A Positional View of Firms’ Reactions to Rankings: Rank Categories and Firm Actions Induced by Category Boundaries

To understand organizations’ reactions to popular rankings, this study elaborates a positional view that an organization’s ranking position motivates its reactions. An organization’s ranking position is jointly defined by its rank category (i.e., top, middle, bottom) and its closeness to the boundaries of its rank category. Reactions to rankings are likely to be induced by the boundaries of rank categories, i.e., organizations ranked closer to the boundaries of their rank categories are more motivated to either climb into a higher rank category or avoid falling into a lower rank category. Through examining firms’ CSR investments as reactions to Fortune Magazine’s Most Admired Companies ranking, the analysis supports the positional view. Firms ranked closer to the boundaries of their respective rank categories are more motivated to make CSR investments, especially when they are larger and thus have more resources devoted to CSR and when the ranking itself is more unstable. The effect of ranking positions is also distinct across different rank categories. Firms in both top and bottom rank categories are primarily driven by the lower boundary of their respective rank categories, whereas firms in the middle rank category are oriented towards both the upper and the lower boundary.