Reputation


The reputation or prestige of a social entity is an opinion about that entity – typically developed as a result of social evaluation on a set of criteria, such as behavior or performance.
Reputation is a ubiquitous, spontaneous, and highly efficient mechanism of social control. It is a subject of study in social, management, and technological sciences. Its influence ranges from competitive settings, like markets, to cooperative ones, like firms, organizations, institutions and communities. Furthermore, reputation acts on different levels of agency: individual and supra-individual. At the supra-individual level, it concerns groups, communities, collectives and abstract social entities. It affects phenomena of different scales, from everyday life to relationships between nations. Reputation is a fundamental instrument of social order, based upon distributed, spontaneous social control.
The concept of reputation is considered important in business, politics, education, online communities, and many other fields, and it may be considered as a reflection of a social entity's identity.

Corporate reputation

Reputation as a concept for companies

Academic literature

Since 1980, the study of "corporate reputation" has attracted growing scholarly attention from economics, sociology, and management. The concept of reputation has undergone substantial evolution in the academic literature over the past several decades. Terminology such as reputation, branding, image and identity is often used interchangeably in both the popular press and – until recently – in the academic literature, as well.
The academic literature has generally settled on a small cluster of perspectives on "what reputation is" in a company context.
Mark C. Suchman examines the relationship between legitimacy, status, and reputation, emphasizing that while these concepts are interconnected, they represent distinct forms of social evaluation. Legitimacy refers to the degree to which an organization's actions align with societal norms and values, status reflects its position within a social hierarchy, and reputation is based on assessments of its past actions and achievements. Understanding these distinctions is essential for organizations seeking to navigate their social environments successfully.
Economists use game-theory to describe corporate reputations as strategic signals that companies use to convey to markets some of their qualities and abilities. Sociologists view corporate reputation as descriptions of the relative status that companies occupy in an institutional field of rivals and stakeholders. Management scholars describe corporate reputations in one of two main ways, including:
  • the broad view: as an aggregation of perceptions that form as audiences judge the behaviors of companies.
  • * This is often evaluated by broad ranking measures of the company as a whole, such as the Fortune Most Admired Companies rankings
  • the specific view: as an assessment, by some specific audience, of the company's ability to perform or behave in a certain way. These are split into two broad categories: outcome/capability reputation and behavior/character reputation, which is intended to capture both the economic and sociological forms of reputation.
  • * outcome/capability reputation: this reputation type involves an assessment of how well the company performs on a certain dimension. The most common examples of these is performing well financially or providing high quality products or services. All of these dimensions can be objectively ordered, such as better/worse financial performance or better/worse product quality.
  • * behavior/character reputation: this reputation type is said to arise when a company is recognized as consistently ''behaving'' in a certain way, in a manner that is relatively devoid of objectively identifiable performance. For instance, a company might prioritize investment in innovation, the improvement of its operational efficiency, or sourcing from local suppliers.

    Practical measurement of reputation

In practice, corporate reputations are revealed by the relative rankings of companies created and propagated by information intermediaries. For example, business magazines and newspapers such as Fortune, Forbes, Business Week, Financial Times, and The Wall Street Journal regularly publish lists of the best places to work, the best business schools, or the most innovative companies. These rankings are explicit orderings of corporate reputations, and the relative positions of companies on these rankings reflect their relative performance on various cognitive attributes. Corporate reputations are found to influence the attractiveness of ranked companies as suppliers of products, as prospective employers, and as investments. For those reasons, companies themselves have become increasingly involved with the practice of reputation management.

Connections to related, company-level concepts

Like any social construct, reputation is similar to certain concepts and different from others. Reputation can be compared to other "social evaluation" or "social judgment" constructs. For instance, reputation is said to be convergent with adjacent concepts like corporate image, identity, celebrity, status, legitimacy, social approval, and visibility, but discriminant from related constructs like stigma and infamy. Reputation is often considered to be a pragmatic evaluation – actors determine whether the target of the evaluation can be seen as useful to them.
Until recently, the relationships with these adjacent constructs were merely theoretical; that is, they were not formally tested or empirically validated for their "nomological relationships" with these other, related constructs.
  • Conceptual relationships: In 2012, the Oxford Handbook of Corporate Reputation was released to provide some clarity to the increasingly fragmented field of social evaluation constructs, all of which had been referred to under an umbrella of "reputation" concepts. In 2020, the introductory part of The Power of Being Divisive: Understanding Negative Evaluations, develops a framework to disentangle a variety of concepts in the field of social evaluations – in particular making the point that negative and positive evaluations can be on different continua, and social actors can be both positively and negatively evaluated at the same time. In this opus and in the Oxford handbook, scholars made incremental efforts to distinguish between handfuls of these constructs, such as:
  • * reputation vs. celebrity
  • * reputation vs. status
  • * reputation vs. legitimacy vs. status
  • * reputation vs. social approval
  • * reputation vs. stigma
  • * reputation vs. status vs. celebrity vs. stigma
  • Empirical relationships: In 2020, Bitektine and colleagues conducted the first major construct validation study to: create scales for the constructs of reputation, cognitive legitimacy, sociopolitical legitimacy, and status, and empirically distinguish between them by undertaking a multiple studies involving several confirmatory factor analyses.
  • * This construct validation effort addressed the "broad view" of reputation as a company-level evaluation. The scale items for reputation that resulted from this effort, as evaluated by an audience of respondents representing the general public, included: "The reputation of this company is excellent", " is a reputable company", and " is a dependable company".
  • * There still exists no construct validation effort for the "specific view" of reputation.

    Consequences

Performance outcomes

Myriad reputation studies from the 1980s to the 2000s demonstrated that a company's reputation was positively related to various performance measures, such as financial success and profitability. However, more recent work demonstrated that reputation can be both "a benefit and a burden", suggesting that "the bigger you are, the harder you fall" with respect to reputation.

Decision outcomes

Relatedly, researchers have theorized or demonstrated that a company's reputation could also influence the decisions and perceptions of its managers; in some cases, reputation can promote the use of risk-reduction strategies by managers as they seek to preserve the reputation they have cultivated. In other cases, researchers argue that reputation can embolden managers to take risks in areas unrelated to their reputation, since stakeholders may be focused on the reputation itself and inattentive to other areas of the company.

Topics relating to reputation

Reputation management

Many organizations create public relations and corporate communication departments dedicated to assisting companies with reputation management. In addition, many public relations and consulting firms claim expertise in reputation management. The growth of the public relations industry has largely been due to the rising demand for companies to establish credibility and reputation. Incidents which damage a company's reputation for honesty or safety may cause serious damage to finances. For example, in 1999 Coca-Cola lost $60 million after schoolchildren reported suffering from symptoms like headaches, nausea and shivering after drinking its products.
Although most companies see reputation management as a central part of a CEO's role, managing reputation involves a set of ongoing activities that are best managed when they are delegated to a specific individual in the organization. This is why some companies have created the position of chief reputation officer. A growing number of people in the business world now have the word "reputation" in their titles – including Dow Chemical, SABMiller, Coca-Cola, Allstate, Repsol YPF, Weber Shandwick, and GlaxoSmithKline. Hoover's shows a list of such officers.
Social media like Twitter, Linked In, and Facebook have made it increasingly important for companies to monitor their online reputations in order to anticipate and respond to criticisms of their actions. There are two main routes that customers can take when complaining about companies: individual-direct response or broadcast-based response. For a company, it takes a lot of time and effort to address individual-direct responses. One study showed that "...72% of customers expect a reply within one hour." In order to best recover from negative complaints on social media, it is important for a company to prove its authenticity by providing more specific answers directly to its critics.