589902

research-article2015

SOQ0010.1177/1476127015589902Strategic OrganizationBapuji and Neville

So!apbox Essay

Income inequality ignored? An

agenda for business and strategic
organization

Strategic Organization
2015, Vol. 13(3) 233246
The Author(s) 2015
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DOI: 10.1177/1476127015589902
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Hari Bapuji and Lukas Neville

Asper School of Business, University of Manitoba, Canada

Abstract
Despite a vibrant body of scholarship and a growing public discourse around the socio-political consequences
of rising income inequality around much of the world, very little is known about the organizational
consequences of societal-level income inequality. In this essay, we draw upon previous literature on the
socio-political consequences of high income inequality to help identify its potential business consequences. In
particular, we suggest that high levels of income inequality can give rise to (1) social movements that coerce
and constrain firms actions, (2) alternative organizational forms that displace existing organizations and
(3) new political and regulatory risks that undermine firms performance or survival. Using this argument,
we emphasize the broader point that income inequality matters to firms and markets and that the study of
inequality needs to be brought in from the cold by organizational researchers. Furthermore, we outline
a specific research agenda aimed at better understanding income inequality and how organizations can
respond to it.

Keywords
Economic inequality, income inequality, legitimacy, markets, organizational forms, political economy, social
movements

There is a vibrant body of scholarship and a growing public discourse about the socio-political
consequences of rising income inequality in much of the world. From the front-page press coverage of Occupy Wall Street in the early 2010s to Thomas Pikettys emergence as a talk-show fixture,
there is a sense that citizens and scholars alike share a concern about income inequality. This concern is rooted in a belief that high levels of inequality are bad for society bad for democracy, bad
for health and well-being and bad for the cohesion of our cities and communities. These beliefs are
borne out in a range of academic research showing that high income inequality has deleterious
effects on the polity, public health, civic life and human development in general (see Neckerman
and Torche, 2007, for a comprehensive review). In other words, we know how inequality affects
Corresponding author:
Hari Bapuji, Asper School of Business, University of Manitoba, 452 Drake Centre, 181 Freedman Crescent, Winnipeg,
MB R3T 5V4, Canada.
Email: hari.bapuji@umanitoba.ca

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individuals and societies. But how does income inequality affect organizations and firms?
Organizational scholarship, to date, has few insights to offer. A search of the literature in management, strategy and organizational studies uncovers very little work considering the firm-level consequences of variations in societal-level income inequality.1
This is not to say that organizational scholars are not interested in inequality or similar issues
quite the opposite. Scholars of micro-level organizational behaviour, for instance, have studied
pay dispersion, which can be viewed as a local, within-firm form of income inequality (see Shaw,
2014, for a review). Organizational sociologists have shown that firms characteristics and practices are implicated in the production of income inequality in societies (e.g. Cobb, 2015; Davis and
Cobb, 2010; Sjberg, 2009; Stainback et al., 2010). Economists have examined how income inequality shapes macroeconomic outcomes like growth and rates of entrepreneurship (e.g. Barro,
2008; Lippmann et al., 2005).
Organizational scholars have also studied social issues closely related to income inequality. For
example, inequalities in gender and race have been widely researched (e.g. Browne and Misra,
2003; Reskin, 2000; Smith, 2002). Base of the pyramid research has considered organizational
strategies and structures that can effectively serve the poor of the world to make them consumers
and entrepreneurs (Prahalad, 2004; Viswanathan and Sridharan, 2012). Scholars have also advocated for corporate social responsibility (CSR) aimed at improving the bottom lines of organizations by enhancing the well-being of people and achieving environmental sustainability (Margolis
and Walsh, 2003; Wood, 1991). And, taking a step further, researchers have also examined the
social benefits of microfinance, social entrepreneurship and multi-stakeholder partnerships
(Battilana and Dorado, 2010; Sloan and Oliver, 2013). In short, despite a vibrant research on CSR
and attention to inequality-related issues, organizational scholars have paid little attention to the
consequences of income inequality in a society for firms.
Although inequalities exist in various forms (e.g. gender, education, health) and at various analytical levels (e.g. household, organization, city, nation), our arguments in this essay are concerned
with income inequality in a society, that is, the dispersion in income within a given population (e.g.
cities, regions or nations). Income inequality is different from pay dispersion (e.g. pay differences
within a team of workers or CEO pay relative to entry-level workers pay) and from gender or
racial inequalities (e.g. proportion of women or people of colour in positions of power).2
Furthermore, with its focus on dispersion, income inequality is also different from prosperity and
poverty, which reflect the abundance of or lack of access to the necessities of life.
The remainder of this essay is organized into two sections. First, we argue that high levels of
income inequality give rise to (1) social movements that coerce and constrain firms actions, (2)
alternative organizational forms that displace existing organizations and (3) new political and regulatory risks that undermine firms performance or survival. Second, we develop a broader research
agenda that strategic organization scholars can pursue to better understand the relationship between
income inequality and organizations, focused in particular on firms response to rising inequality.

