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Financial Implications of Local and Nonlocal Rival Isomorphism A Signaling Paradox

We develop an isomorphism-signaling framework to explain the likelihood of isomorphic behavior (and nonconformity) by a focal firm toward local rivals and nonlocal rivals and then predict financial performance associated with the action. In the presence of asymmetric information, we predict a causal relationship between rival isomorphism and financial performance that reveals a paradox?that is, we theorize and show conditions in which ?conforming? reflected by rival isomorphic behavior is a signal that ?separates? high-quality from low-quality firms. We consider a firm?s costs and benefits of local and nonlocal rival isomorphism and assert that a firm can signal its quality, which affects financial performance of the equity offering. We test and find support for our hypotheses using a sample of firms raising capital abroad from 1994 to 2005. .Printed Journal

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