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Categorical competition in the wake of crisis: Banks vs. credit unions

Publication ,  Journal Article
Chatterji, AK; Luo, J; Seamans, RC
Published in: Organization Science
July 1, 2021

We connect two distinct streams of research on categories to study the role of within-category typicality in the context of legitimacy shocks. We argue that, following a legitimacy shock, member organizations of the tainted, focal category suffer equally, irrespective of their typicality. However, only the typical members of the newly favored, oppositional category benefit. Therefore, the effects of legitimacy shocks are asymmetrically influenced by typicality. We argue this pattern is the result of a two-stage process of categorization by audiences, whereby audiences prioritize distinctions between organizations in a newly favored category and spend limited efforts considering distinctions in the tainted, focal category. We examine our theory in the context of the U.S. financial services industry, where four different kinds of organizations engage in competition: traditional commercial banks, community banks, single-bond credit unions, and multibond credit unions. Consistent with our theory, we show that both traditional commercial banks and community banks suffer in terms of deposit market share following the legitimacy shock of the 2007 financial crisis, but the relative gains to credit unions are strongest for single-bond credit unions.

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Published In

Organization Science

DOI

EISSN

1526-5455

ISSN

1047-7039

Publication Date

July 1, 2021

Volume

32

Issue

3

Start / End Page

568 / 586

Related Subject Headings

  • Business & Management
  • 3507 Strategy, management and organisational behaviour
  • 3505 Human resources and industrial relations
  • 1505 Marketing
  • 1503 Business and Management
 

Citation

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Chatterji, A. K., Luo, J., & Seamans, R. C. (2021). Categorical competition in the wake of crisis: Banks vs. credit unions. Organization Science, 32(3), 568–586. https://doi.org/10.1287/orsc.2020.1403
Chatterji, A. K., J. Luo, and R. C. Seamans. “Categorical competition in the wake of crisis: Banks vs. credit unions.” Organization Science 32, no. 3 (July 1, 2021): 568–86. https://doi.org/10.1287/orsc.2020.1403.
Chatterji AK, Luo J, Seamans RC. Categorical competition in the wake of crisis: Banks vs. credit unions. Organization Science. 2021 Jul 1;32(3):568–86.
Chatterji, A. K., et al. “Categorical competition in the wake of crisis: Banks vs. credit unions.” Organization Science, vol. 32, no. 3, July 2021, pp. 568–86. Scopus, doi:10.1287/orsc.2020.1403.
Chatterji AK, Luo J, Seamans RC. Categorical competition in the wake of crisis: Banks vs. credit unions. Organization Science. 2021 Jul 1;32(3):568–586.

Published In

Organization Science

DOI

EISSN

1526-5455

ISSN

1047-7039

Publication Date

July 1, 2021

Volume

32

Issue

3

Start / End Page

568 / 586

Related Subject Headings

  • Business & Management
  • 3507 Strategy, management and organisational behaviour
  • 3505 Human resources and industrial relations
  • 1505 Marketing
  • 1503 Business and Management