Income inequality ignored? An agenda for business and strategic organization

Abstract

Despite a vibrant body of scholarship and a growing public discourse around the socio-political consequences of rising income inequality around much of the world, very little is known about the organizational consequences of societal-level income inequality. In this essay, we draw upon previous literature on the socio-political consequences of high income inequality to help identify its potential business consequences. In particular, we suggest that high levels of income inequality can give rise to (1) social movements that coerce and constrain firms' actions, (2) alternative organizational forms that displace existing organizations and (3) new political and regulatory risks that undermine firms' performance or survival. Using this argument, we emphasize the broader point that income inequality matters to firms and markets and that the study of inequality needs to be 'brought in from the cold' by organizational researchers. Furthermore, we outline a specific research agenda aimed at better understanding income inequality and how organizations can respond to it.There is a vibrant body of scholarship and a growing public discourse about the socio-political consequences of rising income inequality in much of the world. From the front-page press coverage of Occupy Wall Street in the early 2010s to Thomas Piketty's emergence as a talk-show fixture, there is a sense that citizens and scholars alike share a concern about income inequality. This concern is rooted in a belief that high levels of inequality are bad for society -bad for democracy, bad for health and well-being and bad for the cohesion of our cities and communities. These beliefs are borne out in a range of academic research showing that high income inequality has deleterious effects on the polity, public health, civic life and human development in general (see Neckerman and Torche, 2007, for a comprehensive review). In other words, we know how inequality affects

Income Inequality, Entrepreneurial Activity, and National Business Systems: A Configurational Analysis

“…In the income inequality and institutional literature, Beramendi and Rueda (2014) highlight the theoretical and methodological challenges associated with understanding how income inequality and national institutions coevolve, stressing the need to develop further insights into these mechanisms. These assessments suggest that examining how EA affects income inequality across countries is an important research topic at the intersection of business and societal outcomes (Bapuji & Neville, 2015).…”

Individuals, interactions and institutions: How economic inequality affects organizations

“…Airbnb, Uber, Lyft). Such new models are made possible not only through the mechanism of legitimacy, but also the availability of a large population at the fringes of formal economy ready to lend their labour and assets to make a living (Bapuji and Neville, 2015). Even if small organizations arising out of necessity entrepreneurship might not pose a viable threat, they may occupy market niches and limit the growth and performance of large corporations.…”

“…In addition to constraining managerial action and creating competing organizations, economic inequality in a society can increase political and economic risks for firms (Bapuji and Neville, 2015). As inequality increases the distance between the rich and the rest, and decreases the distance between the middle and the poor, pressures for redistributive policies grow in society (Lupu and Pontusson, 2011).…”

“…Protest movements, such as the OWS movement around the world and anticorruption rallies in countries like Brazil, arise from the broad discontent with inequality and the nexus between politics and money. These protest movements can constrain and affect decision making within firms (Bapuji and Neville, 2015). For example, organization can be pressurized through actions like Say on Pay (i.e.…”

“…By integrating previous research on various types of inequalities and related constructs, much progress can be made to better understand economic inequality. Specifically, much theoretical advancement is possible by relating economic inequality with other types of inequality, and also by comparing and contrasting economic inequality with other social issues (Bapuji and Neville, 2015).…”