Corporate reputation today a misunderstood concept Sara Martins Gonçalves

Corporate Reputation today: a misunderstood concept

Sara Martins Gonçalves


Student of PhD in Management

Lisboa School of Economics & Management (ISEG) ,

Universidade de Lisboa


Rui Vinhas da Silva

PhD and Associate Professor

ISCTE, Lisbon University Institute

Objectives of the presentation:

1. The importance of corporate reputation today

2. A new approach to corporate reputation

3. Conclusion, research limitations and contributions

4. References cited

Silva, R.V. & Gonçalves, S.M. Corporate Reputation today: a misunderstood concept

Interest in Corporate Reputation


Source: Fombrun, CJ (2012)


“In this environment, 65% of business leaders say that reputation management is a top priority for executives and the Board of Directors. That is up from 56% in 2013, with an expectation that even more focus will be put on this topic in the years to come” (Reputation Institute 2014: 1).

Raises the following questions:

1. What triggered the interest in corporate reputation?

2. How is academy responding to this interest in corporate reputation?



We argue that it was the contextual changes that occurred in the last decades – the so-called Information Revolution – (Badineli et al. 2012; Rust and Thompson 2006) that give to corporate reputation an increased role to determine the success or failure of firms. Salient trends of reality: a. Increasing importance attributed to relationships in a business context in

the 70’s took Marketing researchers to address those “voluntary ties among firms and other economic actors” (Barile and Polese 2010b, 26). Since individuals and organizations are progressively more and more interconnected and interdependent, understanding networks and the way actors interact with each other is critical (Spohrer and Maglio 2009).

b. All business are more dependent on knowledge than ever before.


1. What triggered the interest in corporate reputation?


There are numerous definitions for corporate reputation (Barnett and Pollock 2012) and each one of them disclosure the knowledge area premises and the framework used to approach the concept (Fombrun 2012).


2. How is academy responding to this interest in corporate reputation?

Resource-based View

• “firms as a broader set of resources” (Wernerfelt 1984, 171)

• corporate reputation is an intangible resource tied to the firm

• researchers devoted their efforts to know how corporate reputation can influence profitability (Ang and Wight 2009; Bergh et al 2010)

Institutional Theory

• study “the processes by which structures, including schemas, rules, norms, and routines, become established as authoritative guidelines for social behavior” (Scott 2005, 461)

• used to understand how corporate reputation is built through legitimacy and culture inside institutional contexts (Deephouse and Carter 2005; Hall 1992; Rao 1994)

Signaling Theory

• purpose of understanding under which economic conditions buyers and sellers possess asymmetric information when facing a market interaction (Spence 1974)

• reputation research has the purpose of explaining in which extent firm’s choices are signals able of influencing stakeholders’ perceptions about the firm (Basdeo et al. 2006; Walker 2010)


All theoretical frameworks used to study corporate reputation had important roles in understanding corporate reputation in the 80’s, in the 90’s and even after and they were also fundamental to theories arising in Marketing and Management.


The features of the current business context mentioned before are not found, at all or at least partially, or poorly represented in those conceptual frameworks used until now to study corporate reputation.

Therefore, we propose to look at the construct through new lenses that are able to capture the most salient characteristics of relationships occurring between firms and its stakeholders all together.

New approach proposed

Service-dominant

Logic

Nordic

School

Service

Science

Service

Logic


Service Logic main concepts (1/2) Service or the “application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself” (Vargo and Lusch 2004, 2) is the essence of every exchange process. Operant resources – those resources that “produce effects” - are essential in service logic as service provision depends on the existence and application of those resources (Vargo and Lusch 2004; Chandler and Vargo 2011). What can be valued for others is the use of competences that constitutes “service” regardless of its material or immaterial form and value cannot be added to service because it is co-created between parties involved.



Service Logic main concepts (2/2) The resulting value – defined as the “improvement in a system, as judged by the system or the system’s ability to fit an environment” (Vargo, Lusch and Akaka 2010, 146) - is twofold: on one hand it is the usual “value exchanged” and on the other hand there is “value in use” as another dimension of value dependent on idiosyncrasy and context (Vargo and Lusch 2004; Vargo and Lusch 2008a). The resulting value from the service process will be different for each actor as it depends on individual and situational “filters”. Individual “filters” could be individual experiences, imagination or the emotive aspects of the process and situational “filters” could be countless variables affecting the situation surrounding each actor (Sandstrom et al. 2008). The network formed by all actors involved in a service process is a service system and that can go from the simplest shape – an actor interacting with two or three other actors – to the complex one – global economy (Maglio and Spohrer 2008).



