Team 13 - Lily Cheng, Jing Hu, Shirley Kum, Miranda Wong, Jiyeon Yoo, Mingyu Zhang
Phillips, D. J., & Zuckerman, E. W. 2001. Middle status conformity: Theoretical Restatement
and Empirical Demonstration in Two Markets
I. Introduction
In the article published in 2001, “Middle-Status Conformity: Theoretical Restatement and
Empirical Demonstration in Two Markets”, Damon. J. Phillips and Ezra W. Zuckerman stated
that “conformity is high in the middle yet low at the top and bottom of a status hierarchy”,
forming an inverted U-shaped curve (Phillips and Zuckerman, 2001, p. 379). In order to validate
this IUS relationship between status and conformity, Phillips and Zuckerman developed a
theoretical framework to indicate the existence of three possible statuses: high, middle, and low.
Moreover, they argue that IUS conjecture only holds under the following scope conditions:
social-psychological, structural, and action. By applying this framework, we propose to answer
the following question, “Do organizations always act similarly?” by identifying Phillips and
Zuckerman’s arguments, evaluating and challenging the assumptions with real world
organizational phenomena.
II. Scope Conditions
Social-Psychological Scope Conditions:
Phillips and Zuckerman propose that the variance in the value for conformity creates the
inverted-U-shaped curve. They argue that the key conditions for social-psychological
orientations can be explained by different behavioral orientations among organizations where
high- and middle-status organizations have a greater identification with the status hierarchy than
lower-status organizations. Therefore, low-status organizations are less likely to follow industry
norms. In addition, Phillips and Zuckerman states that high-status organizations experience more
security in their current position, which lowers the value of conformity for high-status
organizations. Moreover, conformity is of no value to lower status organization as the audience
1
does not consider them as a participant. Therefore, the middle-status organizations have highest
desire for conformity.
Structural Scope Conditions:
Phillips and Zuckerman proposed four aspects of the structural scope conditions regarding the
nature of the status hierarchy. First, they claim that an organization’s status is steady in order to
ensure their security in the status structure. As long as their status is stable, high-status
organizations will be able to rely on the default legitimacy and maintain their status position
among audiences. The second condition emphasizes that the audience should be able to
distinguish between high-, middle-, and low-status organizations. Thirdly, Phillips and
Zuckerman argue that middle-status organizations face the risk of being downgraded to lowstatus; thus, they have a high level of conformity. Finally, the last structural scope condition
explains that middle-status organizations are at risk of being punished when they violate the
standard.
Actions Scope Condition:
The most challenging scope condition involves a deviant action. Middle-status organizations
reflect not only the desire of classification as a legitimate organization, but also the fear of
demoting to low-status. Therefore, middle-status organizations have to conform in order to
solidify their social standing. However, this is not an issue to high-status organizations since they
are relatively fixed in their identities regardless of their actions.
III. Real World Phenomenon
Yellow Tail
Yellow Tail is a wine brand created by a family-owned winery, based in Australia, called Casella
Winery. When Yellow Tail joined the U.S. market in 2001, they were considered as a low-status
player because they were new and unknown; thus, they expected to sell only 25,000 cases of
wine (The Global Wine Industry, n.d.). According to the social-psychological orientation, low-
2
status organizations are considered to be outsiders since they are non-players and are excluded as
players in the industry regardless of their actions. Therefore, Yellow Tail should not be able to
advance in the status hierarchy.
In 2001, Yellow Tail unexpectedly sold 200,000 cases which challenges the social-psychological
scope condition. Through innovation, Yellow Tail differentiated themselves from traditional
wineries by introducing sweet, fruity and affordable wines. Due to this innovation, Yellow Tail
created easy drinking, ease of selection, and added a sense of fun and adventure to the wine
environment which created a consumer friendly alternative for new wine drinkers (The Global
Wine Industry, n.d.). This expanded Yellow Tail’s target market to a broader population.
In “Grafting Winning Strategies in a Mature Market: the US Wine Industry in 2001”, it
highlights that, within the price range of $7 to $14, Yellow Tail held a total 16% of the U.S. total
wine consumption in 2001. Compared to the top eight wine companies in U.S. and
approximately 2500 other wineries, which makes up 75% and 25% of the total annual wine
production respectively, we can assert that Yellow Tail became a middle-status player in the U.S.
wine industry in 2001. Although Yellow Tail produces low-end wines, their success in 2001
allowed them to be classified as a middle-status organization.
According to the social-psychological scope conditions, the audience will penalize middle-status
organizations that deviate from group norms. Therefore, Yellow Tail’s best option is to conform.
