Collateral impact: how rivalry diffuses shareholder activism threats

July 8th, 2026

This study examines how shareholder activism directed at rivals can indirectly influence the strategic actions of a non-targeted firm. Using the Awareness–Motivation–Capability (AMC) framework, we theorize that firms respond to consequential activism campaigns targeting their rivals by adjusting their competitive growth and social responsibility actions. We distinguish between financially motivated shareholder activism, which carries implicit disciplinary threats, and socially motivated shareholder activism, which carries implicit reputational threats. We argue that financially motivated activism at rivals triggers non-targeted firms to reduce both competitive growth and CSR actions, while socially motivated activism at rivals reduces growth but increases CSR actions of non-targeted firms. We further propose that the intensity of rivalry, shareholder composition and firm status moderate these relationships. We contribute to research on interorganizational diffusion, shareholder activism and social movements.

Introduction

Activists, including activist shareholders, often target firms with the explicit intention of influencing their policies and practices (Hadani et al., 2011, Ryan and Schneider, 2002). However, it remains unclear whether and under what conditions these actions also influence non-targeted rival firms (Chuah et al., 2024). Prior research has focused primarily on the direct effects of shareholder activism (Aluchna et al., 2022, Barros et al., 2021) on competitive growth and social responsibility (Clark and Crawford, 2011, David et al., 2007, David et al., 2001, Lee and Lounsbury, 2011). However, recent research suggests the potential for spillover effects, whereby nontargeted firms adjust their strategies after observing shareholder activism against their rivals (Shi et al., 2020, Shi et al., 2022).

Building on research on interorganizational spillovers (Shi et al., 2020, Shi et al., 2022), we conceptualize collateral impact, a rivalry-based form of interorganizational spillover, as a distinct indirect effect of activism that operates through competitive rivalry. Activism directed at a rival is consequential for non-targeted focal firms because rivals are salient comparison targets, making the campaign more likely to be interpreted as diagnostic and threatening and thereby catalyzing firms’ awareness, motivation, and capability to respond pre-emptively. That is, non-targeted firms can take pre-emptive actions to protect managerial discretion or safeguard their reputations (Ingram et al., 2010, Livengood and Reger, 2010). For instance, activism against Walmart’s expansion efforts influenced Target’s growth decisions (Yue et al., 2013). Yet, research on shareholder activism’s indirect effects remains scarce (Chuah et al., 2024, Denes et al., 2017, DesJardine et al., 2023), limiting our understanding of how activism reverberates across competitors. Hence, we ask: what influence does shareholder activism targeted at rivals have on the competitive growth and social responsibility actions of non-targeted firms?

To address this question, we draw on the Awareness–Motivation–Capability (AMC) framework (Chen et al., 2007) to hypothesize how interorganizational spillovers from shareholder activism occur (Shi et al., 2022). While prior work has examined how social activist pressure can spread through symbolic or tactical diffusion (Briscoe et al., 2015, Briscoe and Safford, 2008, Haveman et al., 2007), the role of shareholder activism and rivalry in the diffusion process remains underexplored. For instance, Shi et al. (2020) show that institutional investors’ activism can generate “portfolio spillovers,” influencing non-targeted firms through shared ownership ties. Yet less is known about a different pathway. That is, how activism targeting rivals can influence firms not connected through ownership but rather through competitive and psychological rivalry (Kilduff, 2019, Kilduff et al., 2010). This is both scholarly and practically relevant given that shareholder activists may aim to evoke “large-scale change…through the symbolic targeting of one or more portfolio firms” (Ryan & Schneider, 2002, p. 555), and advisory firms like Deutsche Bank and Barclays routinely counsel clients to anticipate and deter activist investors before campaigns are launched (Bloomberg, 2014). Yet the conditions and mechanisms of this broader influence remain less known.

A few prior studies have examined the diffusion effects of activism across multiple mechanisms. A governance and finance lens emphasizes portfolio-based spillovers, whereby common ownership diffuses actions across holdings. For example, Shi et al. (2020) argued that common ownership among shareholders facilitates diffusion and is positively associated with restructuring and growth initiatives among non-target firms. A broader diffusion perspective highlights field-level diffusion and institutional isomorphism, as firms imitate practices (Meyer and Rowan, 1977, Strang and Soule, 1998, Still and Strang, 2009). Related work also suggests that diffusion can vary by activism tactics and by whether practices appear voluntarily adopted versus imposed under pressure (e.g., Briscoe et al., 2015, Haveman et al., 2007, Briscoe and Safford, 2008). For example, Briscoe, Gupta, and Anner (2015), in the context of higher education, argued that disruptive tactics are less contagious than evidence-based tactics because they appear to non-targeted colleges to be adopted under pressure. Yet, the relationship between shareholder activism against rivals and potential changes in non-targeted organizations remains understudied. Building on the AMC view of spillovers (Shi et al., 2022), we argue that rivalry (Kilduff, 2019, Kilduff et al., 2010) constitutes a distinct mechanism: because rivals are salient comparison targets, activism against a rival is more likely to be interpreted as diagnostic and threatening, heightening awareness and motivation to act even when firms are not directly targeted.