Effects of high income inequality for firms

Inequality mobilizes protest movements that can constrain and coerce
Under conditions of high income inequality, income and wealth are concentrated in the hands of a
small few. As a result, the rest of the population lacks the resources needed to effectively advocate
and mobilize politically to seek remedies (Edwards and McCarthy, 2004). In addition, some
research evidence also suggests that people might lack the will to question inequality. For example,
income inequality may not engender resistance if it is seen as fair, based on merit and equal

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opportunity (Bjrnskov et al., 2013; Tyler, 2011). Those who study system-justifying ideologies
warn that it is often the most disadvantaged who will accept the fairness and legitimacy of unequal
distributions (Jost et al., 2010). Taken together, we might expect inequality to make firms less
vulnerable to the agitations of protest movements.
However, despite these resource and motivational barriers to mobilization and action,
research shows that discontent, socio-political instability, political violence and insurgency
tend to rise when inequality is high in societies (Alesina and Perotti, 1996; Muller and Seligson,
1987). This is particularly true in countries where people lack formal political processes through
which they can channel their grievances (Schock, 1996). And despite the impediments, the
deprived tend more towards political action when inequality is high (Brady, 2003). One reason
that protest and mobilization may occur despite the apparent barriers is that extreme levels of
inequality provide the basis for the sense of shared identity necessary for collective action. The
Occupy movement, for instance, developed a discourse about the aggrieved 99%, creating an
identity that could be widely shared (except, of course, by those in the top-earning 1%). As the
divides between the richest and poorest become starker, it becomes easier to create a meaningful sense of us and them the identity-based underpinnings of social action. Research on
identity in social movements shows that these kinds of shared identities can be important, even
vital, in helping protest movements to form even when participation is costly or involves a
social dilemma (Klandermans, 2002).
The consequences of protest movements can be seen in corporate decision-making, as firms
respond to the pressures imposed by activists. One need only look at the backlash against CEO pay
to see contentious politics in action. Protest movements emerged against income inequality and
catapulted the issue of CEO pay into the national discourse (Dube and Kaplan, 2012). With executive pay on the front page of newspapers, firms were pressured to respond and did so by changing
the composition of executive pay, shifting towards less contentious forms of compensation
(Kuhnen and Niessen, 2012). If inequality can invigorate social movements, then we might expect
it to undermine investor confidence and influence stock prices, dampen firm performance and
shape the process of strategic decision-making inside firms (Reid and Toffel, 2009; Soule, 2009;
Vasi and King, 2012). These changes may further invigorate the movements that advocated for
them. Research shows that the justification of inequality (described earlier as a barrier) tends to be
weakened when people see evidence of social change (Laurin et al., 2013).
In short, income inequality can have countervailing effects: on one hand, high levels of income
inequality can create resource and motivational barriers to collective action. But on the other hand,
income inequality can also facilitate action by fostering strong group identities and invigorating
them with evidence of social change.

