Activist Protest Spillovers into the Regulatory Domain: Theory and Evidence from the U.S. Nuclear Power Generation Industry

Abstract

We examine how social activism—in the form of public protests against contentious business practices—can spill over into the regulatory domain, extending beyond activists’ articulated goals to affect firms’ regulatory outcomes in areas that are not directly targeted. We argue that firms are likely to experience broader regulatory repercussions after activist protests because public contention invites greater scrutiny of firm behavior by industry regulators, increasing the likelihood that instances of organizational noncompliance will be discovered. Protests can also cause regulators to evaluate targeted firms more negatively in regulatory assessments, especially firms with less favorable preexisting reputations or stakeholder relations, and to tighten regulations on nontargeted issues that signal their commitment to safeguarding the public interest. We further contend that the political context within which regulatory agencies operate shapes the extent of protest spillovers: When political institutions are aligned with activist goals, and when regulators are ideologically sympathetic too, protests have a more pronounced negative impact on firms’ regulatory outcomes in nontargeted domains. We find robust support for our predictions in a statistical analysis of the impact of antinuclear protests—which sought to block nuclear power plant development by electric utilities—on utilities’ subsequent regulated financial rates of return on their assets. Our analysis contributes new insights to research on the indirect consequences for targeted organizations of social activism.

Interorganizational Spillover: A Review and a Proposal for Future Research

“…Similarly, when social activists target firms’ business practices, this can spill over into the regulatory domain. Fremeth et al (2021) demonstrate that firms are more likely to experience broader negative regulatory repercussions after activist protests because public contention invites greater scrutiny of firm behavior by industry regulators. Furthermore, ex ante regulatory sanctions (e.g., fines or penalties) amplify negative spillover to other firms, while industry-regulating institutions can diminish these negative spillover effects (Barnett & King, 2008).…”

“…Like peer organizational response to spillover, responses by stakeholders of peer organizations are also formulated to events occurring at a focal organization as such events may change the stakeholders’ perceptions of peer organizations. Existing research has focused on external stakeholders, such as investors (Gande & Lewis, 2009), the media (Zavyalova et al, 2012), regulatory bodies (Fremeth et al, 2021), financial analysts (Lee & Lo, 2016), customers (Bourdeau, Cronin, & Voorhees, 2007), and suppliers (Nalick et al, 2019). Most of those studies (Barnett & King, 2008; Burchard et al, 2020; Zavyalova et al, 2012) have focused on the perception spillover of nonstrategic events to peer organizations’ stakeholders, and relatively less attention has been devoted to investigating the perception spillover of strategic events to peer organizations’ stakeholders.…”

“…When peer organizations and their stakeholders are unaware of events, interorganizational spillover is unlikely to take place. As noted in our review sections, existing research has investigated a myriad of events that can trigger interorganizational spillover, including industry accidents (Barnett & King, 2008; Diestre & Rajagopalan, 2014), CEO dismissal (Burchard et al, 2020; Connelly et al, 2020), shareholder activism (Reid & Toffel, 2009; Shi et al, 2020), social activism (Briscoe et al, 2015; Fremeth et al, 2021), financial misconduct (Beatty et al, 2013; Paruchuri & Misangyi, 2015), scandals (Nalick et al, 2019; Piazza & Jourdan, 2018), disease outbreak (Paruchuri et al, 2019), protests (Ferguson et al, 2018; Piazza & Perretti, 2020), product recall (Zavyalova et al, 2012), and award events (Fremeth et al, 2021; Reschke, Azoulay, & Stuart, 2018).…”

“…Kang, 2008; Kostova & Zaheer, 1999; Zavyalova, Pfarrer, Reger, & Shapiro, 2012), accounting (Lee & Lo, 2016), and finance (Albuquerque, Brandão-Marques, Ferreira, & Matos, 2019; Denis, Jochem, & Rajamani, 2020), have studied the spillover effect of events such as CEO dismissal (Connelly, Li, Shi, & Lee, 2020), financial misconduct (E. Kang, 2008), social activism (Fremeth, Holburn, & Piazza, 2021), and shareholder activism (Gantchev, Gredil, & Jotikasthira, 2019; Shi, Connelly, Hoskisson, & Ketchen, 2020) from a focal organization to its peer organizations and their stakeholders.…”

Nevertheless, They Persisted: How Patterns of Opposition and Support Shaped the Survival of U.S. Abortion Clinics

“…Along the same lines, when elected officeholders are hostile to stigmatized organizations and their activities, they can implement executive actions or appoint unfriendly regulators to try to drive them out of business or stymie their growth. Stigmatized organizations are also often a magnet for various forms of oppositional activism (Ferns, Lambert, & Gunther, 2021;Fremeth, Holburn, & Piazza, 2022), which can further compound the challenges these organizations face. At the same time, many stigmatized organizations enjoy a core bloc of support, and the negative consequences of stigma can theoretically be mitigated by the backing of supportive audiences.…”