This question is also timely for several reasons. First, shareholders occupy a uniquely powerful governance role, often using formal proposals to shape corporate strategy, but the extent to which their influence creates collateral impact is not well understood. Second, the nature of shareholder activism has evolved: while it historically focused primarily on financial performance (Denes et al., 2017), activism has increasingly included concerns about environmental and social issues. In 2023, 56.7% of shareholder proposals in U.S. public companies addressed social or environmental concerns (Aguilera, 2024). This shift increases the potential for non-targeted firms to face the music before they hear the drums. Third, because engagement is costly for both activists and firms, activists are incentivized to select targets whose actions can catalyze broader industry shifts, while firms are motivated to act early to avoid confrontation.

Our theorizing focuses on instances of activism at rivals that are plausibly consequential enough to induce change in non-targeted firms. Consequential here refers to instances of activism at rival firms that also coincide with notable changes in rival behaviour, thereby creating stronger conditions for spillovers. Activist proposals that are merely symbolic, easily ignored or withdrawn may not alter the strategic landscape; what strengthens the likelihood of a spillover to non-targeted firms is consequential activism, i.e., where the targeted rival engages also undertakes strategic changes that are in line with the activist demands. This distinction is crucial because interorganizational spillover work emphasizes that not every event is equally likely to travel across organizational boundaries. As Shi et al. (2022, p.198) note, “because peer organizations and their stakeholders tend to become aware of rare, visible, and critical events in focal organizations, such events may change the perceptions of peer organizations and their stakeholders, triggering interorganizational spillover.” In our context, shareholder activism that is accompanied by observable changes at rivals meets these conditions by demonstrating that activist pressures may have succeeded and, thus, is consequential for the non-targeted firm. Such outcomes heighten the awareness, threat perceptions, and motivations of non-targeted firms, thereby setting in motion the diffusion process. Accordingly, our hypotheses focus on rival-targeted activism that leads a focal firm to change its competitive or social behavior, as this can be a trigger through which activism at one firm spills over to affect other competitor firms.

To examine how firms respond to threats of activists targeting their rivals, we analyze how non-targeted S&P 1500 firms reacted to socially and financially motivated shareholder proposals directed at their rivals between 2006 and 2013. Socially motivated activism (e.g., on emissions, labor rights, board diversity, employee rights) is typically interpreted as a reputational threat to legitimacy (McDonnell et al., 2015, Flammer et al., 2021), while financially motivated activism (e.g., on board composition, CEO pay, dividends, or asset restructuring) poses a disciplinary threat to managerial discretion (Gantchev, 2013, Goranova and Ryan, 2014). We examine firm responses across two strategic domains: social-responsibility actions, which signal engagement with stakeholder concerns (Marquis & Lounsbury, 2007), and competitive growth actions, such as product launches and market entry, which demonstrate market competitiveness (Livengood & Reger, 2010). Our results show that non-targeted firms curb growth and social-responsibility actions in response to consequential financially motivated activism that targeted their rivals but reduce growth and expand social-responsibility actions following consequential socially motivated activism that targeted their rivals. These spillovers are moderated by the nature of the relationship among firms and the firm’s context. That is, the intensity of rivalry between the nontargeted firm and its targeted rival amplifies the effect of rival-targeted activism on firm growth but has little influence on social-responsibility responses; dedicated institutional ownership weakens growth action spillovers but otherwise shows a limited moderating effect; and finally, firm status heightens sensitivity of its social-responsibility responses, but not growth responses, to rival-targeted activism.

We respond to calls to study the indirect effects of activism by introducing rivalry as a distinct diffusion mechanism and specifying its boundary conditions. Our work offers several contributions. First, we contribute to the interorganizational spillover literature (Shi et al., 2022) by showing that shareholder activism directed at a rival can trigger strategic responses in non-targeted competitor firms through rivalry. Whereas prior work has emphasized portfolio-based diffusion via shared ownership ties (Shi et al., 2020), we identify a distinct pathway in which rivalry, which speaks to the nature of the relationship between companies, heightens perceived threat and motivates strategic adjustment. Second, we extend the shareholder activism literature (Goranova & Ryan, 2014) by examining how proposal heterogeneity shapes spillover effects on competitive growth and socialresponsibility actions. Most prior studies treat activism as a unified phenomenon, focusing primarily on either its financial or social dimensions in isolation (Goranova & Ryan, 2014).1 In contrast, we show that activism is not monolithic: financially and socially motivated proposals carry different substantive demands, activate distinct perceived threats, and produce divergent indirect effects on non-targeted firms. Third, we contribute to the social activism literature by showing that firm-level moderators, specifically, shareholder composition and status, condition how activism diffuses. Firms with more dedicated investors are buffered from short-term pressures, slowing diffusion, whereas high-status firms accelerate contagion.

The study is available on Science Direct