Inequality facilitates alternative, competing organizational forms

The first form of threat (i.e. from protest movements) is likely to be felt most acutely by firms who
engage in practices that contribute directly to inequality. The Occupy movement targeted firms
(Goldman Sachs, for instance), who were seen as culpable for the financialization of the American
economy and the compensation practices that accompanied it. But firms less directly involved in
the production of inequality may nonetheless be adversely affected by it.
Inequality, we argue, can serve as a legitimating resource for insurgent firms against incumbents
at the firm level and for institutional entrepreneurs against conventional practices at a field level.
Davis (2013) describes two ways forward from the demise of the large, consolidated corporation.
On one hand, there will be highly specialized, growth-oriented and often short-lived firms who
employ few directly, instead coordinating production through loose global networks. On the other,

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a series of alternatives will emerge amidst the ruins of shareholder capitalism, resulting in new or
newly invigorated organizational forms, from maker movements through open-source to locavore movements and benefit corporations (B corporations).
Taking Occupy Wall Street as an example of an inequality-driven protest movement, we can
see how dissatisfaction around inequality can translate into opportunities for new forms. The
movement itself creates a substrate for local and horizontal forms of economic organization
(Davis, 2013). It also revitalized existing alternative organizational forms. For example, Bank
Transfer Day, an event spun off from the Occupy movement, encouraged consumers to switch
their financial services from traditional banks to credit unions and cooperatives (Soule, 2012).
The event resulted in over half a million new credit-union customers (Mayer, 2012). This is not
necessarily an isolated event: research shows that cooperatives flourish when anti-corporate sentiment rises, even in contexts when they are pitted against entrenched corporate power (Boone and
Ozcan, 2014).
Hybrid corporate forms may also gain new legitimacy and momentum when inequality rises.
Resistance to the primacy of shareholder value has created an appetite for organizational forms that
allow organizations to pursue a social mission without fear of being litigated against by shareholders. These forms include low-profit limited liability companies (LLCs), social-purpose corporations and B corporations. Battilana et al. (2012) attribute the rapid growth of these forms, in part,
to the calls for reform that arose in response to entrenched inequality. Although the growth of
new organizational forms is multiply determined (e.g. Andr, 2012; Hiller, 2013; Wilburn and
Wilburn, 2014), rising income inequality may help to create the impetus to support and legitimate
these forms.
Finally, inequality may advance insurgent firms and new organizational forms by pushing more
of the population into the informal economy. In transitional economies, rising inequality is accompanied by a larger proportion of economic output occurring in the informal economy (Rosser et al.,
2000). But even in the developed economy, similar dynamics might be possible. Consider the
growth of the sharing economy for example, renting out a spare room on Airbnb or using a
personal car as a hack cab through Uber or Lyft. These economic activities occur at the fringe of
the informal and formal economies. The tenuous employment and economic scarcity at the bottom
of the income distribution under conditions of high inequality are central to the supply of labour
and assets underlying these services business models. Lippman et al. (2005) describe how high
levels of income inequality in a society can contribute to these forms of necessity entrepreneurship. While hoteliers (for instance) are not likely to be the target of anti-inequality activists and
social movements, they are nonetheless vulnerable to disruptions like Airbnb that are accelerated
by inequality.
In short, high levels of income inequality in a society can threaten conventional firms by opening up possibilities for alternative organizational forms.3 This can occur as activist movements
provide legitimacy and support to alternative forms and as inequality creates labour market conditions that can promote alternative business models.

Inequality deteriorates institutions and creates new political risks

Even in the absence of protest movements and competing organizational forms, income inequality
can deteriorate the institutional and political arrangements that undergird traditional capitalism in
other ways. In this section, we explore three such effects: (1) the promotion of protectionism and
policy deadlock, (2) the rise of corruption and (3) threats to property rights that promote the
expanded use of guard labour. Together, these effects of inequality serve to reduce stability and
increase political risk.

