We live in a world full of rankings—like the Fortune 500 for businesses, and the U.S. News & World Report rankings for colleges. Being ranked higher usually means more visibility, more respect, and better opportunities. As such, companies, universities, and all kinds of organizations put significant effort into climbing the rankings or keeping their spot.
But these rankings often do more than just listing organizations one by one. They also often group organizations into tiers—like top, middle, and lower tiers. Think of law schools in the United States, which are categorized into Tier 1 through Tier 4, based on the U.S. News & World Report rankings. Or Fortune’s distinction between the more prestigious Fortune 500 and the slightly less celebrated Fortune 1000. What is interesting is how a small change in rank can make a significant difference when it positions an organization into a next higher tier or a lower one.
Imagine two law schools—one ranked 50th and the other 51st. The 50th ranked school is just inside the prestigious Tier 1, while the 51st is just outside it. Even though their rank positions are nearly identical, they fall into distinct status tiers. The 50th school gets the status boost and opportunities tied to Tier 1 status, while the 51st misses out. As such, the tiered status hierarchy creates a sharp difference in their status position.
Do those organizations positioned close to the boundaries of a tier—relatively high or low within a tier—behave differently from those positioned in the middle of the same tier? A new study published in the Strategic Management Journal says yes—and the answer is more nuanced than you might expect.
Chunhu Jeon of Morgan State University, along with Jonathan Bundy and Wei Shen of Arizona State University analyzed data from Korean business groups ranked in an asset-based ranking from 2001 to 2018. They looked specifically at acquisition behaviors—competitive actions to boost their asset size, which is exactly how the ranking is determined. They reveal two interesting patterns in acquisition behaviors of those near the top or bottom of a tier, compared to those in the middle, one they call tier-aspiration effect and the other tier-maintenance effect:
- Tier-Aspiration Effect: Organizations at the top of their tier—just below the cutoff for the next higher tier—are more likely to take bold, even risky acquisitions to move up. Being at the top, they are comfortably positioned in the tier and feel secure about their tier status. Their strong position gives them confidence to take aggressive actions without worrying much about potential setbacks.
- Tier-Maintenance Effect: On the flip side, organizations at the bottom of their tier—just above the cutoff for the next lower tier—are in a tricky spot. They are motivated to maintain their current tier status but taking risky actions—like acquiring unrelated firms—could also backfire and cause them to drop to the lower tier. So, they are more cautious—unless the organizations just below them in the lower tier are putting on the pressure. When that happens, the bottom-tier organizations are more likely to take competitive actions to hold their tier position.
This study demonstrates that positions within a tier can have a significant impact on how organizations behave. It is not just about being in a high or low tier—where exactly they sit within a tier matters too. Furthermore, threats from below could also shape nuanced actions of those just above the tier cut-off.
This research adds a fresh layer to our understanding of how rankings drive behavior. By looking at the nuances in behavior within tiers, the study highlights how organizations are motivated not just by where they are but also by where they almost are.
