Fiss and Zajac AMJ

THE SYMBOLIC MANAGEMENT OF STRATEGIC CHANGE:SENSEGIVING VIA FRAMING AND DECOUPLING

PEER C. FISSUniversity of Southern California

EDWARD J. ZAJACNorthwestern University

This study develops a symbolic management perspective on strategic change to predictand test the antecedents and consequences of how firms frame strategic change. Usingdata from a sample of contemporary German corporations, we find support for ourpredictions that firms (1) use specific framing language that fits better with theirdivergent stakeholder preferences, (2) use language that decouples espousal and actualimplementation of strategic change, and (3) realize positive market responses toinstitutionally appropriate frames of change.

The topic of strategic change, defined as an alter-ation in an organization’s alignment with its exter-nal environment (Rajagopalan & Spreitzer, 1996;Van de Ven & Poole, 1995), has been at the center ofa growing literature in both the strategy and organ-izational theory fields (e.g., Fombrun, 1993; Gins-berg, 1988; Hofer & Schendel, 1978; Johnson, 1987;Zajac & Shortell, 1989; for a review, see Rajago-palan & Spreitzer, 1997). An important develop-ment in this literature is that strategic change isincreasingly seen as not only a shift in structuresand processes, but also as a cognitive organization-al reorientation (Barr, 1998; Barr, Simper, & Huff,1992; Gioia & Chittipeddi, 1991; Reger, Gustafson,Demarie, & Mullane, 1994) involving “a redefini-tion of the organization’s mission and purpose or asubstantial shift in overall priorities and goals”(Gioia, Thomas, Clark, & Chittipeddi, 1994: 364).Most of the research in this direction has so farfocused on how managerial cognitions and “sense-making” processes affect the likelihood and con-tent of strategic change (e.g., Barr, 1998; Meindl,

Stubbart, & Porac, 1994; Nutt, 1998; Reger et al.,1994; Walsh, 1995). However, an important impli-cation of this emerging cognitive perspective isthat the success of strategic change will dependnot only on an organization’s ability to imple-ment new structures and processes, but also onthe organization’s ability to convey the new mis-sion and priorities to its many stakeholders (cf.Smircich, 1983). Since an organization’s survivalover time often depends on its conforming tonormative expectations rather than simply oper-ating with greater efficiency (DiMaggio & Powell,1983; Meyer & Rowan, 1977; Oliver, 1991), theimportance of ensuring both understanding andacceptance of new strategies among key constit-uents is a central element of the legitimacy im-perative for organizations.

Although most prior studies have highlighted thesubstantive importance of strategic change for or-ganizational survival, the processes by which or-ganizations aim to present such change to bothinternal and external constituents have rarely beenstudied. However, strategic change frequently in-volves symbolic struggles over the purpose anddirection of an organization. As numerous works inthe change management literature have pointedout, “buy in” by constituents is crucial for changeto succeed (e.g., Kotter, 1996; Quinn, 1996). Assuch, previous theories of sensemaking regardingstrategic change need to be complemented by abetter understanding of “sensegiving” (Gioia &Chittipeddi, 1991), the latter referring to the pro-cesses by which strategic change is framed anddisseminated to an organization’s constituents.Since strategic change generally involves the reor-dering of priorities and the disruption of estab-

Both authors contributed equally. The helpful com-ments of the following are gratefully acknowledged:Bruce Carruthers, Dania Dialdin, Paul Hirsch, NormanMacintosh, Steven Salterio, Art Stinchcombe, Amy Hill-man and the anonymous AMJ reviewers, and seminarparticipants at Erasmus University, Harvard BusinessSchool, London Business School, Queen’s School ofBusiness, the Stockholm School of Economics, the Uni-versity of Southern California, the University of Zurich,Uppsala University, and Vienna University of Economicsand Business Administration. We also thank SayyidaJaffer for expert research assistance.

Much of this research was conducted while the firstauthor was at Queen’s University in Canada.

� Academy of Management Journal2006, Vol. 49, No. 6, 1173–1193.

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lished relationships, such change tends to be con-troversial—both internally and externally—andalmost always presents a justification problem. Wetherefore suggest that more attention needs to bepaid to the symbolic processes that aim to createand legitimate the meaning of strategic change(Dutton & Duncan, 1987; Gioia et al., 1994; Zajac &Westphal, 1995).

To better understand how symbolic strugglesover the meaning of strategic change play out, inthis study we connect to the recent framing per-spective in the social movement literature, whichemphasizes struggle over symbols as the key tosuccessful change (e.g., Benford & Snow, 2000;Snow, Rochford, Worden, & Benford, 1986). By em-ploying the concept of framing, we examine howorganizations present strategic change to key stake-holders and what factors determine the choice ofdifferent framing approaches. Furthermore, we alsoexamine the relationship between framing and im-plementation of strategic change, and whether sym-bolic action may be substituted for substantivechange (Westphal & Zajac, 1994, 1998).

THEORETICAL BACKGROUND

Strategic Change and Framing Processes

A growing stream of research has suggested thatcognitive sensemaking processes are important inthe strategic decision making process by determin-ing reference points and suggesting possible out-comes (Fiol, 1994; Nutt, 1998; Reger et al., 1994). Inthis “cognitive lens perspective” (Rajagopalan &Spreitzer, 1996), the concept of framing has mostlybeen used to refer to cognitive processes by whichmanagers understand and “enact” their organiza-tional environment (Daft & Weick, 1984; Pondy &Huff, 1988; Reger et al., 1994). However, the idea offraming may well be expanded beyond the formu-lation of strategic change to cover mobilization forand legitimation of strategic change (Gioia & Chit-tipeddi, 1991). To do so, we suggest that it is usefulto draw on the concept of framing as it is used inthe literature on social movements (Benford &Snow, 2000; Gamson, Croteau, Hoynes, & Sasson,1992; Snow & Benford, 1988). Scholars studyingsocial movement organizations have long arguedthat one of the primary goals of these organizationsis to affect interpretations of events among variousaudiences (e.g. Benford, 1993; Benford & Snow,2000; Haines, 1996; Snow et al., 1986). Frames inthis sense are best understood as “schemata of in-terpretation” (Snow et al., 1986) that actors use toaffect the interpretation of events among differentaudiences. Frames simplify and condense the

“world out there” by selectively punctuating andencoding events in order to render them meaning-ful (Hunt, Benford, & Snow, 1994), keeping someelements in view while hiding others (Williams &Benford, 2000). This use of framing encompassesthe importance of strategic action in framing activ-ities (Hensmans, 2003) and emphasizes the poten-tial for conflict as different actors promote theirparticular versions of reality to target audiences(e.g., Benford, 1993; Coles, 1998; Haines, 1996). ForKellner, the concept of frame disputes “representssociety and culture as contested terrain and depictsvarious social groups and movements as strugglingfor power” (1992: 58), suggesting that it would befruitful to apply the concept of framing to organi-zational phenomena (e.g., Hensmans, 2003; Mc-Adam & Scott, 2005).

