Activist engagement and industry-level change: Adoption of new practices by observing firms

Abstract

Activists strive to create industry-level change and institutionalize socially and environmentally responsible practices by engaging with high profile and legitimate firms. In doing so, they reach a broad audience of firms who carefully observe and evaluate the activists-target interaction. Drawing on legitimacy theory and using a vignette-based roleplaying experiment, this paper investigates how different characteristics of both the activists' campaign and the targeted firms' response jointly affect the likelihood that observing firms' decision makers will support the sustainability practice recommended by the activists. Specifically, we assess how observers' evaluations of both the legitimacy of the target firms' decision and the legitimacy of activists' recommendation affect their support for the activists' recommendations. Subsequently, we evaluate the ways in which different characteristics of the activists-target interaction (including activists' engagement style, their evidence quality, and target firm adoption decision) drive these two legitimacy evaluations. Our results highlight the importance of both target decision legitimacy and activists' recommendation legitimacy on the relationship between target's practice adoption and observer support for the practice.