Reputation

Organizational Reputation can have multiple definitions. In a recent article, Lange et al. (2011) reviewed the management literature discussing reputation.

In their review, they categorize definitions of reputation into three general ideas:

  1. Being Known
    • Being well-known, broad awareness of the firm irrespective of judgment
    • Disagreements on prominence distinction
  2. Being Known for Something
    • Includes an assessment of a particular attribute of interest or value
    • Perceived quality, evaluation, judgment
  3. Generalized Favorability
    • Includes an assessment based on aggregate multiple organizational attributes
    • Affective, long term

The literature focuses on the effects of reputation. Traditionally, these are positive. For example, reputation can help an organization the benefit of the doubt when negative information is exposed. However, there are also negative effects. For example, reputation can result in raised expectations and subject a firm to the burden of celebrity – or intense scrutiny.

Some papers discussing organizational reputation include:

  • Elsbach 1994:
    • She examined how organizational verbal accounts were constructed after controversial events in order to manage organizational legitimacy, and how effective they are. She drew on impression management research and institutional theory. Her analysis of CA cattle industry shows that organizational accounts that combine acknowledging forms of accounts with references to widely institutionalized characteristics are the most effective in protecting organizational legitimacy.
  • Wade, Porac, Pollock, Graffin 2006:
    • They studied the effects of the certification of individual managers on organizational-, and individual-level outcomes. Using the data from Financial World’s CEO of the year context, they found that certified CEOs received higher compensation than noncertified CEOs when performance was high but lower remuneration (rewards) when performance was poor.
  • Mishina, Dyke, Block, Pollock 2010:
    • Previous studies suggest that high performing firm are less likely to do illegal activities but in reality there are number of instances. They ask why and under what conditions prominent and successful firms would take risks to do bad things? In their paper they discuss the effects of high aspirations, expectations, and prominence. They define Corporate illegality as an illegal act primarily meant to benefit a firm by potentially increasing revenues or decreasing costs. They discuss underlying psychological mechanisms: Loss aversion, house money effect and hubris impact corporate illegality. Loss aversion: if potential gains and losses are of similar magnitude, the negative consequences of losses will loom larger than the other, therefore dominate decision making. House money effect: prior gains tended to lead to higher levels of risk taking, thinking that prior gains are extra money, “the house’s money”, to gamble with.

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