For the literature on strategic change, the conceptof framing thus provides an attractive approach forunderstanding the process of sensegiving, particu-larly when such change may be highly controver-sial. By framing strategic change and thereby artic-ulating a specific version of reality, organizationsmay secure both the understanding and support ofkey stakeholders for their new strategic orientation(Benford, 1993; Haines, 1996). An important ques-tion, then, is how organizations frame strategicchange and what circumstances predict the use ofdifferent frames. In this study, we suggest that thechoice of different frames for strategic change canbe determined by a number of specific structuraland interest-based factors. Our use of frame analy-sis thus connects to previous work on organization-al representations and, particularly, to prior workon organizational impression management (e.g.,Arndt & Bigelow, 2000; Dutton & Dukerich, 1991;Elsbach, 1994; Elsbach & Sutton, 1992; Elsbach,Sutton, & Principe, 1998). Drawing on Pfeffer’s ar-gument that one of the key tasks of management isto “provide explanations, rationalizations, and le-gitimation for the activities undertaken in the or-ganization” (1981: 4), this literature has examinedthe ways in which organizations aim to restorelegitimacy after controversial events (Elsbach,1994), ward off stigma (Sutton & Callahan, 1987), orotherwise protect themselves from negative events(Elsbach et al., 1998; Meznar & Nigh, 1995). How-ever, this research has mostly examined the diver-sity and effectiveness of different impression man-agement tactics. With a few exceptions (e.g., Zajac& Westphal, 1995), factors predicting the use ofdifferent impression management strategies havebeen less well studied. Our current study thus ex-tends prior research on organizational representa-tions by examining both the antecedents and con-sequences of different framing activities.

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The current study also expands on prior work byexamining how framing processes may interactwith the presence or absence of actual changes inan organization’s strategy. Prior research on sym-bolic management has pointed to the importance ofdecoupling in organizational settings—that is, sit-uations where compliance with external expecta-tions may be merely symbolic rather than substan-tive, leaving the original relations within anorganization largely unchanged (e.g., Edelman,1990, 1992; Westphal & Zajac, 1994, 1998, 2001).However, little is known about how decouplingmay affect framing processes. It seems plausiblethat implementation and decoupling result in theuse of different framing approaches, either to dis-tract outside stakeholders from closer scrutiny or toappease stakeholders opposed to actual implemen-tation. In the current study we thus examined theinterplay between both forms of symbolic manage-ment—framing and decoupling—to establish adeeper understanding of the ways in which theirrespective mechanisms interact and how the phe-nomenon of sensegiving applies to both espousedand realized strategic change.

The Empirical Context: Shareholder ValueManagement among German Firms

The very recent shift toward a shareholder valueorientation among German firms presents a partic-ularly interesting case within which to study theframing of strategic change. Traditionally, the Ger-man business environment has been characterizedby a view of corporations as coalitions betweenthree equally legitimate stakeholder groups: man-agement, employees, and shareholders. This viewof corporations is reflected both in the system ofcodetermination (Bradley, Schipani, Sundaram, &Walsh, 1999) and in a managerial ideology thatstresses long-term growth over high returns forshareholders. For these reasons, Germany has beenfrequently cited as the classic case of nonshare-holder orientation (e.g., Jurgens, Naumann, &Rupp, 2000).

However, since the early 1990s, a growing num-ber of publicly listed German firms have publiclyproclaimed their switch toward shareholder-ori-ented policy. For example, Jurgen Schrempp, suc-cessor of Edzard Reuter as the CEO of Daimler-Benz, declared in his inauguration speech that hisgoal would be to create “profit, profit, profit!” (DerSpiegel, 1997). Similarly, Ulrich Hartmann, CEO ofVEBA, aggressively promoted a move toward ashareholder-centered strategy. These were majorshifts in stated corporate mission and goals withthe potential for having significant organization-

wide impact on top management behavior and firmvalue. A shareholder-oriented strategy, by placingthe interests of shareholders above those of otherconstituents, represents a clear and highly contro-versial break with the traditional German stake-holder model of corporations and a major shift infirms’ priorities. Furthermore, the considerable re-sistance to this policy change (Fiss & Zajac, 2004;Jurgens et al., 2000; Sanders & Tuschke, 2007) hashighlighted the extent to which this change is stra-tegically important. As such, it offers a particularlyinteresting opportunity to study the framing of con-troversial strategic change, since it involves a par-adigm shift that brings into question organizationalconstituents’ most basic assumptions about the na-ture of the firm (Bartunek, 1984; Reger et al., 1994).1

Although prior research has examined the factorscausing a move toward a shareholder value orien-tation (e.g., Fiss & Zajac, 2004), the current studyshifts the focus to the strategies used by firms toframe this consequential shift, as well as marketreactions to such framing activity.

Two Framing Approaches: Acquiescence andBalancing

Strategic changes may be seen fundamentally ei-ther as a departure from the old (a substitutioneffect) or as an addition to the old (an additioneffect). In framing a strategic shift toward share-holder value management, German firms utilizedtwo different framing approaches that corre-sponded to these substitution and addition effects.Following Oliver’s (1991) classification of strategicresponses to institutional processes, one can cate-gorize these frames as acquiescence and balancing.

Acquiescence. An acquiescence frame impliesthat an organization is consciously obedient tonorms and institutional processes (Oliver, 1991).

1 Our current study thus connects most closely to thecognitive perspective on strategic change, in which suchchange is defined as “a combination of changes in thecontent of strategy as well as accompanying organization-al and environmental conditions” (Rajagopalan & Spre-itzer, 1996: 62). The shift of German firms from theirtraditional stakeholder-sensitive policy toward a share-holder-oriented policy represents just such a shift in thecontent of strategy and has likewise been accompaniedby changes in organizational structures, particularly in-centive mechanisms and control systems, as well aslarger environmental conditions (cf. Fiss & Zajac, 2004;Jurgens et al., 2000). We are not claiming to identifyspecific changes in product-market positioning, but thatis of course not the only corporate change that wouldqualify as strategic.

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Regarding a shareholder value orientation, use ofthis frame means a firm publicly expresses itsacquiescence to the globally diffusing “standard”model of shareholder-oriented governance (Han-smann & Kraakman, 2001). Indeed, in using anacquiescence frame, the firm shows it is eager todemonstrate its compliance with a moral orderthat places the demands of shareholders first. Forexample, in 1995, the annual report of one firm,AGIV, proclaimed this: “The overriding goal ofall the necessary changes is to unleash the fullvalue and profit potential of all the AGIV compa-nies in accordance with consistent shareholdervalue management.” The annual report of an-other firm, Metallgesellschaft, for the same yeargives shareholder value management an equallycentral position: “Boosting shareholder value isat the centre of the Metallgesellschaft Group’sstrategies and decisions.”

Balancing. However, not all corporations re-sorted to an acquiescence framing that indicatedfull compliance with a strategy of placing share-holders first. Instead, a number of firms deviatedfrom the “standard” model by resorting to a balanc-ing frame, seeking to accommodate the diverginginterests of different constituents. For example, the1997 reports by Lufthansa and VIAG explicitlyspeak about balancing the interests of shareholdersagainst those of other stakeholders:

The management of Lufthansa sees it as an impera-tive strategic task to achieve a harmonious balance

between the respective interests of customers, em-ployees, and shareholders. Only in this way can thecompany’s value be augmented on a lasting basis.

