How Situated and Constitute Frames Affect Investor Reactions to Firm Actions

We integrate two distinct literatures, on social approval assets and categories, to develop a more general theoretical framework of interpretive frames or lenses – modes of interpretation that filter available information – that introduces the notions of situated and constituted frames. Our theory highlights the conceptual differences that exists between situated frames, which are based on the industry categories to which firms belong, and constituted frames, which are based on types of behaviors firms exhibit. We then theorize and test whether and how the simultaneous use of such distinct frames impact investor reaction to firm actions. In a rigorous empirical test, we find that investors “wear” situated and constituted frames simultaneously, leading to interpretations of actions that are distinct and that cannot be explained by either of these two lenses alone. We conclude by highlighting the relevance of our research and findings for future research on interpretive frames, market actors’ evaluation of organizations, and social approval assets.