Embeddedness, social identity and mobility: Why firms leave the NASDAQ andjoin the New York Stock Exchange

Organizations derive their social identity from membership in formal groups and strive to maintain a positive social identity. When their social ident ity is threatened and group boundaries are permeable, organizations defect to other groups. This paper suggests that organizations receive identity-di screpant cues when in-group members defect to an out-group, but how organiz ations respond to such cues hinges on their social affiliations to the in-g roup, out-group, and defectors. A study of organizations that migrated from the NASDAQ stock market to the New York Stock Exchange reveals that strong ties to in-group members (NASDAQ members) reduced the impact of identity-d iscrepant cues and diminished defections. Conversely, strong ties to out-gr oup members (NYSE members) enhanced the impact of identity-discrepant cues and increased defection. Proximity to defectors increased cross-overs-organ izations followed defectors to whom they had direct ties. implications for the study of embeddedness are outlined.