The primary entrepreneurial goal of VIAG is to en-sure the long-term growth of the company’s valuewhile at the same time safeguarding the interest ofemployees and customers.

The same is true for the 1997 Bayer AG annualreport, which stated that the company’s managerialincentive plan involving stock options in fact“shows Bayer’s success in achieving a balance be-tween stockholder value, value management andemployees’ interests.” Figure 1 provides an over-view of the emergence and distribution of acquies-cence and balancing framing in the annual reportsof the 112 largest German corporations between1990 and 2000.

HYPOTHESES

Stakeholder Exposure

What factors influence how firms frame theirstrategic change? First, the framing of strategicchange will be affected by stakeholder interests,and these interests may frequently lead to conflict-ing pressures even in the presence of broader pres-sures for conformity (Friedland & Alford, 1991; Ol-iver, 1991; Pfeffer & Salancik, 1978). Incompatibledemands may make unilateral conformity difficultif not impossible, since attending to the demands of

FIGURE 1Use of Acquiescence and Balancing Framing in Annual Reports by the 112 Largest German Corporations,

1990–2000


one stakeholder may involve neglecting or defyingthe demands of another. However, some firms aremore vulnerable to pressures from their environ-ment than others (Pfeffer & Salancik, 1978). Specif-ically, the extent of a firm’s insulation from versusexposure to diverse stakeholder groups is likely toaffect the firm’s positioning of its actions (Oliver,1991). This argument suggests that firms with dif-fering levels of visibility are likely to frame strate-gic change in different ways. Visibility can be mea-sured indirectly, for example as firm size (e.g.,Pollock, Fisher, & Wade 2002); however, a moredirect indicator of visibility is the number of timesa firm is mentioned in mainstream media such asnewspapers (Meznar & Nigh, 1995). Because of theresulting exposure to multiple stakeholder groups,firms with greater visibility in the media shouldface greater pressures to adapt the framing of theiractions to pressure from multiple sources. Thus,regarding a strategic shift toward a shareholdervalue orientation, firms with greater visibilityshould exhibit a greater likelihood of using a bal-ancing framing.

Hypothesis 1. The greater the visibility of aGerman firm in the news media, the morelikely it will espouse a shareholder value ori-entation using a balancing framing.

Stakeholder Ownership Power

Stakeholder exposure represents only one aspectof how stakeholders affect the framing of strategicchange. Resource dependence theory (Pfeffer &Salancik, 1978; Salancik, 1979) suggests that fram-ing will also likely depend on the power and inter-ests of different stakeholder groups. Greater organ-izational dependence on any specific stakeholdergroup suggests greater acquiescence to the de-mands of that group, while decreasing dependencemay increase the likelihood of compromise oravoidance behavior (Oliver, 1991). An importantquestion then is which groups exert the greatestpower over a corporation and what their interestsare in impelling or impeding a contested policy.

Ultimate power over a corporate enterprise lieswith ownership, and the importance and interestsof different ownership groups should figure prom-inently in the formulation and framing of strategicchange. In this study, we primarily examined thepower and interests of three groups of owners thatfigure prominently among German shareholders:government entities, families, and domestic banks.These are arguably three of the most importantownership groups in the German context, and theyhave been previously linked to the adoption of a

shareholder value orientation (cf. Fiss & Zajac,2004).2 Greater ownership by these groups and thusgreater organizational dependence on them shouldtherefore affect the likelihood that a firm chooses aspecific framing of a move toward a shareholdervalue orientation. Furthermore, the interests ofthese owners are likely to be more complex thanthose of the standard public shareholder, suggest-ing these owners may be more likely to favor fram-ing in which compromise and balancing interestsare emphasized.

Government ownership. Domestic governmentalentities have to attend to the interests of severalcorporate stakeholders, making them less likely tosupport a strategic shift that privileges the interestsof one stakeholder group over those of others (Shlei-fer & Vishny, 1994). As a shareholder value orien-tation has been the subject of fervent critique fromemployees and unions, government actors stand tolose significant numbers of votes from supporting ashareholder value approach. In line with this argu-ment, a number of high-ranking German party lead-ers and government officials have criticized theemergence of United States–style managementamong German firms. For example, then Germanchancellor Gerhard Schroder has been quoted assaying that recent corporate governance scandals inthe United States are attributable to managements’singular attention to the interests of shareholders atthe expense of other stakeholders (Chicago Tri-bune, 2002). German firms with large blocks ofshares controlled by German governmental entitiesshould thus be likely to use a more balanced fram-ing of shareholder value management.

Family ownership. Family ownership is com-mon and significant among German corporations(Whittington & Mayer, 2000). Family owners tendto have long associations with the firms theyfounded (Kang & Sørensen, 1999), making themmore likely to subscribe to the traditional view offirm governance, which stresses long-term capitalinvestment, survival of the firm, and the intentionof passing the firm on to descendents (e.g., Casson,1999). These emphases suggest that family ownersshould prefer a balancing framing of shareholdervalue management, a framing that is more in accor-dance with the local business environment.

2 In addition to these three focal groups, Fiss and Zajac(2004) mentioned nonfinancial firms as a fourth owner-ship group of interest. Although data limitations pre-vented us from testing more specific hypotheses aboutthis ownership group, we do control such firm owner-ship in our analyses.


Domestic bank ownership. German banks oc-cupy a central role in the German corporate gover-nance system since they act as the primary suppli-ers of capital and representatives of shareholderinterests. Traditionally, German banks followed amodel of “patient capital” in which shareholdingwas as a long-term investment rather than an assetmanagement activity (Jurgens et al., 2000; Schroe-der & Schrader, 1998). However, during the 1990s anumber of German banks became increasingly con-cerned with the yield on their shareholdings andannounced a move toward a shareholder value ori-entation (Fiss & Zajac, 2004). In announcing thisshift, these banks themselves also relied on an ac-quiescence or a balancing framing. We thereforeexpect that banks will use their ownership influ-ence to likewise affect the framing of this strategicchange in firms in which they hold ownershipstakes. Accordingly, we expect to find a differentialeffect for bank ownership that depends on the fram-ing used by the shareholding bank. The prior dis-cussion thus suggests the following hypotheses re-garding the power and interests of differentownership groups:

Hypothesis 2a. The higher the extent of a firm’sownership by German federal or state govern-ment, the more likely the firm will espouse ashareholder value orientation using a balanc-ing framing.

Hypothesis 2b. The higher the extent of a firm’sownership by German families, the more likelythe firm will espouse a shareholder value ori-entation using a balancing framing.

Hypothesis 2c. The higher the extent of a firm’sownership by German banks that have them-selves espoused a shareholder value orienta-tion using a balancing framing, the more likelythe firm will espouse a shareholder value ori-entation using a balancing framing.

Framing and Implementation of StructuralChanges

The framing of strategic change should further-more be influenced by the presence of actions thatconvey a credible commitment to a new strategy.One way to view this relationship is that acquies-cence to demands for shareholder value manage-ment will be accompanied by structural changesthat are consistent with such a strategy. Similarly,the absence of structural implementation and im-plied hesitation to make changes should be accom-panied by a balancing framing. This view wouldsuggest consistency between framing and imple-mentation on the part of a firm.

