Do reputational threats influence the rigidity of US agencies? A dynamic panel data approach

Abstract

AbstractWhat happens to organizational rigidity when public organizations faced reputational threats over time? Do they take external criticism as incentives to become less rigid and more innovative and flexible through employee involvement and empowerment? Or do reputational threats paradoxically contribute to the very rigidity that is often stereotyped as inherent parts of government? Building on threat‐rigidity theory, we test the temporal relation between reputational threats (both in terms of the direction of reputation and its turbulence) and organizational rigidity. We apply a dynamic panel data approach combining different data sources on 34 US agencies over a period of 13 years. The results show that organizational rigidity increased, both when reputations evolved negatively over time and when reputations evolved more turbulently. No combined effect of negative reputations and reputational turbulence was observed. Both sources of reputational threats independently precluded organizations from creating a climate of employee empowerment, involvement, flexibility, and innovation.