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Inequality promotes parochial or deadlocked policy-making. There is a vibrant debate about whether
inequality increases mass preferences for redistributive policies (see Dallinger, 2010; Jger, 2013).
Nonetheless, evidence suggests that high inequality can foster demands for redistribution. As the
relative distance between the middle and poor shrinks and the chasm between the middle and richest widens, the middle class align themselves politically with low-income voters, providing room
for left-leaning political parties to gain ground (Lupu and Pontusson, 2011). And, Burgoon (2013)
shows that high inequality is associated with stronger anti-globalization policies on both the political left and right, as parties outside of the centre adopt policies opposed to global engagement and
international institutions and supportive of trade protectionism. Not only do extreme parties stake
out more parochial positions, but voters appetite for highly polarized and extreme politics rises
with inequality (Grafstein, 2013). From this perspective, voting under high inequality cleaves into
two extremes: the wealthy, who adopt conservative positions aimed at the strongest possible protection against appropriation (extremes of laissez-faire), while poorer voters go for broke, accepting riskier options that offer more forcefully redistributive policies (Grafstein, 2013). In other
cases where the rich do favour more moderate policies of redistribution, their positions are often
motivated by concerns over stability and the fear of being victimized by crime (Dion and Birchfield, 2010; Rueda and Stegmueller, in press). In other words, high inequality can create the electoral demand for parties advocating policy positions that are generally quite unfavourable to
business or political deadlock between polarized extremes.
Inequality increases corruption. Inequality can serve to weaken political and institutional arrangements in other ways that are unfavourable to business (or, at a minimum, challenging for incumbents). Inequality shapes, often for the worse, the institutional arrangements that smooth the
functioning of free markets. Jong-Sung and Khagram (2005) demonstrate that inequality weakens
accountability mechanisms, providing opportunities for corruption which, in turn, further exacerbate inequality. Less equal societies have also been found to have weaker, low-quality institutions
(Chong and Gradstein, 2007), a weaker rule of law (Sunde et al., 2008) and a higher risk for firms
of expropriation and repudiated contracts (Keefer and Knack, 2002). One of the reasons for the
relationship between inequality and corruption is what Uslaner (2007) calls the inequality trap.
When inequality is high, social solidarity crumbles. People are prone to mistrusting one another
and become suspicious of government. When generalized trust is low, people are more likely to
perceive corruption as necessary, see the law as ineffective and become less interested in helping
others, since the expectations of reciprocity and social exchange are weakened.4 And so, inequality
breeds corruption. In turn, corruption exacerbates inequality, as patronage and clientelism centralize power and concentrate economic benefits (Uslaner, 2011).
Inequality erodes property rights and promotes the use of guard labour. As institutions weaken under
conditions of high inequality, there tend to be increases in the underground economy and informal
sector, creating challenges like piracy for firms operating in the formal economy (Husted, 2000).
But even if firms avoid the theft of their intellectual property by black market competitors, inequality might still stifle the payoffs to innovation. As inequality rises, the pool of potential adopters for a new technology is limited (Mueller et al., 2013). A large middle-class mass market, vital
to the diffusion of innovation, is oftentimes absent from highly unequal economies. Innovative
firms must therefore contend with a pair of challenges in societies with greater inequality: even if
they can find a mass market that makes innovation profitable, they must cope with weaker protections for their intellectual property from pirates and black marketeers. Given the challenges of
protecting property rights and guarding against corruption, it is perhaps unsurprising that highinequality societies have a greater proportion of economic activity that is tied up unproductively

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in what Jayadev and Bowles (2006) call guard labour efforts spent enforcing claims and contracts, protecting property rights and maintaining the status quo against disruptions and unrest.
In sum, we argued that income inequality can create difficult conditions for firms at multiple
levels. At the level of the firm, inequality can constrain managerial action by invigorating protest
movements, providing those movements with a potent shared group identity. At the level of the
market, inequality can disrupt existing organizational forms by delegitimizing incumbents and can
also create opportunities for insurgents by shifting a larger share of the population into necessity
entrepreneurship. Finally, at the level of nations, inequality can increase political risk through
policy and institutional changes. It polarizes politics and can invigorate redistributive policies, it
contributes to corruption by eroding generalized trust and it threatens property rights by growing
the informal sector, necessitating increases in guard labour.

Income inequality and organizations: A research agenda

In the previous section, we outlined three ways that firms might be affected by high and rising income
inequality. While there are boundary conditions around each of these effects (not all instances of
income inequality will produce them, and not all firms will be identically affected by them), we argue
overall that income inequality is an issue that matters not only for societies but for firms as well.
To energize a uniquely organizational and strategic perspective on the social issue of income
inequality, two lines of inquiry are necessary. The first involves conceptual groundwork, relating
income inequality to prior related work, for example, by considering in greater detail how income
inequality is distinguished from other forms of inequality and in what ways it differs from other
social issues. The second line of research is predominantly empirical, focused on the reciprocal
relationship between income inequality and organizations why firms might respond to inequality,
which firms are most likely to act and what form that action is likely to take. These questions are
fundamental to developing clearer theory and evidence about the role firms play in shaping the
self-correcting or self-reinforcing dynamics of income inequality.