Through these lenses:


1. Corporate reputation can be seen as an operant resource.

It is broadly demonstrated in corporate reputation literature that it is an important intangible and dynamic resource (e.g. Bergh et al. 2010; Boyd, Bergh and Ketchen 2010; Pfarrer, Pollock and Rindova 2010 just to mention some recent works) and since it is a resource particularly relevant to the service proposal acceptance when an actor intends to engage in a service experience for the first time (Puncheva 2008) or does not have enough information to make a decision and needs to reduce uncertainty (Jensen, Kim and Kim 2012).




2. Corporate reputation can be seen as a contextual filter able to influence perception of the service’s value from each actor.

In this way, the actor’s perception about a firm can act as a contextual filter by reducing uncertainty regarding the service process. On the other hand, when we are looking at the reputation concept applied to industries or markets – or service ecosystems – some authors mention that reputation can act as a regulatory mechanism by stimulating firms to behave according what is expected of them (Brammer and Jackson 2012; McKenna and Olegario 2012). This typically happens in situations where formal regulation is required but is missing (McKenna and Olegario 2012).




3. Corporate reputation can be seen as a dimension of value in use for the firm and for the service beneficiary in such a way that could be used by both as a resource in a future interaction.

The exclusive human characteristic of being able of combining past, present and future (Chandler and Vargo 2011) is of the most relevance in reputation studies. Corporate reputation is the result from a group of perceptions collected from interactions between the firm and the actor over time (Jensen, Kim and Kim 2012). Reputation reinforcement builds trust (Keh and Xie 2009) and that is clearly an emotional dimension of value in use. In other words, corporate reputation creates value is one of the most common proposition in corporate reputation literature (Barnett and Pollock 2012) but above all, from a service perspective, corporate reputation is value.




4. Corporate reputation is service ecosystem-specific.

During several years and to most of researchers corporate reputation was a collective judgment from its stakeholders (Barnett, Jermier and Lafferty 2006) but recently this proposition has been challenged. Fombrun (2012) advocates that corporate reputation should be “stakeholder group-specific” and “reference group-specific”. Also Jensen and colleagues (2012) argue that corporate reputation as a collective assessment has little practical utility and is difficult to measure. The service literature complies with this recent perspective on corporate reputation concept as actors and contexts are partially defined by one another in such a way that every service ecosystem is unique (Chandler and Vargo 2011).




5. In such a context, the interdependence between service systems intensifies the risk of damage when reputational problems occur.

We have been watching the escalation of consequences from reputational problems all over the world. From a service literature perspective, the explanation is in the increased interconnection and interdependence of “social, technological, economic, environmental, and political systems that people are part of and within which they play multiple overlapping roles” (Spohrer and Maglio 2009, 7).


Research limitations: This is a conceptual and exploratory paper without empirical analysis .

Conclusion, research limitations and contributions

Contributions: This paper opens the door for a wide range of new questions about corporate reputation within a service system: how can corporate reputation be defined in this context? How can it be measured? How can corporate reputation be used to create value? Given the interconnectedness and interdependence between service systems, how does reputation propagation works? These are only a few relevant research opportunities.

We propose to study corporate reputations within a framework resulting from three prominent streams of research in service theory. The reflections made about corporate reputations in a service framework took us to conclude that corporate reputation has, in deed, an increased importance as it plays several roles in firms’ daily practices.


Ang, S. H., and Wight, A. M. 2009. Building intangible resources: The stickiness of reputation. Corporate Reputation Review 12(1): 21-32.

Badinelli, R., Barile, S., Ng, I., Polese, F., Saviano, M., and Di Nauta, P. 2012. Viable service systems and decision making in service management. Journal of Service Management 23(4): 498-526.

Barile, S. and Polese, F. 2010b. Linking the viable system and many-to-many network approaches to service-dominant logic and service science. International Journal of Quality and Service Sciences 2(1): 23-42.

Barnett, M. L. and Pollock, T. G. 2012. Charting the Landscape of Corporate Reputation Research. The Oxford Handbook of Corporate Reputation, ed. Barnett, ML and Pollock, TG, 1-15. Oxford: Oxford University Press.

Barnett, M. L., Jermier, J. M., and Lafferty, B. A. 2006. Corporate reputation: The definitional landscape. Corporate Reputation Review 9(1): 26-38.

Basdeo, D. K., Smith, K. G., Grimm, C. M., Rindova, V. P., and Derfus, P. J. 2006. The impact of market actions on firm reputation. Strategic Management Journal 27(12): 1205-1219.

References


Bergh, D. D., Ketchen, D. J., Boyd, B. K. and Bergh, J. 2010. New frontiers of the reputation—Performance relationship: Insights from multiple theories. Journal of Management 36(3): 620-632.

