The Impact of Corporate Strategy on a Firm's Reputation
- PDF / 118,121 Bytes
- 11 Pages / 646 x 816 pts Page_size
- 57 Downloads / 225 Views
Volume 8 Number 3
Academic Research The Impact of Corporate Strategy on a Firm’s Reputation Robert J. Williams, Mel E. Schnake and William Fredenberger Department of Management, Langdale College of Business, Valdosta State University, Valdosta, GA
ABSTRACT This study examined 178 Fortune 500 firms as to the link between their corporate strategies and their reputation scores. The results suggest that while related diversified firms experienced higher performance levels, on average, than single business firms, the related diversifiers also had lower reputation scores than single business firms. Further, unrelated diversified firms experienced lower reputation scores than related diversifiers, although the mean difference between the two strategies was not statistically significant. The results suggest that firms considering a change in strategy might also anticipate a change in their overall reputations. Some possible implications of the link between a firm’s strategy and reputation are discussed.
KEYWORDS: diversification, firm’s reputation, firm’s strategy INTRODUCTION A great deal of evidence has been presented in recent years supporting the positive link between a good corporate reputation and a firm’s value (Balmer and Gray, 1999; Clark and Montgomery, 1998; Fombrun and Shanley, 1990; Gregory, 1991; Marconi, 1996; Phelan and Lewin, 2000; Rao, 1994; Roberts and Dowling, 2002; Sabate and Puente, 2003a; Smith, 1994; Vergin and Qoronfleh, 1998). Fombrun (1996) defines
reputation as the overall estimation of the firm by its stakeholders, which is expressed by the reaction of customers, investors, employees and the general public. Hall (1992) states that a firm’s reputation consists of the knowledge and emotions held by individuals. In general terms, reputation boils down to how others perceive the firm and respond to it. From a strategy perspective, reputation can be viewed as a distinct asset of a firm. Barney (1991) argued that reputation is an asset that allows the firm to exploit an opportunity or defend itself against a competitive threat. Within this resource-based theory of the firm, reputation can be valuable, rare, difficult to imitate, non-substitutable and a source of profits and rents (Barney, 1991; Hall, 1992). A good reputation communicates to customers the quality of a firm’s product mix, and allows the firm an opportunity to charge premium prices for its goods and services (Klein and Leffler, 1981; Milgrom and Roberts, 1986; Phelan and Lewin, 2000). A favorable reputation provides a firm’s salesforce with easier access to customers (Garbett, 1988). The added self-assurance enjoyed by employees who work for a wellrespected firm easily translates into heightened employee morale and productivity (Garbett, 1988; Gray, 1986; Gregory, 1991).
Corporate Reputation Review, Vol. 8, No. 3, 2005, pp. 187–197 # Henry Stewart Publications, 1363–3589
Page 187
The Impact of Corporate Strategy on a Firm’s Reputation
A firm’s favorable reputation attracts investors, since it implies relative investment security (Gray, 1986; Gregory, 1991; Marco
Data Loading...