Distinguishing income inequality from similar social issues

Relationships between income inequality and other forms of inequality. In this article, we have been
deliberate to focus on income inequality in particular, distinguishing it from other forms of social
inequality (for instance, inequalities in health or educational access or outcomes, inequalities in
political voice or participation, inequalities in resources and treatment associated with race, gender
or other characteristics, or inequalities in social status and prestige). However, future research may
want to think about how income inequality relates to these other forms of inequality. Kawachi
(2002), for instance, notes the predictable co-occurrence of income inequality and residential segregation (a form of social and status inequality), which in turn links to inequalities in health and
well-being. Similarly, researchers may consider the ways in which pay dispersion (local, firm-level
inequality in pay) amplifies or attenuates income inequality (at the societal level). There may be
firms which act as islands of equality in highly unequal societies, or the opposite; the interaction
between these local and global conditions merits scrutiny. Whether these inequalities are orthogonal from one another, or overlap into deeper faultlines, may have consequences for the dynamics
we describe as well as other challenges firms might face due to high income inequality (Bapuji and
Mishra, 2015).
Distinguishing between income inequality and other social issues. An immediate theoretical question is
whether inequality is different in any meaningful way from other social issues. For example, we

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argued that income inequalities might constrain, disrupt and delegitimize firms. But a wide range
of other social issues can have the same effects; King and Soule (2007) discuss how activist protests (on issues ranging from labour policy to gender discrimination) can disrupt firms by spooking
investors. However, for each of the three mechanisms described in our article, there are characteristics that make income inequality conceptually distinct: first, inequality is distinct in its effect on
protest movements because it both suppresses dissent (by limiting material resources) and catalyses it (by making available certain resources of shared identity). This dynamic is not found in other
social causes. Second, inequality is distinct in how it shapes new organizational forms. While other
social issues might generate new fields and forms (organic farming, for instance, or communitysupported agriculture), the invigoration of new forms at the border of the informal economy, driven
by tenuous employment, is particular to income inequality. And third, the consequences of inequality for firms in terms of governance, the black market and graft are substantially different from
those related to other social problems. While environmental degradation, for instance, has effects
on political risk, they are entirely distinct from and operate through different mechanisms than
those created by income inequality. Taken together, these differences suggest that inequality may
require distinct theorizing, separate from a range of other social issues that firms confront and need
to respond to.

Inequality and organizations: How else are firms affected?

Inequality and the internal environment of the firm. Our article has focused on three mechanisms
tying income inequality to the fate of organizations. But other mechanisms are certainly possible.
Bapuji (2015) described how inequality in the firms operating environment shapes cognition,
emotion and behaviours of employees within the firm, which in turn affects interactions within
teams. Extremes of income dispersion might create, for instance, a sense of privilege at the top of
the distribution that contributes to a sense of entitlement and willingness to violate laws and norms
(Ct et al., 2013; Piff, 2014). If inequality does create these extremes of class distinctions, it might
have a range of adverse effects on social relationships, morality, judgment and decision-making
(Ct, 2011). Within the firm, high pay dispersion (especially when out of proportion to differences in inputs) can adversely affect employee attitudes and turnover (Shaw, 2014; Wang et al.,
2015) and promote aggression and selfishness in managers (Desai et al., 2009). Future research
might consider how income inequality at the societal level might produce these negative consequences within firms (even those without local extremes in pay dispersion).

Inequality and organizations: Which firms will act?

