Shamed And Able: How Firms Respond To Being Rated

The authors examine how firms respond to third-party ratings of their corporate environmental activities. Using insights from institutional theory, they hypothesize that ratings are particularly likely to spur responses from firms whose legitimacy is threatened - and thus are shamed - by these ratings. They extend existing theory by drawing on the strategic choice perspective to hypothesize that the greatest performance improvements will be exhibited by those shamed firms that face lower-cost opportunities to improve - and thus are particularly able to respond. They find empirical evidence that supports the hypotheses, and present implications for theory and public policy.