However, judging by the success of Yellow Tail, it is apparent that the conjecture does not apply
to all organizations. Yellow Tail reached its status through a substantial change which can also
be seen in the case of Blackberry.
Blackberry
3
Blackberry (formerly known as RIM), one of the four major smartphone brands in the world,
along with iPhone, Windows Phone, and Android, is most famously known for producing
smartphones with a “QWERTY” keyboard. In 2011, Blackberry controlled 41% of the
smartphone market in Canada, whereas iPhone controlled 23% (Financial Post, 2013). However,
due to intense competition and the popularity of smartphones with a touch screen keyboard, such
as iPhone and Android devices, Blackberry’s popularity dropped drastically. Blackberry’s
keyboard phones were no longer in demand, thus, its worldwide sales declined by 33.6% from
2011 to 2012 (Financial Post, 2013). As a result, Blackberry has been downgraded to a middleor even a low-status organization.
As consumer preferences shifted, Blackberry needed a new plan to remain in the smartphone
market. In January 2013, Blackberry released the Blackberry Z10, a smartphone that contained a
touch screen keyboard. As a result, Blackberry’s Canadian market share increased to 13.5% in
the first quarter of 2013 (Epstein, 2013). By conforming to the industry standards and consumer
preferences for the smartphone, Blackberry has been able to recapture some of its lost market
share. This example shows that scope conditions in which high-status organizations “see less
value in conformity” and have “greater role incumbency” do not hold (Phillips and Zuckerman,
2001, p. 388). Blackberry’s situation demonstrates that high-status organizations are pressured to
conform to other high-status organizations’ actions in order become retain their stability.
IV. New Theoretical Insights
Phillips and Zuckerman’s conjecture appears to be straightforward to the average man, but after
careful consideration, we have concluded that their ideas cannot be applied to the complex and
dynamic market of the 21st century. There are too many conditions that need to be met in order
for IUS conjecture to be valid.
4
In today’s society, organizations promote change and find new ways to make an impact on their
audiences. It is unlikely for low-status organizations to remain as a non-player. In addition,
organizations in all parts of the status hierarchy need to keep innovation in order to hold their
position or advance upwards. Phillips and Zuckerman should consider how innovation or
technological advances can affect the company and their status, as shown in the Yellow Tail
example. Low-status players can utilize their internal and external opportunities, such as research
and development and advertisement, to create new products or improve current products and be
able to gain recognition from the audience.
From the conjecture proposed by Phillips and Zuckerman the middle-status conformity theory
cannot be conclusive because there are various types of audience that view the identity of the
“players” differently, such as investors, competitors, and consumers. For example, investors
determine an organization’s status by what an organization does, costs of operation, size, and
sales, whereas a competitor will establish an organization’s status based on the relative threat
they experience when new products or innovations are revealed to the public.
Organizations do act similarly in the way they all need to continually innovate if they want to
maintain or advance their status. Moreover, the type of similarity that these organizations share
differs from the aspects outlined in the IUS conjecture. Thus, the two cases in this memo
presented challenges Phillips and Zuckerman’s IUS conjecture as being too limited.
REFERENCES
5
Casella Wines: Yellow Tail. (n.d.) The global wine Industry. Retrieved from
https://web.duke.edu/soc142/team5/compyellow.html
Epstein, A. 2013. BlackBerry Market Share CANADA Q1. 2013. Boy Genius Report
Media, LLC. Retrieved from
http://bgr.com/2013/05/17/blackberry-market-share-canada-q1-2013/
Full Glass Research. 2011. The economic impact of the wine and wine grape industries
on the oregon economy. Economic impact of oregon state wine. Retrieved from
http://industry.oregonwine.org/wp-content/uploads/2011/07/OR-EconReport-2010-Final2.pdf
Hopton, J. 2009. Grafting winning strategies in a mature market: the US wine industry in
2001. Blue ocean strategy. Retrieved from http://hbr.org/product/crafting-winningstrategies-in-a-mature-market-the/an/BOS018-PDF-ENG
Phillips, D.J., & Zuckerman, E.W. 2001. Middle status conformity: theoretical
restatement and Empirical Demonstration in Two Markets. American Journal of
Sociological Review, 107(2): 379-429
Reuters. 2013. BlackBerry’s smartphone market share declined more than 33% in 2012.
Financial Post. Retrieved from http://business.financialpost.com/2013/02/13/blackberrysmartphone-market-share-declined-44-in-fourth-quarter-gartner/?__lsa=2d9f-44bf
6