Managing Asymmetric Events With Anticipatory and Reactive Strategies

Impression management refers to the strategies a firm uses to influence how evaluators view the firm, a key factor that impacts firm outcomes and that is particularly salient when negative events are disclosed. Research to date has investigated how firms manage evaluator impressions either before or after such events, but considerations of how firms use anticipatory and reactive impression management together remains less developed. To address this limitation, we build on event-oriented perspectives in management and leverage theory from organizational impression management to first delineate how information asymmetric negative events—salient and damaging occurrences known first to firm insiders—enable firms to use anticipatory and reactive impression management strategies as an interrelated effort. We then investigate the degree to which evaluators’ reactions to anticipatorily managed events moderate reactive strategy selection following asymmetric events. We conclude by assessing the relative effectiveness of different strategic combinations on firm stock responses following an asymmetric event. Using a comprehensive sample of 238 late-stage, publicized clinical trial termination events in the pharmaceutical industry from 2003 to 2017, we find strong support for our hypotheses. Overall, this study seeks to demonstrate how firm impression management may be more nuanced and interrelated than previously theorized and how a greater understanding of these strategies can fundamentally shape how firms manage asymmetric events.