3) the actions are mostly symbolic. We also show that taking a stance on polarizing issues creates opportunities for the firms' competitors to counter their ideological positioning, strengthening weaker rivals in the process. Thus, in competitive markets, taking clear stances on polarizing, salient issues can segment the market, increasing the profits of all firms, and, potentially, intensifying polarization.

The misuse of prescription drugs is a pressing public health crisis in the United States that is fueled by high-risk prescribing. We show that high-risk prescribing comprises two distinct practices: (1) routinely overprescribing to patients whose prescription-fill patterns are consistent with misuse or abuse, which conforms to the definition of deviance in sociology, and (2) routinely overprescribing to patients whose prescription-fill patterns are within possible bounds of medical use, which does not. We call the second practice “liminal prescribing,” a term that indicates it is legally and morally ambiguous. Using 213.9 million prescriptions to construct a four-year panel of the patient-sharing networks of 500,472 physicians, we find that deviant and liminal prescribers have starkly different social network structures and social influence processes; larger and more cohesive networks among prescribers are associated with more deviance but less liminality. Physicians’ ties to liminal prescribers increase liminal prescribing but do not increase deviance. Our results suggest that liminal prescribing is distinct from deviant prescribing and is not a milder form of deviant prescribing. Liminal prescribing is far more prevalent than deviance and accounts for most of the oversupplied benzodiazepines in our dataset (55.8 versus 8.7 percent, respectively). Our study highlights that the social structures supporting liminal practices differ from those that support either rule-abiding practices or deviance.

We explore the relationship between organizational religious affiliation and wrongdoing using a unique data set on inspections in 16,101 nursing homes over five years. We find that violations of standards of care are more severe in religiously affiliated homes. We track this difference to a reduction in the likelihood that organizational members file complaints rather than poorer behaving caretakers or differential treatment by enforcement agents. Fewer complaints increase the time that religiously affiliated homes operate without monitoring, which allows violations to escalate before they are detected. Our findings highlight an understudied process in the literature on organizational wrongdoing: Although much attention has been devoted to how inspector bias can lead to incorrect conclusions about the true rates of wrongdoing across organizations, religious affiliation can lead to similarly incorrect conclusions—but through an internal organizational process.

Supplemental material, sj-pdf-1-asq-10.1177_00018392221137681 for Where Is All the Deviance? Liminal Prescribing and the Social Networks Underlying the Prescription Drug Crisis by Victoria (Shu) Zhang, Aharon Cohen Mohliver and Marissa King in Administrative Science Quarterly

This case traces the development of a live entertainment company, Sofar Sounds, from a conversation among three friends about their frustrations with live music events, through early success and now to a point where the CEO, Rafe Offer, has to make important decisions about its future growth. Sofar Sounds' business model is to organize small sized music gigs with unknown artists, trying to recapture the 'old days' of the intimacy and atmosphere of small venue music shows. It progressed from being a 'hobby' in 2009, with occasional gigs in London and New York, to a venture-capital backed venture in 2016 with two hundred gigs a month across more than twenty countries. The case describes the challenges of rapid growth in today's digital economy, and it opens up important issues for debate about platforms' business models, growth trajectories, balancing social and financial goals, and building the capabilities needed for long-term growth., LBS Case Code: CS-18-014

I study the role of external auditors in the diffusion of stock-option backdating in the U.S. to explore the role of professional experts in the diffusion of innovative practices that subvert stakeholders’ interests. Practices that are eventually accepted as misconduct may emerge as liminal practices—ethically and legally questionable but not clearly illegitimate or outlawed—and not be categorized as misconduct until social control agents notice, scrutinize, and react to them. I examine how the role of external auditors in the diffusion of stock-option backdating changed as the practice shifted from liminality to being illegal and illegitimate. The findings suggest that professional experts’ involvement in the diffusion of liminal practices is highly responsive to the institutional environment. Initially, professional experts diffuse these practices via local networks, but when the legal environment becomes more stringent, implying that the practice will become illegitimate, experts reverse their role and extinguish the practice. The larger network remains largely uninvolved in both diffusing and extinguishing the liminal practice until the practice is publicly exposed and labeled as illegal and illegitimate. The findings further show that the diffusion and then extinguishing of backdating before it was outlawed depended on the adopter’s geographic proximity to a local office of a complacent expert and on the absence of traceable communication about backdating between these offices. This combination set the stage for each office to develop independent views about backdating, leading some offices to view backdating favorably and diffuse it, and others to view it unfavorably and curtail it—even at the same time and within the same audit firm. This study contributes to research on the diffusion of misconduct by providing insight into the role of professional experts and the mechanisms and boundary conditions governing that role.