However, a number of studies taking a symbolicmanagement perspective have argued that sym-bolic adoption (i.e., adoption in name only) is amechanism by which organizational legitimacy isenhanced while internal power relations are leftlargely unchanged. For example, in their study oflong-term incentive plan adoption, Westphal andZajac (1994) found that public announcement ofadoption was frequently decoupled from actual im-plementation. Likewise, the announcement ofstock repurchasing programs was often decoupledfrom their actual implementation (Westphal &Zajac, 2001). In these studies, legitimacy wasachieved not through actual compliance but rather,by actions that appeared to reveal compliance butin fact concealed nonconformity (cf. Edelman,1992; Elsbach & Sutton, 1992).

Regarding the framing of strategic change, thissymbolic management argument suggests that firmsopting not to undergo the substantive structuralchanges implied by a strategic reorientation mightbe substituting symbolic compliance for structuralimplementation. The notion of symbolic ratherthan substantive compliance suggests the possibil-ity that a clear-cut acquiescence frame might in factnot be accompanied by actual implementation ofstructural changes. Furthermore, the present con-text also suggests that German corporations thatactually implement significant structural changesfavoring shareholders may also be motivated to usea language frame (i.e., a balancing frame) that will“soften the blow” and fend off stakeholder criti-cisms. Taken together, these arguments suggest thefollowing hypothesis:

Hypothesis 3. German firms that engage inpractices commensurate with a shareholdervalue orientation are more likely to use a bal-ancing framing.

Market Reaction to Framing

The framing of strategic change is likely to havesignificant consequences for an organization. Inthis study, we examined the effect of frame choiceon the evaluation of a firm by financial markets. Sofar, only a few studies have explored how stockmarkets react to symbolic actions (Westphal &Zajac, 1998; Zajac & Westphal, 2004). According tothe sociological perspective on financial marketsproposed in these studies, institutional and histor-ical context influences the logic of appropriatenessthat financial markets use in evaluating firm ac-tions (Fligstein, 2001; Zajac & Westphal, 1995). Re-garding the effect of frame choice on financial mar-kets, this perspective would suggest that markets


will respond more positively if a firm’s framing ofstrategic change is in line with the institutionalcontext. Although shareholder-centered strategyoriginated in an institutional context very differentfrom the setting that was studied here, it seemslikely that as a guide for firm actions the sharehold-er-centered strategy will “have to pass through apowerful filter of the more local cultural and struc-tural opportunities and constraints in order to mo-bilize consensus” (Meyer, 2004a: 5). Given the con-troversial nature of a move toward a shareholdervalue orientation, a framing that describes the stra-tegic change as “translated” (Czarniawska & Jo-erges, 1996; Meyer, 2004a) and adapted to localcircumstances should therefore be more likely toelicit a favorable reaction than a framing that isinsensitive to local context. These considerationslead to the following hypothesis:

Hypothesis 4. German firms using a balancingframing will be rewarded with higher stockevaluations.

METHODS

For this study’s sample, we determined the 100largest publicly traded German companies in 1990in terms of sales and market capitalization. Overlapbetween the list based on sales and the list based oncapitalization resulted in a sample of 123 compa-nies, with complete data available for 112 compa-nies. These firms, which represent a variety of in-dustries, included most of the corporate leaders ofGermany and accounted for more than 80 percentof the total capitalization of the German stock mar-ket in 1990. The observation period began in 1990and ended in 2000.

Measures

Dependent variables. The current study em-ployed two dependent variables: the framing ofstrategic change toward shareholder value and ac-tual returns to shareholders. Data on the firms’choice of an acquiescence or a balancing framingcame from a content analysis of the companies’annual reports, the corporate communicationsmost commonly examined in prior research (e.g.,Abrahamson & Hambrick, 1997; Abrahamson &Park, 1994; Bettman & Weitz, 1983; D’Aveni & Mac-Millan, 1990; Fiol, 1994). Most corporate execu-tives consider annual reports to be their most im-portant communication channel (Abrahamson &Park, 1994; Goodman, 1980), and prior research hassuggested that the content of annual reports signif-icantly affects shareholder decisions (e.g., Buhner

& Moller, 1985; Staw, McKechnie, & Puffer, 1983).For German firms in particular, the annual report isstill the most important means of self-presentationand the appropriate vehicle for announcing strate-gic change and communicating with shareholdersas well as other stakeholders. Such reports further-more have the advantage of allowing comparabilityacross firms and years, making them particularlysensible for our study.

Coding for the presence of frames largely fol-lowed the procedure for frame analysis describedby Benford (1993) and was conducted in threestages. During the first stage, two independent cod-ers read each annual report and coded for state-ments indicating a company’s espousal of a share-holder value orientation. Both coders were nativespeakers of German and were instructed to onlyconsider statements that included either the Eng-lish term “shareholder value” or its German equiv-alent, “Unternehmenswertsteigerung,” and its de-rived forms. Our interest was specifically in theframing of a move toward a shareholder value ap-proach, and we therefore only considered state-ments from annual reports if they explicitly relatedto this issue. Many of these annual reports were notavailable in machine-readable format, making anautomated search infeasible. Any disagreementsbetween the coders occurring at this stage stemmedfrom the fact that some occurrences of shareholdervalue were missed, and differences could be easilyresolved by comparing the coding to the origi-nal text.

Using Oliver’s (1991) theoretical categorizationof strategic responses, we then reviewed a sampleof these statements and developed descriptions ofacquiescence and balancing frames regarding ashareholder value orientation. To represent an ac-quiescence frame, a statement had to indicate thereporting organization’s explicit espousal of ashareholder value orientation without qualificationor alteration. An example of this frame comes fromthe 1998 annual report of the firm Brau und Brun-nen AG: “The business policy of Braun und Brun-nen AG is marked by a focus on core competenciesand . . . the recasting toward and alignment withthe principles of shareholder value” (our transla-tion). The same frame is evident in the 1995 annualreport of VEBA AG: “The groupwide implementa-tion of cash-flow-controlling instruments has madeVEBA a pioneer of value-oriented management inGermany and Europe. . . . The shareholder valueprinciple is evident in our corporate strategies andpolicies.”

In contrast, a balancing frame was indicated if afirm’s annual report stated that it adhered to share-holder value management but qualified this state-


ment by simultaneously affirming the legitimacy ofthe claims of other stakeholder groups. An exampleof this is provided in the Daimler Benz AG 1996annual report, which defined value-based manage-ment as follows:

The permanent and continuous expansion of ourcompany’s value is only possible when the interestsof all groups that contribute to our success are giventhe appropriate degree of consideration. Our eco-nomic performance and satisfactory returns for ourshareholders depend on motivated employees, sat-isfied customers, and reliable and innovative sup-pliers. . . . Management at Daimler Benz is thereforededicated to increasing the value of the Companyfor the benefit of everyone involved.

The same balancing frame is evident in BewagAG’s 1996 discussion of its strategy: “Bewag avowsvalue-oriented company leadership. . . . However,we will continue in the future to take into account,in well-balanced proportion, the interests of ourcustomers and shareholders, as well as employeesand partners” (our translation).

