Skip to Content

Stanford GSB News

 

Keep Main Street Safe for Local Opinions

May 2006

STANFORD GRADUATE SCHOOL OF BUSINESS—Grassroots movements supporting diversity and trying to wrest control away from corporations are spurring the birth and preservation of small entrepreneurial organizations throughout the world. Local communities, for example, are fighting the arrival of big-box stores to keep the streets safe for mom-and-pop enterprises, and on the internet, podcasts and bloggers are offering options that bypass mass programming from media conglomerates.

In the midst of this conflict between diversity and mass production, Professor Hayagreeva Rao offers one of the first studies to shed light not only on how social movements spawn entrepreneurial activity to challenge large organizations, but also on whether such movements make an appreciable dent in corporate control of culture.

Specifically, Rao studied how low-power FM radio stations that feature a small broadcast radius (usually less than 3.5 miles) and often a very specific point of view drew measurable numbers of listeners away from bigger, better funded mainstream stations. What draws audiences, his research found, is that the upstart stations' content makes a connection with listeners.

Rao and his colleagues found that across the United States the sheer number of these low-power FM stations had no effect on the market shares of chain-owned radio stations. Instead it was the diversity of their ideas—the varying religious, ethnic, educational, and political causes pursued by the upstarts—that lured measurable numbers of listeners from the mainstream stations.

After Congress changed the law in 1996 to permit companies to own multiple radio stations in multiple markets, chains bought up locally owned stations rapidly and Clear Channel became the largest owner, with more than 1,200 stations by the year 2000. "This intensified long-standing concerns about diversity and the needs of local communities," explains Rao, the Atholl McBean Professor of Organizational Behavior and Human Resources.

Disgusted with the fact that corporate-owned chain broadcasters were replicating programming formats nationwide, replacing local personalities with syndicated programming, and eliminating local news departments entirely, reformers in 2000 successfully petitioned the Federal Communications Commission (FCC) to license low-power stations to allow local entrepreneurs to broadcast their own programs. Within five years, 2,796 applications were filed, resulting in the issuance of licenses for 907 microstations, leading to more diverse and locally responsive programming.

In their study, Rao and co-researchers Henrich Greve, professor of strategy at the Norwegian School of Management, and Jo-Ellen Pozner, a doctoral student at the Kellogg School of Management, analyzed data on the number of low-power FM license applications and license acceptances by the FCC from 2000 to 2005. They also examined listenership of the smaller stations, and the market share of radio stations owned by big corporate chains in more than 3,000 counties across the United States.

The researchers found that what happened in communities varied greatly. In the Birmingham, Ala., radio market, for instance, which had 18 stations, of which 15 were chain-owned before 2000, 5 groups applied for low-power licenses, resulting in 2 licensed community-based stations. In the Tucson, Ariz., radio market, however, where two of 15 stations were already independently owned, 16 applications resulted in 3 licenses for new, low-power stations. In Birmingham, the researchers found, the listenership of chain-owned channels dropped, whereas in Tucson, the chains temporarily lost market share but gained it all back by 2005.

Broadcast for the low-power stations may include local and ethnic churches (particularly Latino, Korean, and Chinese Christian groups), county and state transportation services, school districts, cultural groups, and community groups.

The researchers found that more low-power FM applications originated in communities with high concentrations of chain-owned stations. "The strong presence of a common ‘enemy' seems to have motivated such activity," explains Rao. There were more applications in communities with a higher density of nonprofit organizations as well because, he suggests, such nonprofit networks provided the knowledge, skills, and resources necessary to support the creation of alternative radio stations.

The fact that listeners did tune in to the smaller stations means that organizations seeking to affect popular culture through the creation of new entrepreneurial enterprises should hone their offerings to appeal to multiple groups rather than simply try to increase the numbers of such enterprises, says Rao. "Too much choice is demotivating," he points out. When communities had too many low-power stations, after a while audience volume dropped as listeners began to lose interest.

The study provides insights into how innovation really takes place. "People typically think that major technological and organizational breakthroughs are most often driven by a single individual or company," said Rao, "but this study shows that innovation and entrepreneurship are more often the result of collective action over time. Social movements often serve as the real force for new organizational forms."

The findings go far beyond radio audiences. Business needs to think much more actively about how social movements affect entrepreneurship, Rao argues.

"If you're an entrepreneur, you need to figure out how to create or join a cultural movement and take advantage of it," he says. "If you're a large firm, you need to figure out how you're going to manage the effects on your business of such a social movement. If you see new kinds of organizations emerging that challenge your reputation and your market share, are you going to sit around and operate according to business as usual?"

—Marguerite Rigoglioso

Related Information

"Vox Populi: Resource Partitioning, Organizational Proliferation, and the Cultural Impact of the Insurgent Micro-Radio Movement," Henrich Greve, Jo-Ellen Pozner, and Hayagreeva Rao, American Journal of Sociology, forthcoming

The Demography of Corporations and Industries, Glenn R. Carroll and Michael T. Hannan, Princeton University Press, 2000

"Institutional Change and the Transformation of Interorganizational Fields: An Organizational History of the U.S. Radio Broadcasting Industry," Huseyin Leblebici, Gerald R. Salancik, Anne Copay, and Tom King, Administrative Science Quarterly, 1991

Comparative Perspectives on Social Movements: Political Opportunities, Mobilizing Structures, and Cultural Framings, edited by D. McAdam, J. McCarthy, and M. Zald, Cambridge University Press, 1996

"Big World: How Clear Channel Programs America," Jeff Sharlet, Harper's Magazine, December 2003