Who pays the burden of inequality?. If income inequality does represent an adverse environmental
condition for firms, the question becomes whether firms will take action to attenuate inequality.
Several parallels can be found in other literatures. Whether firms adopt CSR initiatives hinges on
the business case for CSR (Carroll and Shabana, 2010). Whether they adopt environmental protections depends on whether it pays to be green (Stefan and Paul, 2008). And whether firms seek
gender balance depends on whether that balance will improve firm performance (Dezs and Ross,
2012). A future stream of research, therefore, might seek to carefully identify which firms are most
and least vulnerable to the costs and burdens of inequality, and which firms benefit most from
action.
The role of field position. Organizations face a dilemma in addressing social issues like inequality.
Any action taken to alleviate a social issue would likely require coordinated action from a wide

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range of organizations and institutions, each differing in their level of interest in such coordination.
While the costs of action might be borne by individual firms, any benefits would be diffuse and
shared. In other words, despite contributing to social issues and being harmed by them, a single
firm may have little ability or motivation to affect change. Inequality makes this social dilemma
even more acute. It weakens governance institutions (as described earlier), which can in turn take
the teeth out of self-regulatory efforts led by larger firms (cf. King and Lenox, 2000). One approach
to determining which firms are most likely to engage in costly unilateral action would be to look at
firms field position that is, their position in a fields reputational hierarchy and the benefits that
accrue to them for maintaining their primacy in this hierarchy (McDonnell and King, 2013). Those
most likely to take action are those with something meaningful to lose from threats to legitimacy
and reputation. So, some inequality-attenuating changes might occur in the peripheries of a field,
where organizations are more proximate to their stakeholders (Driscoll and Starik, 2004), or in
privately held firms where leaders attitudes can shape the firms ethos (Lewin and Stephens,
1994). Canadas Lee Valley Tools, for example, has a maximum 10:1 ratio between its highest and
lowest paid workers (Grant, 2014). But incumbents with a central position seeking to defend and
maintain their legitimacy may also act (King and Walker, 2014; Reid and Toffel, 2009). Consider
Costco, whose CEO-to-worker pay ratio is 57:1, allowing it to avoid some of the legitimacy challenges faced by high-dispersion competitors (597:1 at Target, for instance, or 1034:1 at Wal-Mart,
according to Payscale.com, n.d.).

Inequality and organizations: What actions will firms take?

Value distribution and inequality. In addition to research into who is most likely to act, it is important
to understand what form that action might take. Cobb (2015) describes a number of firm-level
behaviours that contribute to income inequality, including their choices about pay levels, job
matching and the boundaries of the firm. Firms that seek to attenuate inequality might use any one
of these as a lever. Future research could broaden this line of inquiry by considering the wide range
of ways that firms capture or distribute created value (Bowman and Ambrosini, 2000; Coff, 1999;
Lepak et al., 2007), including their tax strategies (compliance vs avoidance), their philanthropic
contributions (elite vs mass) and their means of distributing revenues (public markets vs employee
ownership).
Sustainability and legitimation. A further question for future research is how firms organize their
inequality-attenuating work in order to gain recognition and preserve legitimacy. The sustainability movement, focused on environmental standards, has certifications, standards and labelling,
often organized in concert with civic-society groups and social movements (De Boer, 2003; Sharma
and Henriques, 2005). If firms begin to take action, these institutions may be adapted to include
inequality as a social issue to address. Indeed, while sustainability is often associated with environmentalism, the construct does include social and economic dimensions (Jennings and Zandbergen,
1995; Starik and Rands, 1995). The use of these standards and structures might provide a path for
firms to be recognized by stakeholders for their (costly) contributions towards attenuating
inequality.

Conclusion
Aetnas Mark Bertolini recently assigned Pikettys Capital in the Twenty-First Century to his management team to read and justified wage changes at the firm based on restoring the whole social
compact (Matthews and Francis, 2015). As it stands, it may be difficult for management scholars

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to determine whether this should be thought of as a predictable firm strategy or simply as the idiosyncratic preference of a single CEO. More broadly, we currently know very little about whether
we should expect firms to deliberately act to attenuate inequality. Our arguments in this article
suggest a direction for future research that would help to clarify these issues. We described three
ways in which firms might be adversely affected by income inequality (protest movements, insurgent organizations and increased political risk), and we outlined a series of research questions
aimed at understanding which firms will be most affected by inequality, when we might expect
them to act and what form those responses might take.
It is our hope that readers (even those who might be sceptical of our proposed mechanisms) will
be convinced that the time is ripe for a research agenda paying attention to not only how firms
shape inequality but also how income inequality shapes firms. Organizational scholars have not
shied away from researching thorny social issues in the past, as we can see in the research on gender and racial inequalities. By considering income inequality from a strategic and organizational
perspective, we can advance not only management theory and practice but also catch up to other
fields that have given earlier and deeper consideration to the effects of income inequality on individuals and societies. We hope this essay sparks some thinking in those directions.
Authors note
Both authors contributed equally.