In the third stage, we provided these descriptionsof acquiescence and balancing frames to the twocoders, who then independently classified eachstatement as indicating either an acquiescence or abalancing framing. The coding scheme containedvery little ambiguity, and intercoder reliability forframe choice was high (Cohen’s � � .90). Any dis-agreements were resolved through discussion be-tween the coders.

Finally, to assess the consequences of strategicchanges in terms of shareholder value, we usedtotal stock market returns (defined as capital gainsplus dividends), one of the most widely used mea-sures of firm performance regarding shareholderinterests.3 We also used total market returns be-cause the strategic change studied here was com-municated via annual reports, rather than via singlepress releases tied to particular days. In other

words, it was appropriate to treat evidence of stra-tegic change toward shareholder value and its con-sequences differently from one-day announce-ments, such as those concerning CEO succession,and their same- or next-day market reaction conse-quences.

Independent variables. We measured firm visi-bility using the total number of German news arti-cles mentioning a firm (cf. Meznar & Nigh, 1995).The data were collected from four daily newspa-pers: the Handelsblatt, German’s most importantnewspaper focusing on economics and business;the Suddeutsche Zeitung, the largest daily with arelatively left-liberal orientation; the FrankfurterAllgemeine Zeitung, Germany’s flagship conserva-tive newspaper; and the Frankfurter Rundschau,another national broadsheet with generally left-lib-eral views. By collecting data from the most impor-tant daily business and general interest papers, weaimed to cover the full economic and politicalspectrum. We combined article counts from thesesources into an index of visibility that showed ex-cellent reliability (� � .92). A principal componentfactor analysis confirmed that all four items loadedhighly and positively on a single factor that ac-counted for 85 percent of the variance. Factor load-ings ranged between .92 and .93. All data werecollected from GENIOS, a full-text media archive(http://www.genios.de), and from the online ar-chive of the Frankfurter Allgemeine Zeitung(http://www.faz-archiv.de/).

Data on the levels of government, family, anddomestic bank ownership came from Worldscopeand were cross-checked with data from Wer gehortzu wem?, a directory of German firms publishedtriennially by the Commerzbank AG. We followedprior research (Elston & Goldberg, 1999; Fiss &Zajac, 2004) in establishing mutually exclusive cat-egories of blockholders whose influence was mea-sured on a scale ranging from 0 to 4. The codingwas tied to substantively significant thresholds: 5percent is the level of holdings at which ownershave to disclose their identity and blockholding,and this level of ownership provides minimal mi-nority protection; 25 percent (a blocking minority)gives veto powers on a number of governance is-sues; 50 percent represents a controlling majority;and 75 percent or more ownership constitutes asupermajority with extensive rights in terms of cor-porate control and supervisory board elections.

To measure structural change, we used three dif-ferent governance practices: (1) value-based man-agement control systems, (2) stock option plans forcompany management, and (3) internationally ac-cepted accounting standards. All of these practices

3 The determinants of dividends and share price differin that management tends to have more control overdividends—traditionally the primary way by which prof-its are distributed to shareholders—and less control overshare prices, since these are more strongly affected bymarket forces and outsider expectations. Although, ac-cording to the dividend irrelevance theory of efficientmarkets, shareholders should be indifferent to whetherreturns are realized through dividends or capital gains,we agree with the view of more behaviorally orientedworks in financial economics that this theory is basedon unrealistic assumptions (e.g., Hirshleifer, 2001;Shleifer, 2000). We therefore also assessed models thatcontrolled for a firm’s dividends; results were essen-tially unaffected.


can be seen as demonstrating credible commitmentto a shareholder value orientation.

Value-based management control systems, an im-portant way in which shareholder value manage-ment is implemented, are often linked to profitabil-ity goals specified by division or activity (Jurgens etal., 2000). They represent a “financialization” ofmanagement in that performance evaluation is ex-plicitly tied to the interests of shareholders.

Value-based management systems are frequentlycoupled with stock incentive plans for managers.These plans are generally considered a powerfultool for aligning the interests of management withthose of a firm’s owners and for implementing ashareholder value approach (e.g., Meyers, 1981).

Our third measure of structural change was theadoption of international accounting standardssuch as U.S. generally accepted accounting princi-ples (US-GAAP) or international accounting stan-dards (IAS). For years, international analysts havecriticized German corporations for not being inves-tor friendly, since German accounting rules easilyallow firms to hide large cash reserves or improvetheir balance sheets. The adoption of internation-ally accepted accounting standards reduces theability of managers to hide their assets and signifi-cantly strengthens the position of shareholders.

Data on these three measures came from thefirms’ annual reports, and we cross-checked thedata by directly contacting all firms still operatingat the time the data were collected. All three mea-sures were coded as dummy variables.

Control variables. The presence and framing ofstrategic change may also depend on a firm’s finan-cial record, with poor prior records indicating agreater need for change. We therefore controlled forprior performance using an accounting-based vari-able and a market- based variable; these were returnon assets (ROA) and total returns, respectively. Weomitted these performance measures from modelsin which total investment returns was the depen-dent variable.

The size of a firm may also affect its visibility,since smaller firms may be able to better avoidpublic scrutiny (Meznar & Nigh, 1995; Pfeffer &Salancik, 1978). We therefore controlled for organ-izational size using the log of market capitalization.Since diversification and internationalization mayalso affect the number of stakeholder groups towhich a firm is exposed, we controlled for diversi-fication using the number of four-digit SIC indus-tries in which a firm operated, and we controlledfor internationalization using the ratio of foreignsales to total sales (Sullivan, 1994).

Since ownership effects may differ to the extentthat a firm uses external finance, we controlled for

reliance on the stock market for financing using afirm’s debt-to-equity ratio, corrected for the share ofequity held by outsiders (cf. La Porta, Lopez-de-Silanes, & Shleifer, 1997). Furthermore, the emer-gence of the shareholder value movement in theUnited States has been linked to ownership byinstitutional investors and the diffusion of shareownership (e.g., Hansmann & Kraakman, 2001; Us-eem, 1993). We therefore controlled for blockhold-ings by foreign banks, foreign and domestic insur-ance firms, and other widely held financialinstitutions, such as investment and pension funds(cf. Gorton & Schmid, 2000), and for the percentageof shares dispersed. We likewise controlled forownership by other domestic firms, another own-ership category that has been linked to the emer-gence of a shareholder value orientation (Fiss &Zajac, 2004). To contrast the effects of differentbank owner interests, we additionally controlledfor the ownership level of banks that have used abalancing rather than an acquiescence framing.

A strategic change toward a shareholder-ori-ented policy is likely to meet resistance fromother stakeholder groups, such as a firm’s em-ployees. Employee unions have been vocal oppo-nents of shareholder value management in Ger-many, and their influence might therefore alsoaffect how a firm presents such a new policy.However, unions have at times also sided withshareholders in calling for greater transparencyin accounting standards and for tying managerialcompensation more closely to performance(Hopner, 2001). We therefore controlled forunion strength using unionization of works coun-cilors, measured as the percentage of works coun-cil seats captured by union representatives in afirm’s corresponding industry (cf. Fiss & Zajac,2004). In Germany, works councils are the prin-cipal employee representation body. They are le-gally mandated and nearly universal in firmswith 500 workers or more (Addison, Bellmann,Schnabel, & Wagner, 2004). Works councilors areelected by a firm’s employees and hold consider-able information, consultation, and codetermina-tion rights regarding firm policy; the unioniza-tion of works councilors thus presents a goodmeasure of union strength. Data on the workscouncil elections held in 1990, 1994, and 1998came from the Institut der Deutschen Wirtschaftin Cologne.

