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Strategic Responses to Stigma and Uncertainty: Three Essays on the Cannabis Industry

  • Author(s): Dioun, Cyrus Kurosh
  • Advisor(s): Haveman, Heather A
  • et al.
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Abstract

Essay 1. How can organizations use strategic frames to develop support for illegal and stigmatized markets? Drawing on interviews, direct observation, and the analysis of 2,497 press releases, I show how pro-cannabis activists used distinct framing strategies at different stages of institutional development to negotiate the moral boundaries surrounding medical cannabis, diluting the market’s stigma in the process. Social movement organizations first established a moral (and legal) foothold for the market by framing cannabis as a palliative for the dying, respecting moral boundaries blocking widespread exchange. As market institutions emerged, activists extended this frame to include less serious conditions, making these boundaries permeable.

Essay 2. States govern markets through legal regimes. Although prices are central to markets, we know little about their relationship with legal regimes. We build on sociological and legal scholarship to develop two theories of the impact of legal regimes on prices. Both predict that uncertainty created by legal regimes raises prices by increasing costs and increases price dispersion by hindering the development of market norms, but they differ in how legal regimes create uncertainty. The single-level theory predicts that uncertainty results from the lack of clear property rights; the multi-level theory predicts that uncertainty results from conflict about property rights between legal regimes created by different levels of government (federal, state, local). We apply these theories to state-legal markets for medical cannabis in the United States. Consistent with the multi-level theory, we find that conflict between state-level and federal-level legal regimes resulted in higher and more dispersed prices for medical cannabis and that alignment of local-level and federal-level legal regimes resulted in less dispersed prices. We conclude by considering how the multi-level theory of legal regimes might be applied to other markets.

Essay 3. Organizations selling stigmatized products persist despite fierce opposition from hostile audiences. Scholars have explained the viability of stigmatized organizations by detailing strategies organizations pursue to decrease public scrutiny and/or develop legitimacy for contested products. These explanations foreground how organizations attempt to conceal their stigma to decrease scrutiny from hostile audiences, but rarely describe how these stigma management strategies affect marketing products to customers. Yet stigmatized markets persist because consumers purchase stigmatized products, inviting further study into how stigma management strategies affect organizational performance. In this paper, I show how seeking legitimacy from critics can hurt organizational performance by delegitimating products in the eyes of customers. Using deep learning for text classification to analyze product descriptions advertised by retailers in Washington State’s recreational cannabis market, I find that organizations pursued three distinct stigma management strategies: diluting stigma, embracing stigma, and commoditization. Most organizations chose not to explicitly address the stigmatized features of their products, instead focusing on the chemical content of their products (commoditization). A few organizations differentiated their products by diluting or embracing stigma. Organizations that diluted stigma performed worse across all contexts than organizations that did not. However, organizations that embraced stigma performed better in areas where stigma was strongest. Together, these findings suggest that stigma could be an asset, not a liability, and that legitimacy-seeking behavior may undermine organizational performance.

Main Content

This item is under embargo until July 21, 2022.