While research has identified several forms of stigma, organizational conduct has been central to stigmatization. In this study, we argue that conspiracy theories give rise to a new form of stigma, illusory conduct stigma. It occurs when one or more stakeholder groups penalize organizations for imaginary actions. This study builds a theoretical foundation of illusory conduct stigma, how it affects organizations, and how organizations participate in its perpetuation. We identify three characteristics that are central to conspiracy theories: interlacing of relevant and irrelevant evidence, identification of actors, and the centrality of emotions. They affect organizations through claims of inexplicable actions, expansive expectations, and disparate beliefs. In turn, organizations, at times, perpetuate illusory conduct stigma through the production, facilitation, and forbearance of conspiracy theories. Contextualizing organizations and their place amid conspiracy theories, the study explains how illusory conduct stigma manifests and survives in the society.