A firm’s framing choice may also depend on thefirm’s embeddedness in director networks, sincecentrality in these networks increases a firm’s vis-ibility (Knoke & Burt, 1983). We therefore con-trolled for a firm’s network centrality using Free-man’s (1979) measure of degree centrality,


calculated as the total number of ties a firm haswith other firms in a sample.4 We collected the dataon board membership from the firms’ annual re-ports and updated them annually. Since Germanyhas a two-tiered board structure, we included mem-bers of both a firm’s management and supervisoryboards in our analysis, as members of the manage-ment board often sit on the supervisory boards ofother companies.5

Since framing activity may apply to both realizedand unrealized changes, we controlled for firmsthat fully decoupled by including in our analyses adummy variable coded 1 if a firm had not imple-mented any of the three practices in any givenyear.6 For models in which stock evaluation ratherthan framing choice was the dependent variable,we also included firm visibility as a control. Formodels that used the complete set of firms, data forthe Handelsblatt were available for the completeobservation period, but data for the SuddeutscheZeitung, Frankfurter Allgemeine Zeitung, andFrankfurter Rundschau were only available as of1993 or later. When using visibility as a controlrather than as a variable of interest, we thereforeonly used article counts from the Handelsblatt.This approach was preferable because reliabilityand factor analyses determined that data from allthree tapped the same construct, and using incom-plete data from the other two sources would haveled to selection bias from excluding almost a thirdof all firm-years in the original sample.

Previous research has indicated that the emer-gence of a shareholder value orientation amongGerman firms has been contested, leading to anuneven outcome with considerable variation acrossfirms (e.g., Fiss & Zajac, 2004; Jurgens et al., 2000).However, to account for the possible influence ofan overall shift in the German business environ-ment toward a shareholder value orientation, wecontrolled for the effect of time by using a yearcount variable. Finally, we controlled for possibleindustry differences by including dummy variablesfor two-digit SIC codes, except when using fixed-

effects models in which such dummies were notnecessary. Owing to the large number of variables,coefficients for industry dummies are not reportedin the tables.

Analysis

To examine the choice of acquiescence versusbalancing framing, we estimated maximum-likeli-hood logistic regression models (Long, 1997).7 Thisanalysis was restricted to those firms in the samplethat announced moves toward a shareholder valuestrategy and whose framing of this change couldthus be observed. Since we had data with repeatedobservations on firms, we estimated robust stan-dard errors using the Huber-White sandwich esti-mator (White, 1980).

To analyze the relationship between differentframes and outcomes for shareholders, we usedfixed-effects pooled time series regression analysis(Allison, 1994; Johnson, 1995).8 A fixed-effectsmodel is statistically equivalent to a change scoremodel and removes all between-firm differences,leaving only within-firm variation to be explainedby the independent variables. The coefficients arethus not biased by any observed or unobservedunchanging firm differences. These features makethe fixed effects model particularly suitable for sit-uations such as ours, where the main interest is in

4 When compared to alternative measures of networkcentrality such as Bonacich’s (1972) power index, Free-man’s degree centrality was a conservative choice thatresulted in slightly larger standard errors for the coeffi-cients of most of our independent variables of interest.

5 In the German two-tiered governance system, themanagement board is responsible for running an enter-prise, and the supervisory board appoints and overseesthe management board.

6 Conversely, we found essentially no evidence of im-plementation without framing among firms in oursample.

7 In the interests of robustness, we also estimatedHeckman selection models (Heckman 1979), using themodel described by Fiss and Zajac (2004) for the predic-tion of shareholder value espousal as the selection equa-tion. However, these analyses led to substantially iden-tical results.

8 Although previous studies of stock market reactionshave tended to examine the difference between a firm’sobserved and expected returns during a specified obser-vation window (Patell, 1976), this event study method-ology appeared inappropriate here for two reasons. First,an assumption of event study methodology is that eventsof interest are unanticipated and provide the marketswith information not previously known (McWilliams &Siegel, 1997). However, the framing of strategic change isunlikely to satisfy this assumption, since this framing ismost likely not a single, unanticipated event. Rather,management will provide information about a shift in afirm’s orientation through various means, such as meet-ings with analysts, press releases, etc. Such leakage ren-dered use of standard event study methodology problem-atic, and stock market reaction would not be expected tobe as punctuated as with other events, such as the an-nouncement of an impending merger or new CEO. Wetherefore used the total return in the year following theannouncement of a shift toward shareholder value man-agement as our dependent variable.


the effect of an intervention (frame choice) and thecases do not constitute a random sample of a pop-ulation (Hsiao, 1985; Petersen, 1993). A Hausmantest indicated that the fixed-effects model was theappropriate choice (�2 � 148.56, df � 21, p � .001).To allow contrasting the effects of one or the otherframe, we conducted these fixed-effects analyseson all firms in the sample. The fixed-effects modelsthus focus on the unique effect of choosing a framewhile controlling for implementation and between-firm differences. Finally, all independent and con-trol variables in our models were lagged by oneyear, with the exception of our structural changemeasures in models predicting frame choice, sincewe were interested in the co-occurrence of framingand structural change.

RESULTS

Table 1 provides descriptive statistics and corre-lations between all variables in the smaller sample,and Table 2 provides the results for the logit mod-els predicting the choice of acquiescence or balanc-ing framing. The results support the view thatstakeholder exposure is important for framing stra-tegic change. Consistently with Hypothesis 1, thefindings indicate that that our measure of mediaexposure is positively correlated with the use ofbalancing framing.

We also find considerable support for the impor-tance of stakeholder power. The results confirmsignificant coefficients for the level of governmentownership (Hypothesis 2a) and ownership by do-mestic banks that themselves have used a balancingframing (Hypothesis 2c). For family ownership(Hypothesis 2b), the coefficient is significant and inthe predicted direction in model 3, but drops belowsignificance in the fully specified model. In sum,these findings indicate that stakeholder powerstrongly affects a firm’s choice of framing a movetoward a shareholder value strategy.

Regarding the implementation of structuralchanges, we find support for Hypothesis 3, whichposits that firms actually implementing practicescommensurate with a shareholder value approachare more likely to use a balancing framing, ratherthan an acquiescence framing. For two of the threeshareholder value practices, implementation wassignificantly associated with the use of balancingframing.

Table 3 provides descriptive statistics and corre-lations for all variables in the full sample, andTable 4 shows the results of our fixed-effects timeseries analysis of how the use of different framesaffects shareholder outcomes while simultaneouslycontrolling for the implementation of commensu-

rate practices. The results offer support for Hypoth-esis 4, which holds that German firms using a bal-ancing framing to justify their shareholder valueorientation will experience significantly higherstock evaluations. Not surprisingly, both framingcoefficients are positive, but only the coefficient fora balancing framing is significant. We found nosignificant effect for German firms offering an ac-quiescence framing of their strategic change.

