The Effect of Organizational Atypicality on Reference Group Selection and Performance Evaluation

Abstract

Recent research shows that audiences sometimes respond to organizational performance in ways that seem anomalous according to prior theory. In this paper we propose that variations in the extent to which an organization conforms to the norms and expectations of a known organizational category can affect the way evaluators construct reference groups, and subsequently shape their responses to organizational performance. In an experiment on investing in and evaluating the performance of a certain kind of financial organization, we show that organizational atypicality increases an evaluator’s likelihood of choosing a nonconforming referent for the purpose of making (enhancing) evaluations of the organization’s performance. Evaluators’ ex ante feelings of commitment toward the organization further moderate this relationship. Our results have several implications for research related to organizational and categorical identity, performance evaluation, and judgment and decision making. The online appendix is available at https://doi.org/10.1287/orsc.2017.1154 .