Information Spillovers from Protests Against Corporations: A Tale of Walmart and Target

Lori Yue, Hayagreeva Rao, Paul Ingram

Motivation

From 1998 to 2008, Walmart made 2,050 proposals, encountered 805 protests, and managed to open 1,234 stores.

Target floated 1,110 proposals, attracted only 74 protests, and was able to open 1,046 stores.

What explained the striking difference in the protest rates experienced by Walmart and Target?

Popular Media’s Explanation • Walmart is a poster child of extreme capitalism• Target has a benevolent corporate image

Activists argue that Target is not really that different from Wal-Mart• Serres, 2005; Bustillo and Zimmerman, 2010• A tough anti-union attitude• Wages and benefits mirror Walmart’s• Super Target has similar impacts as Walmart Supercenter • Walmart is a regular contributor to community causes

• “Why is Walmart the bad guy?”

A New Explanation: Information Spillover from Social Movement Activism

• A framework with three parties: a first-mover (Walmart), a second-mover (Target), activists

• Information asymmetries. Activism against the first-mover signals a community’s preference

• Second-mover receives the signals and better positions itself

Walmart and Target Store Location, Before 1998

2322 Walmart stores 764 Target stores

Walmart and Target Store Opening: 1998-2008

1311 Walmart in triangles 1004 Target in dots

Hypotheses

H1: Protest events against Walmart have a curvilinear (+,-) relationship with Target’s entry.

H2: Walmart’s withdrawals due to protests have a curvilinear (+,-) relationship with Target’s entry.

H3: Walmart’s successes in overcoming activists have a positive relationship with Target’s entry.

Data and Methods

Data: All the 25,375 places in the U.S. from 1998 to 2008. Due to the creation of time-lagged variables, the sample used in the final estimation include all the years from 2001 to 2008.

Store Proposal and Protest: A media search from 1998 to 2008 using the Lexis-Nexis, the America’s News, and the Sprawl-Busters databases. Matched with a list of Walmart/Target store openings from 1998 to 2010.

Variables

Dependent Variable: A dummy variable to indicate whether Target proposed to open a new store in a place in a year

Independent Variables:• Anti-Walmart protest• Walmart’s withdraw due to protest• Walmart’s success despite protest

Control Variables: Community characteristics (population, income per capita, unemployment, urban, race, and region), political ideology (Pro Democrat, hazard of institutional escalation ), organization of mobilization (anti-Target protests, union, church, Main Street Program) ; retail economy (distance to Target d.c., Wal-Mart and Target stores within 5 miles); the effect of media (media’s attention, unfavorable editorials)

Estimation

Problem: Unobserved heterogeneities that simultaneously affect Walmart’s proposal (Y1), anti-Walmart protests (Y2), Walmart’s withdrawals (Y3), and Target’s entry (Y4)

Solution: Conditional Mixed Process (CMP) Model (Roodman, 2011)

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Discussion & Conclusion

Theoretical Contribution1. The literature on private politics has emphasized the direct effect of

protests on their intended opponent, and overlooked information spillovers from protests.

2. We distinguished between two types of spillovers, one type produced by the incidence of protest and a second type from a targeted firm’s response.

3. We contribute to the strategy literature on market entry by showing second-movers benefit from a first-mover’s exposure to protests.

4. For organizational learning, we show that social movement activism constitutes another form of information spillover between organizations.

Extension & Revision-mechanism & market size