Can Faking it Lead to Making it: The effect of industry scandal on symbolic and substantive organizational change

We build from work on decoupling and impression management to develop an argument for the conditions under which industry scandals can lead organizations to make voluntary substantive change in practices to better adhere to violated norms. Most work on whether organizations change in reaction to scandals talks about the coercive, external forces like law enforcement or customer boycotts that can cause organizations to change. We focus on whether and when individuals inside of organizations might change how they behave to better adhere to norms that were known to be violated in the industry, simply based on a normative logic, one based on voluntary and not coerced or forced change. We use proprietary data from a firm that regulates the shipping industry to observe reactions to a large industry accident. We test, based on previous research, whether individuals in this firm engage in more symbolic impression management behavior as a result of the scandal. To move beyond existing arguments we test whether engaging in these symbolic activities will cause individuals to engage in more substantive change in their practices that would allow them to better adhere to norms. Furthermore we test the normative logic mechanism by observing how this varies by level of professionalism (i.e., those who are more sensitive to norms). Our ability to separate the symbolic actions from the substantive change allows us to overcome issues in previous studies on decoupling and impression management that only view the public and external actions of a firm and often assume that there is no relation between substantive and symbolic change.