Not All Sparks Light a Fire : Stakeholder and Shareholder Reactions to Critical Events in Contested Markets

This paper examines when and how a critical mass of social and political stakeholders mobilizes against a corporate organization, and the impact of such mobilization on the value of the organization. We examine the conditions and dynamics that explain whether an isolated, stakeholder-initiated negative statement or action – a “spark” – goes unnoticed or escalates into a cascade of stakeholder reactions targeting the firm. We argue and show empirically that both stakeholders' and shareholders' reactions following critical events are largely influenced by stakeholders' prior beliefs about the target organization and by the reactions of peer stakeholders to the critical event. We test these arguments using a dataset of more than 51,000 media-reported events describing the interactions between 2,293 political, social and economic stakeholders and 19 publicly-traded gold mining firms operating 26 mines around the world