Funding
This research received no specific grant from any funding agency in the public, commercial or not-for-profit
sectors.

Notes
1.

2.

3.

Our search of the literature suggests that this question does not seem to have gripped scholars of strategy
and organizational theory. In Strategic Management Journal, for example, we find only two papers that
consider the consequences of income inequality in the firms environment. In one, Carnahan et al. (2012)
consider how employee turnover is shaped by the interaction between income inequality within the firm
and income inequality in the firms industry environment. In the other, Holburn and Zelner (2010) demonstrate that firms in high-inequality environments tend to develop specific capabilities that help them
manage political risk, allowing them to enter riskier foreign markets. A search of the top 50 management journals yields a similar result: a handful of papers on how organizations contribute to inequality,
a smaller set of papers where inequality is peripherally considered and none that make the consequences
of inequality for firms a central concern. In Strategic Organization, the number of papers focused on the
consequences of income inequality for firms is zero.
Income inequality is different from wealth inequality, which captures the dispersion in the assets owned
by a given population. Although income inequality and wealth inequality are highly correlated, we
remain focused only on income inequality in this essay because as creators and distributors of economic
value, firms have a central role to play in income inequality. In contrast, businesses have a less central
role in wealth inequalities, which can be a result of historic accumulation as well as taxation policies.
We do not intend to argue that income inequality will necessarily give rise to a flurry of institutional
entrepreneurship and new alternative forms of organizing. Just as high income inequality creates
resource barriers to collective mobilization, it also makes it difficult to build alternatives to conventional
capitalism. Cooperatives, for instance, are likely to be established by members of a broad middle class
pooling their assets. To the extent that incomes are dichotomized between the opulently wealthy and
desperately poor, cooperatives (and other similar structures) may be more difficult to form. The material
resources necessary to experiment with new organizational forms may make large corporations difficult
to displace. But, inequality can withdraw certain social resources in particular, legitimacy from large

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organizations and provide them to these alternative organizations to give them the momentum needed to
succeed.
This finding that inequality deteriorates trust takes on particular importance when one considers the
fundamental role that trust plays in the formation of the type of protest organizations and new forms
discussed in the first two sections of this article. Previous research shows that trust is critical in making
collective action possible (Kramer et al., 1996), driving protest participation (Benson and Rochon, 2004)
and allowing multi-stakeholder partnerships to form (Sloan and Oliver, 2013).

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Author biographies
Hari Bapuji is an Associate Professor of strategic management and international business at University of
Manitoba. His research is focused on management of organizational problems that have an effect on society
and vice versa. He has published two books and numerous scholarly articles in leading management journals,
including Harvard Business Review, Journal of Business Ethics, Journal of Management Studies, Journal of
Operations Management, Management and Organization Review and Management Learning. His research
has been widely cited by hundreds of print and electronic media outlets, including New York Times, Huffington

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Post, Financial Times, Business Week, Wall Street Journal, Forbes, CNN, China Daily, USA Today and CBC.
Address: Asper School of Business, University of Manitoba, 452 Drake Centre, 181 Freedman Crescent,
Winnipeg, MB R3T 5V4, Canada. [email: hari.bapuji@umanitoba.ca]
Lukas Neville is an Assistant Professor of organizational behaviour at the Asper School of Business, University
of Manitoba. He received his PhD in organizational behaviour from Queens School of Business. His primary
research interests relate to the formation, maintenance and repair of trust in organizations. His work has
appeared in the Journal of Occupational Health Psychology, Negotiation and Conflict Management Research,
Psychological Science and Research on Managing Groups and Teams. Address: Asper School of Business,
University of Manitoba, 412 Drake Centre, 181 Freedman Crescent, Winnipeg, MB R3T 5V4, Canada.
[email: lukas.neville@umanitoba.ca]

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