Daniel Malter is an Assistant Professor of Business Administration in the Strategy Unit at the Harvard Business School where he teaches Strategy in the MBA required curriculum. Professor Malter studies social market structure, specifically, the status hierarchies and identities of organizations within markets. His work has implications for market selection, how firms should maneuver the incentive structure in their markets, and for how individuals and firms should structure their networks to best appeal to their audiences. He received his Ph.D. in strategic management from the Robert H. Smith School of Business at the University of Maryland after earning his diploma at Humboldt Universität zu Berlin.
On the Causality and Cause of Returns to Organizational Status: Evidence from the grands crus classés of the Médoc
This paper addresses the recent debate about the causality of status effects and identifies the symbolic effect of status on the prices organizations charge for their products. I exploit the grand cru classification of the chateaux of the Médoc, created in 1855, as a fixed hierarchical symbol of class status. The classification cannot be reversely affected by the quality chateaux produce or the prices they charge, which greatly facilitates the estimation of the causal effect. To discern whether status serves as a signal of quality under uncertainty or satisfies the motive of conspicuous consumption, I study a period of time during which the uncertainty about quality has arguably declined. An instrumental variable and a matching estimator identify a symbolic effect of status on prices. The effect increases in a time of decreasing uncertainty, which supports the motive of conspicuous consumption as a driver of the effect. However, the results caution that we might commonly overestimate the symbolic value of status if we underestimate the disproportional value markets place on the pinnacle of quality, the enduring nature of reputation, and the effect of endogenous quality choices on status effect estimates.
Keywords: Status and Position;
His research interests lie in phenomena pertaining to the status and identity of organizations and individuals in markets.
In his work on status orders, Professor Malter studies the ways in which status orders affect the returns to organizations, the incentives and opportunities in markets, social market structure, and firm decisions. Using data on a highly structured wine region of France, Professor Malter probes status benefits and incentives flowing from the status order. Analyzing the grand cru producers in the Médoc, he has shown empirically that audience taste for goods of conspicuous consumption is a sufficient condition for returns to organizational status. Further, while higher-status producers have a greater incentive to invest in quality, status differences explain little of the quality differences among classes. In another study of chateaux in two areas of Bordeaux, he found that the order of quality among producers is more flexible in the area with the more flexible status hierarchy. This difference may be driven by the stronger incentives to invest in quality and by the shorter time producers need to compensate for a lack of status through the continued demonstration of quality under the more flexible status hierarchy.
In his work on identity, Professor Malter investigates when and why high-status affiliations make organizations and individuals less appealing to their audiences. In a study of the venture capital industry, he finds that a venture capital firm is less likely to raise a new venture fund the more its identity is eclipsed by or confounded with the identities of high-status syndicate partners. In related work on participants in competitive labor markets, he finds that when the true quality of an individual is uncertain, audiences discount candidates with overly strong high-status affiliations because such affiliations raise doubts whether the candidate is merely riding on the coattails of the affiliates. These studies suggest that organizations and individuals can improve their audience approval by structuring their relationships in ways that signal distinctiveness from the established elite in their fields.