Crisis spillover: guilty by association

I’m researching how challenges and crises can move from one organization to another for my doctoral dissertation. One fascinating thing I found in my literature review was this concept of “crisis spillover” that can cause a crisis from one company to occur in another company – even if they aren’t directly connected. Often called “guilty by association” – the idea of crisis spillover is most easily observed in public relations crises.

Here’s how it works.

Making up an example, let’s say a specific company is found to have contaminants in their products which makes them un-saleable. As a result, the company might face backlash from their crisis: maybe consumers will avoid their product for a time or demand refunds on uncontaminated goods. If it’s a publicly traded company, the stock price might drop as investors attempt to reduce risk.

Meanwhile, the company’s main competitor might have perfectly fine products – but still face similar effects. Customers and shareholders might decide the whole industry is risky and reduced sales or a lowered stock price might result – even though the competitor may have done nothing wrong to start.

Want to learn more about this phenomenon? Great! You can learn more about my study findings here.