Regarding the control variables, the adoption ofvalue-based accounting methods has a large, posi-tive effect on changes in investment return, indi-cating financial markets reacted positively to theadoption of this practice. On the other hand, theuse of stock option plans and international ac-counting standards was not associated with achange in total returns. It would be helpful to havemore detailed data on stock option plans to furtherexamine this finding, but such data are unfortu-nately not available in the German context. Finally,the models show a significant, negative correlationbetween the log of market capitalization and totalreturns. A possible explanation for this finding isthe substantial number of German firms with largemarket capitalization and low sales (particularlyutility firms) that are marked by fairly stable shareprices and stable but modest dividend payments.

DISCUSSION

We began by suggesting that strategic change inmajor corporations can be quite controversial witha firm’s internal and external constituents, con-fronting the firm with the challenge of presentingand justifying significant strategic change to impor-tant constituents. We proposed that constituentsensemaking of such strategic changes can be sig-nificantly shaped by firms’ efforts at constituentsensegiving via specific forms of language framingand decoupling. Specifically, we used extensivelongitudinal data on contemporary German firmsthat have adopted a shareholder value orientation(a strategic change that remains controversial inGermany) to posit and test multiple predictionsregarding: (1) the roles of stakeholder exposureand stakeholder power as drivers of firms’ choos-ing alternative forms of language framing (balanc-ing vs. acquiescence); (2) the relationship be-tween language frames and substantial change;and (3) the financial market consequences of afirm’s choice of language frames. We found thatfirms tended to employ language frames that sug-gested sensitivity to the level of a firm’s stake-holder exposure and stakeholder power; that aninteresting disconnect between framing and ac-tion existed; and that a balancing framing, with


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its emphasis on harmonizing the interests ofshareholders and traditional German stakehold-ers, tended to be valued higher by German finan-cial markets, even when we controlled for theimplementation of commensurate shareholdervalue practices. The implications and relevanceof our theoretical perspective and empirical find-ings are discussed below.

To better understand the process of sensegiving,we employed the concept of framing from the so-cial movements literature. As we have argued, thisconcept offers an attractive and theoretically ma-ture basis for understanding how organizations aimto influence the interpretation of organizational ac-tions by various audiences. At the same time, theconcept of framing implies that the meaning ofevents may make for differing experiences of the“same” data, since frames imply boundaries thatreveal certain aspects while keeping others out ofsight (Williams & Benford, 2000). A focus on theframing of organizational actions thus highlightsthe inherently strategic and political nature ofmeaning construction and presentation (Hens-mans, 2003). Framing implies that there are fre-quently competing interpretations and ways of pre-

senting organizational actions (Oliver, 1991). Inline with these assumptions, our findings showthat structural determinants, such as stakeholderexposure and dependence, strongly affect the fram-ing of strategic change as organizations try to nego-tiate constituent demands. Furthermore, the con-cept of sensegiving we employ here points to aninherent instability in the meaning of organization-al actions (Gioia & Chittipeddi, 1991). Althoughthis instability opens up opportunities for meaningmanipulation, our study also suggests that theeventual framing of actions is closer to a negotiatedoutcome, with the influence of different stake-holder groups carrying significant weight.

Our study also contributes to the literatures onsymbolic management and organizational decou-pling. A number of studies have established therole of decoupling announcement from implemen-tation (e.g., Westphal & Zajac, 1994, 1998), yet weshow in this study that decoupling is not simply abinary choice (i.e., say vs. do), but can be morenuanced and may involve multiple ways of pre-senting and justifying organizational actions, withsome justifications more likely than others to bedecoupled from real changes. Our results suggest

TABLE 4Results of Fixed-Effects Time Series Regression Analyses for Total Investment Returnsa

Independent Variable Model 1 Model 2

Acquiescence frame 6.49 (5.04)Balancing frame 5.20* (3.01)Visibility 0.05** (0.02) 0.05** (0.02)Government ownership 0.72 (3.82) 1.18 (3.83)Family ownership �1.06 (4.69) �0.40 (4.70)Bank ownership, acquiescence frame 10.20 (7.21) 7.63 (7.38)Bank ownership, balancing frame �13.59* (6.51) �16.82* (6.75)Value-based accounting systems 20.27** (6.02) 18.78** (6.07)Stock options �3.65 (7.05) �5.23 (7.12)International accounting standards �2.51 (6.96) �3.75 (7.07)Debt/external market capitalization �0.86 (7.06) �1.30 (7.06)Other firm ownership �2.53 (2.51) �2.71 (2.51)Institutional investor ownership �7.61 (4.52) �9.08 (4.64)Percentage of shares dispersed �0.41** (0.14) �0.43** (0.14)Market capitalizationb �32.41*** (3.25) �33.40*** (3.30)Diversification 1.43 (11.88) 1.59 (11.87)Internationalization 0.08 (0.12) 0.07 (0.12)No implementation 8.83* (4.01) 7.63 (4.07)Union strength �1.00* (0.47) �0.94* (0.47)Network centrality �0.77 (0.21) �0.37 (0.21)Time 2.13*** (0.54) 1.87*** (0.56)Constant 331.11*** (57.09) 335.20*** (57.17)Observations 924 924

a Robust standard errors are in parentheses. Significance tests are one-tailed for directional hypotheses and two-tailed for controlvariables.

b Logarithm.* p � .05

** p � .01*** p � .001


that some firms may use an acquiescence framingto substitute symbolic compliance for structuralimplementation, and other firms may use a balanc-ing framing to “soften the blow” when implement-ing major structural changes. The theoretical per-spective and research design of our study thusenabled us to uncover an interestingly ironic situ-ation: those organizations that fervently proclaimtheir conformity to demands for strategic changeare in fact less likely to be the ones that actuallyimplement structural changes, while those that doimplement such changes may often feel compelledto downplay their conformity.

This finding also raises some intriguing ques-tions regarding the sustainability of a symbolicmanagement approach that substitutes surfacecompliance for actual implementation. Althoughprevious research indicates that investors may notnecessarily devalue firms that exhibit growing evi-dence of decoupling activities (Zajac & Westphal,2004), a more subtle force toward reconciling ex-ternal representation and internal workings maycome from inside such firms. If the image projectedby an organization and the way the members of theorganization themselves see it are persistently in-consistent, these cognitive inconsistencies arelikely to eventually precipitate corrective action(Dutton & Dukerich, 1991). Thus, the amount oftime that an organization is able to “talk the talk”but not “walk the walk” may be limited not onlybecause outsiders will enforce full compliance, butalso because insiders will experience an identitytransformation. Such a view also finds support intheoretical arguments that organizational identityis dynamic and unstable, emerging from a negoti-ated process that is particularly influenced by in-sider perceptions of outsider impressions (Gioia,Schultz, & Corley, 2000).