Having friends in high places is often considered necessary to achieve success. Indeed, connections with upper-class individuals has been identified as a key component of social capital. Despite th...

How do investors react to firms “picking sides” along ideological fault lines? Integrating strategic differentiation logic with work on ideological polarization, we argue that some investors will react positively to information that a firm supports a contested social issue and some to information that a firm opposes it. We conduct a financial event study of the Corporate Equality Index (2002-2018), which ranks the largest U.S. firms on LGBTQ policies and practices – naming the “best performers” and the “worst offenders”. We find that on the day the index is released, these companies experience a positive cumulative abnormal return, whereas the companies ranked in the middle do not. Our findings speak to the emerging literature in strategy on the relationship between societal values and financial valuation.

Firms and their managers are increasingly taking a stand on pivotal and often polarizing social and political issues such as gun control, immigration, LGBT rights, and climate change. Yet managemen...

We develop a theory of how firms respond to each other’s CSR activities. We contend that whether a firm will emulate, ignore, or oppose a rival’s CSR efforts depends on attributes of the underlying social issue, the level of market competition, and the substantiveness of CSR. We develop a formal model of CSR as a function of these factors, allowing, in particular, for issues to be socially polarizing. The model predicts several distinct equilibrium outcomes, including the potential for counterpositioning, whereby rival firms mutually boost their profits by taking opposing positions on a social issue. The model shows that such counterpositioning is more likely when issue salience is high but agreement is low, when markets are highly competitive, or when CSR is largely symbolic.

Supplemental material, MohliverOnlineSupp for How Misconduct Spreads: Auditors’ Role in the Diffusion of Stock-option Backdating by Aharon Mohliver in Administrative Science Quarterly

Recent research has shown that ethical behavior can be influenced by features of the immediate environment such as the presence of a cheater or the characteristics of a room. We suggest ethical behavior is similarly shaped by a more diffuse and enduring situational feature: the state of the economy. Building on work showing that prosperity fuels overconfidence, risk-taking, and greed, we argue that ethical behavior improves when the economy falters. Five studies spanning diverse populations and different types of misconduct find support for this hypothesis. During prosperous economic times, companies were more likely to submit regulatory filings that would later be restated for fraud (Study 1), academics were more likely to publish papers that later would be retracted (Study 2), Major League Baseball pitchers were more likely to try to harm opposing batters (Study 3), and students were more likely to steal, damage property, shoplift, and submit plagiarized work (Studies 4 and 5). While a large body of research has shown that proximal situational variables can influence ethical impulses, our findings suggest that more diffuse macroeconomic factors can similarly shape unethical behavior.

One of the big questions following the enactment of new corporate legislation is whether it is effective in altering firm behavior. In this paper, we push this question further to investigate how legislation might be effective in altering firm behavior, independent of the coercive nature of legislation and enforcement. We study the impact of the Sarbanes - Oxley Act of 2002 on the behavior of publicly traded firms restating earnings. We find that Sarbanes - Oxley does generate a change in behavior, such that firms are much more likely to take costly remedial action – in the form of firing the Chief Executive Officer or Chief Financial Officer – in the wake of a restatement after the legislation was enacted than they were before. We also find that Sarbanes - Oxley redirects media attention to the problem of restatement, and that this media attention is itself associated with more costly remedial action. Finally, we find that media attention partially mediates the effects of the legislation on firm response, suggesting that it is the redirection of attention, rather than the legislation itself, that changes organizational behavior. This conclusion is further supported by a regression discontinuity analysis, which reveals a change in firm behavior even for those organizations not yet subject to the terms of the legislation.

In this paper, we examine whether strong environmental circumstances at an impressionable stage of life will have lasting implications for ethical behavior. Drawing on work showing that perceptions of financial abundance increase the likelihood of ethical transgressions as well as imprinting work suggesting that early career conditions can leave a lasting mark on later career behavior, we propose that entering the workforce during an economic boom will increase the likelihood that people will engage in ethically questionable practices later in their careers. Using a large sample of American executives between 1996 and 2005, we find that those who began their careers in economically prosperous times were more likely to backdate stock options later in their careers. While past work has shown that contextual cues affect the likelihood of engaging in unethical behavior, the present findings suggest that strong environmental conditions at a formative period of life can affect ethical impulses for a long time to come.