Institutionalized Strangers: How Activist Short Sellers Cultivate Outsiderness to Purvey Novel Information to the Market

• In Event: Market Codes: Bureaucrats, Brokers, and Algorithms

Abstract

Outsiders often drive institutional change but risk being dismissed for lacking established markers of legitimacy. While sociology research typically examines how outsiders overcome this liability by adopting institutional norms to gain entry, this paper explores how professionals may instead cultivate and maintain outsiderness as a strategic asset. Using a 35-year case study of activist short selling (1990–2025), we analyze the conditions under which actors exploit rather than expunge their outsider status to influence the mainstream. We argue these professionals function as institutionalized strangers—figures who leverage technical expertise alongside deliberate markers of illegitimacy to preserve the functional autonomy needed to purvey novel information to the market. By strategically signaling defiance of institutional norms, short sellers are empowered to publish critical data on corporate misconduct and fraud that insiders cannot because they are constrained by professional etiquette, organizational affiliation, and corporate ties. This case illustrates the institutional conditions that allow certain professions to exploit an ambiguous outsider-insider status to address market failures, even while remaining morally stigmatized and marginalized. Ultimately, we suggest that successful intervention in a field may depend not on assimilation, but on a strategic hybridization of technical competence and behavioral defiance.

Authors

• Brad R. Turner, Massachusetts Institute of Technology

• Georg Rilinger, MIT Sloan School of Management