When Symbols Matter: Uncertainty, Entrepreneurial Identity and Firm Performance in Mexico

Abstract

Extant research reveals conflicting empirical results on the performance implications of firm names. We propose that the inconsistent findings in the literature are due in part to prior studies not considering the role of environmental uncertainty in a firm’s social environment. We argue that the symbolic value of a firm name on performance will be higher in uncertain conditions because these conditions encourage audiences to rely more on subjective symbols of a firm's internal identity. We test our hypotheses in the context of Mexico from 2001-2006 which corresponds with increasing rates of homicides of women, largely brought on by warring Drug Trafficking Organizations. We find that firm names that align with key institutionalized values are associated with higher firm performance in uncertain times, but that younger firms benefit to a great extent from this strategy. We contribute to the literature on cultural entrepreneurship and organizational identity.