Misery Loves Company: The Spread of Negative Impacts Resulting from an Organizational Crisis

Abstract

We describe how negative impacts emanating from an organizational crisis that initially strikes only one organization can overflow the boundaries of that organization and affect others in the industry. We argue that this spillover process is contingent on the characteristics of the organizational form to which the stricken organization belongs, the characteristics of other organizations in the same industry, and the characteristics of the industry itself. Finally, we speculate that the spillover process, coupled with differential mortality, might move crisis-prone industries toward more robust structures over time.