Our study likewise contributes to previous workon organizational impression management (e.g.,Dutton & Dukerich, 1991; Elsbach, 1994; Elsbach &Sutton, 1992). Much of this prior research has usedin-depth case studies to explore the effectiveness oforganizational accounts; in the current study wetook a different approach by using a larger sampleof organizations and quantitative methods to assessthe factors that predict the use of different frames.Although our approach thus explores a differentfacet of the impression management process, ourfindings reinforce some of the results of this priorqualitative research, such as the importance of “le-gitimated accounts” for corporate restructuring(Arndt & Bigelow, 2000) and the view that impres-sion management tactics that connect to institu-tionalized characteristics tend to be more effective(Elsbach, 1994). Our findings highlight the fruitful-

ness of linking impression management and insti-tutional theories (cf. Elsbach & Sutton, 1992).

Our study also has implications for the literatureon corporate governance, particularly regarding theadoption of governance practices such as stock op-tions and accounting standards (e.g., Fiss & Zajac,2004; Sanders & Tuschke, 2007; Tuschke & Sand-ers, 2003). Our analyses indicated a strongly posi-tive market reaction to the implementation of val-ue-based accounting systems, yet we observed nosuch effect for the adoption of stock options orinternationally accepted accounting standards.That stock options were an inconsistent predictorof framing suggests that such plans may themselvesbe ambiguous in terms of how they are perceivedby organizational constituents, a phenomenon thatis also currently apparent in the United States, asfirms have to some extent begun to move away fromusing executive stock options. Regarding account-ing standards, a possible explanation for the ab-sence of a positive market reaction to the adoptionof such standards in Germany is that the marketperhaps does not perceive these governancechanges to be effective devices for controlling andmonitoring managerial actions. However, more re-search would be needed to more clearly determinewhether this is indeed the case.

An important task for future research would be tofurther examine the relationship between differentforms of substantive and symbolic actions. Partic-ularly regarding the subject of strategic change, re-searchers still have much to learn about the natureand effectiveness of proactive organizational ac-tions vis-a-vis their environments (Rajagopalan &Spreitzer, 1996). For example, although we haveshown how specific frames may substitute for im-plementation, future studies might examine underwhich conditions specific frames might instead bereinforced by the presence of commensurate ac-tions, and what factors may make these differentprocesses more or less effective. Prior research insymbolic management has tended to focus on ei-ther behavior or communications, and though thisstudy has examined symbolic management prac-tices as they relate to both espoused and realizedchange, scholars are still only beginning to under-stand the interactions between both forms of organ-izational actions.

Future research might also continue to explorethe framing of strategic change by connecting alarge-scale sample approach with more qualitative,interpretive analysis of organizational communica-tions. Such research could also explore alternativeframing dimensions. For example, in presentingstrategic change, an organization might take a he-roic stance by portraying itself as a pioneer search-


ing for new growth opportunities. Alternatively, anorganization might perhaps take a mundane stanceby portraying itself as pragmatically pursuing “re-alpolitik.”9 An important step in this direction isthe work of Meyer (2004b), who offered a detailedanalysis of different interpretive frames in the pub-lic discourse over shareholder value managementin Austria during the 1990s. By combining qualita-tive and quantitative analysis of frames across dif-ferent groups of actors and time periods, such re-search would allow embedding organizationalimpression management activities within a largerdiscursive landscape.

Another promising avenue for future researchwould be to expand the study of stakeholder reac-tions to include new and different groups. As haveprevious studies (Westphal & Zajac, 1998; Zajac &Westphal, 2004), the present research focused onthe reaction of financial markets to framingchoices. However, a number of other stakeholdergroups’ reactions are also relevant to firms, such asemployees (one observable reaction could be theincidence of labor strikes), debtors (credit ratings asreactions), government agencies (political com-mentary or hearings), customers (sales), and evenboards of directors (CEO tenure and compensa-tion). An important question would be how effec-tive different frames are regarding these differentaudiences. Such research would allow a better un-derstanding of how the embeddedness in differentstakeholder communities not only affects framechoice and trade-offs (i.e., the antecedents of fram-ing), but also frame effectiveness (i.e., the conse-quences of framing). Furthermore, a closer analysisof different stakeholder groups might also demon-strate that firms are not necessarily consistent intheir communication to different audiences. By ex-panding the analysis to channels of communicationother than annual reports, future research couldalso examine how firms may tailor the framing oftheir messages in different media, such as pressreleases, “road shows” for the investor community,and speeches targeted at employees or activistgroups. If the firms’ messages to different audiencesare inconsistent, then firms may additionally facethe task of explaining such inconsistencies, or mayperhaps use anticipatory means of impression man-agement to defuse criticism (cf. Elsbach et al.,1998).

We hope our study can also lay the groundworkfor a theory of symbolic management that tran-scends national contexts. We have shown here that

framing and decoupling are not purely Americanphenomena and may be successfully studied in aninternational corporate context. Such a theorywould emphasize that frames are embedded in so-cietal processes and that a comprehensive analysisof framing processes would benefit from addressingthe historical, cultural, and structural contexts thatfilter and shape the perceptions of organizationalconstituents. For example, our hypothesis that theGerman stock market would generally favor a bal-ancing framing over an acquiescence framing iscontext-specific, given Germany’s history, culture,and business structure; we would not posit thisrelationship for the U.S. stock market. However,the notion that stock markets react to firms’ framingof strategic change is clearly not bounded by inter-national borders. Future research might explorewhether different stock markets react differently tothe same organizational actions because of culturaldifferences in host countries.

Growing globalization and other macro socialchanges furthermore suggest that it may be fruitfulfor future research to study whether the effective-ness of frames for organizational actions differsover time, and how such processes interact withthe presence of commensurate actions. It seemspossible that frames lose their potency for mobiliz-ing organizational constituents, either owing to ex-haustion of their potential or—in the case of sub-stitution for substantive actions—owing to learningeffects on the part of different audiences. Currentresearch regarding, for example, processes of mar-ket learning about firm actions seems to suggestthat markets may in fact be “teachable” (Zajac &Westphal, 2004). Regarding the role of framing, thisidea also suggests that evaluations of differentframes may not only depend on frame resonancewith a cultural and institutional environment (Di-ani, 1996; Kubal, 1998), but that that this frameresonance may likewise be influenced by strategicactions aimed at influencing dominant institu-tional logics. Thus, we hope that our study stimu-lates future research not only on the factors andprocesses that affect which frames firms use andhow they are evaluated, but also on the factors andthe processes by which the evaluation context itselfis constructed and maintained.

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Peer C. Fiss ([email protected]) is an assistant pro-fessor of strategy at the Marshall School of Business atthe University of Southern California. His current re-search interests include framing and symbolic manage-ment, corporate governance and the diffusion of prac-tices, and the use of set-theoretic methods such asQualitative Comparative Analysis (QCA) in managementand the social sciences. He received his Ph.D. jointlyfrom the Departments of Management & Organizationand Sociology at Northwestern University.

Edward J. Zajac ([email protected]) isthe James F. Bere Distinguished Professor of Managementand Organizations in the Kellogg School of Managementat Northwestern University. His research on organiza-tional adaptation and change, corporate governance, andstrategic alliances has been published widely in majoracademic journals. His Ph.D. in organization and strategyis from the Wharton School of the University of Pennsyl-vania.


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