Amandine Ody-Brasier

Abstract

Scholars have argued that high-status organizations enjoy cost advantages in certain areas. Prior work has emphasized the role of attention spillovers in driving these cost advantages, with exchange partners offering preferential terms to high-status organizations because they anticipate that some of the positive attention directed at their high-status clients may ultimately spill over and benefit them. Yet, while high-status actors attract a great deal of positive attention, they also receive disproportionate scrutiny. In this paper, we propose that exchange partners consider that the disproportionate negative attention directed at their high-status affiliates may spill over to them, and that, under certain conditions, they will charge them more as a result. To test this argument, we analyze annual fees paid by clients of varying status levels in the $60 billion U.S. market for audit services. Consistent with our arguments, we find that high-status clients tend to be charged higher fees than their peers. We show that this result is partly driven by auditors’ concern that any error or misconduct will receive a great deal of attention. Our results highlight important contingencies and scope conditions that clarify the relationship between organizational status and costs.