Brammer, S. and Jackson, G. 2012. How regulatory institutions influence corporate reputations: a cross-country comparative approach. The Oxford Handbook of Corporate Reputation, ed. Barnett, ML and Pollock, TG, 297-319. Oxford: Oxford University Press.

Chandler, J. D. and Vargo, S. L. 2011. Contextualization and value-in-context: How context frames exchange. Marketing Theory 11(1): 35-49.

Deephouse, D. L., and Carter, S. M. 2005. An Examination of Differences between Organizational Legitimacy and Organizational Reputation*. Journal of Management Studies 42(2): 329-360.

Fombrun, CJ. 2012. Corporate Reputation: Definitions, Antecedents, Consequences. The Oxford Handbook of Corporate Reputation, ed. Barnett, ML and Pollock, TG, 94-113. Oxford: Oxford University Press.

Hall, R. 1992. The strategic analysis of intangible resources. Strategic Management Journal 13(2): 135-144.

References


Jensen, M., Kim, H. E. E. Y. O. N. and Kim, B. K. 2012. Meeting Expectations: A Role-Theoretic Perspective on Reputation. The Oxford Handbook of Corporate Reputation, ed. Barnett, ML and Pollock, TG, 140-159. Oxford: Oxford University Press.

Keh, H.T. and Xie,Y. 2009. Corporate Reputation and Customer Behavioral Intentions: The Roles of Trust, Identification and Commitment. Industrial Marketing Management 38: 732-742.

Maglio, P. P. and Spohrer, J. 2008. Fundamentals of service science. Journal of the Academy of Marketing Science 36(1): 18-20.

McKenna, C. and Olegario, R. 2012. Corporate reputation and regulation in historical perspective. The Oxford Handbook of Corporate Reputation, ed. Barnett, ML and Pollock, TG, 260-277. Oxford: Oxford University Press.

Pfarrer, M. D., Pollock, T. G. and Rindova, V. P. 2010. A tale of two assets: The effects of firm reputation and celebrity on earnings surprises and investors' reactions. Academy of Management Journal 53(5): 1131-1152.

Puncheva, P. 2008. The role of corporate reputation in the stakeholder decision-making process. Business & Society 47(3): 272-290.

References


Rao, H. 1994. The social construction of reputation: Certification contests, legitimation, and the survival of organizations in the American automobile industry: 1895–1912. Strategic Management Journal 15(S1): 29-44.

Reputation Institute. 2014. Playing to Win in the Reputation Economy - 2014 Annual Reputation Leaders Study. Available at: www.reputationinstitute.com [13/10/2014].

Rust, R. T. and Thompson, D. V. 2006. How does marketing strategy change in a service-based world. The service-dominant logic of marketing: Dialog, debate, and directions,ed. Lusch and Vargo, 381-392.NY: M.E. Sharpe

Sandström, S., Edvardsson, B., Kristensson, P. and Magnusson, P. 2008. Value in use through service experience. Managing Service Quality 18(2): 112-126.

Scott, W. R. 2005. Institutional theory: Contributing to a theoretical research program. Great minds in management: The process of theory development, ed. Smith and Hitt, 460-484. Oxford: Oxford University Press.

Spence, A. M. 1974. Market signaling: Informational transfer in hiring and related screening processes. Cambridge, MA: Harvard University Press.

Spohrer, J., and Maglio, P.P. 2009. Service Science: Toward a Smarter Planet. Service Engineering, ed. Karwowski & Salvendy, 3-30. NY: Wiley

References


Vargo , Lusch, R. F. and Akaka, M. A. 2010. Advancing service science with service-dominant logic. Handbook of service science, ed. Maglio, Kieliszewski and Spoher, 133-156. NY: Springer

Vargo and Lusch, RF. 2004. Evolving to a New Dominant Logic for Marketing. Journal of Marketing 68(1): 1-17.

Vargo and Lusch, RF. 2008a. Service-dominant logic: continuing the evolution. Journal of the Academy of Marketing Science 36: 1-10.

Walker, K. 2010. A systematic review of the corporate reputation literature: Definition, measurement, and theory. Corporate Reputation Review 12(4): 357-387.

Wernerfelt, B. 1984. A resource‐based view of the firm. Strategic Management Journal 5(2): 171-180.

References


Student of PhD in Management

Lisboa School of Economics & Management (ISEG) ,

Universidade de Lisboa


Rui Vinhas da Silva

PhD and Associate Professor

ISCTE, Lisbon University Institute

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Corporate reputation today a misunderstood concept Sara Martins Gonçalves

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