Birds of a feather: intra-industry spillover of the Target customer data breach and the shielding role of IT, marketing, and CSR

The authors develop a conceptual framework for conditions under which news of a major customer data breach at a U.S. retail firm is likely to decrease other U.S. retailers’ shareholder value. Using the massive data breach at Target Corporation as their empirical context, and an event study of 168 publicly listed U.S. retailers as their methodology, the authors find considerable support for their framework. Results indicate that the Target data breach resulted in negative abnormal returns for other U.S. retailers, and that the strength of this contagion effect was moderated by factors related to retailers’ (a) size and product market similarity with Target, (b) governance-related tie-strength with Target, (c) information technology-related ability to prevent a similar breach, (d) marketing ability to respond effectively in the aftermath of a similar breach, and (e) corporate social responsibility. The authors show that although a major retail data breach may result in an intra-industry spillover, managers can use factors related to information technology, marketing, and corporate social responsibility to help insulate their firms from this contagion effect.