Status, Quality, and Social Order in the California Wine Industry

By Benjamin, Beth A.; Podolny, Joel M. | Administrative Science Quarterly, September 1999 | Go to article overview

Status, Quality, and Social Order in the California Wine Industry


Benjamin, Beth A., Podolny, Joel M., Administrative Science Quarterly


Over the last ten or fifteen years, sociologists have given considerable attention to the role of market ties as conduits for flows of information and resources. The basic argument is that market ties represent channels for the transmission of goods and services valued by market actors. Examples of this network-based approach include research on interpersonal networks and job search (Granovetter, 1974; Fernandez and Weinberg, 1997), the diffusion of information through interlocking directorships (Davis, 1991; Haunschild, 1994), and market models emphasizing how a firm's position in the flow of payments and resources affects its autonomy (Burt, 1980, 1992). More recently, sociologists have suggested that ties are also important conveyers of identity in that an actor's relations in a market influence how others perceive the actor (e.g., Baum and Oliver, 1991). One stream of research emphasizing the role of networks as conveyers of identity is research on the role of status in the marketplace (Podolny, 1993, 1994; Han, 1994; Stuart, Hoang, and Hybels, 1999). In this work, a market exchange is viewed, at least in part, as an act of affiliation whereby the average status of a market actor's affiliates influences perceptions of the actor and thus the flow of payments, resources, and opportunities available to that actor.

In this paper, we seek to advance this line of research by examining status more completely. Specifically, our work extends previous research in three ways. First, we show that an actor's status position influences the quality at which the actor chooses to produce, as well as the economic returns the actor derives from producing at a given quality. While prior research on market status has regarded the effects of status and quality on market outcomes as largely independent, in this study we examine how the affiliations constituting an actor's status position actually affect the actor's choice of quality and its subsequent returns. Second, previous research into status dynamics in both market and nonmarket settings has at best employed extremely imperfect correlates of quality (e.g., Podolny, 1993). In this study, we examine status relations in the California wine industry - a context that allows us to include more direct measures of past and present quality because of the substantial amount of time and attention the industry devotes to measuring quality differences across products. Finally, though previous research has revealed a certain amount of stability in status over time, to date there has been little if any research that has documented a mechanism by which this inertia occurs. In this study, we clarify a mechanism underlying the reproduction of the status ordering by demonstrating how an actor's current affiliations affect and constrain returns to subsequent affiliations.

AFFILIATION, STATUS, AND QUALITY

It is well accepted that consumers' expectations about the quality of a producer's products determine - at least in part - the flow of payments and resources that the producer receives, but what determines such expectations in the first place? The quality of past offerings certainly provides one source of expectations. Economic models of reputation, for example, often emphasize the importance of past quality (e.g., Shapiro, 1983; Allen, 1984; Wilson, 1985), as do some sociological models (Raub and Weesie, 1990; Kollock, 1994). Expectations about quality also derive from affiliations that market actors develop through their exchange relations. As market actors enter into exchanges with other actors, they often become identified with one another. For example, when a firm enters into an ongoing exchange relation with an auditor, the auditor's status affects how others perceive the firm (Han, 1994). Similarly, when a hospital establishes and publicizes relations with a well-respected agency or donor group, it increases the perceived quality of its services (Perrow, 1961). And when a young firm affiliates with a more established community group or other well-known organization, it may increase the perceived legitimacy of its activities and thus its chances of survival (Wiewel and Hunter, 1985; Baum and Oliver, 1991). …

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