The disparate economic outcomes of stigma: Evidence from the arms industry

| Wesley Helms, Strategic Management Journal

This paper represents one of the first attempts to explicitly flesh out the relationship between stigma targeting the firm or its affiliates, and the economic penalties associated with it. The research provides evidence that the use of stigmatizing labels can lead to the economic sanctioning of firms.

Researchers present a mixed-methods study of stigma and its negative economic impact on firms in the global arms sector. The study provides an initial framework for future studies on the conditions under which the economic consequences commonly associated with stigma are likely to materialize.

The research advances knowledge on whether and when stigmatizing judgments materialize in stigmatized industries. On average, audiences’ stigmatizing judgments have material economic consequences that vary based on judgment attributes and the audience delivering it.

The findings also suggest that audiences have – at least in theory – some degree of strategic control over the economic consequences that organizations suffer because of stigmatizing judgements. Interest groups could seek to strategically fine-tune their condemnation to inflict economic harm on their targets. Civil society actors could strategically choose to frame their vilification attempts in terms of harm, rather than illegality, in order to inflict greater economic penalties, while market actors could direct their attention to the exchange partners of firms engaged in controversial activities – pushing them to withdraw from transactions.