Defining and Measuring Corporate Reputations

• Published date: 01 September 2016
• Date: 01 September 2016
• DOI: http://doi.org/10.1111/emre.12081

Defining and Measuring Corporate Reputations

GRAHAME R. DOWLING

Discipline of Marketing, School of Business, University of Technology Sydney, Australia

Corporate reputation is a construct that has gained widespread recognition in the disciplines of strategy,

corporate social responsibility, management and marketing because a good reputation is thought to be more

commerciallyvaluable than a bad reputation. However,recent reviewsof the scholarly literaturesuggest that because

the construct of corporate reputation has been defined in a wide variety of ways it is difficult to understand the

antecedents and consequences of the construct. To illustrate this problem 50 different definitions of corporate

reputations are reviewed. This analysis suggests that some of the most prominent measures are not grounded in

the definitions that are thought to underpin them. This phenomena presents a challenge to anybody wanting to

meta-analyze findings and to build new theories of corporate reputation. To help advance the field a framework is

presented to guide the refinement of scholarly definitions so that they are well constructed and thus capable of

guiding the development of valid measures of the construct. To illustrate this framework a new definition and some

new measures are provided.

Keywords: corporate reputation; definitions; measures

Introduction

Many reviewers of corporate reputation scholarship

express frustration with the overall state of the field (see

for example, Balmer, 2001; Chun, 2005; Barnett et al.,

2006; Highhouse et al., 2009; Walker, 2010; Helm and

Klode, 2011; Lange et al., 2011; Barnett and Pollock,

2012). At the heart of much of this frustration are the twin

issues of construct definition and measurement. Construct

definition is important because it determines the nature of

research questions that are posed, the methods used to

examine these questions, the way measures are designed

and the way findings are translated. Hence, poorly defined

constructs make it difficult to be confident about what are

significant empirical findings, non-findings and discrep-

ancies. This in turn hinders the search for empirical

generalizations and the development of theory. Thus,

substantive knowledge development stagnates.

In various branches of organizational science there has

been ongoing concern about how constructs are defined

and the link between construct definition and measurement

(e.g., Dobni and Zinkhan, 1990; Teas and Palan, 1997;

Wartick, 2002; MacKenzie, 2003; Wacker, 2004;

Hillenbrand and Money, 2006; Suddaby, 2010; Rossiter,

2011a; Dowling and Gardberg, 2012; Trump et al.,

2015). While nearly all of these papers have been cr itical

of past attempts to define and measure many constructs,

few offer concrete suggestions about how to better link

measures to their definitions. What these papers also

expose is that when an area of inquiry is plagued with

competing definitions of the same construct, the

common research strategy of relying on the work of

others, also known as the appeal to precedent perpe tuates

the current confusion in the literature.

This paper illustrates the problems of definitional

confusion and poorconstruct measurement. The construct

of corporate reputation is chosen because there is a

scholarly literature, a program of publicity, and a

managerial body of practice anchored to some prominent

measures of corporate reputation. In some cases the

scholarly literature has been used to inform the measure

of corporate reputation while in others it has not. For

example, while the America’s most admired companies

(AMAC) measure is publicized by the business magazine

Fortune andused extensively in scholarlyresearch it is not

grounded in any formal definition of the construct.

1

Also,

formal definitions of reputation do not underpin most of

the prominent so-called reputation rankings of business

schools (for a critique of these see Devinney et al.,

2008). In contrast, the Reputation Institute’sReputation

Quotient

™

(RQ) measure of corporate reputation is

underpinned by a formal definition, but as the analysis

below suggests the measure is not an accurate reflection

Correspondence: Grahame Dowling, Discipline of Marketing, School of

Business, University of Technology Sydney, Broadway NSW 2007,

Australia.E-mail Grahame.Dowling@uts.edu.au

1

This measure was later expanded to become the world’smostadmired

companies(WMAC).

European Management Review, Vol. 13, 207–223, (2016)

DOI: 10.1111/emre.12081

©2016 European Academy of Management

of the definition.These examples suggest that both theory

and practice are being contaminated by the problem of

either not basing a measure of corporate reputation on a

formal definition or defining the construct one way but

measuring a (slightly) different construct. I call this

defining A and measuring B.

This paper proceeds by providing a brief historical

overview of corporate reputation to establish the

importance of this construct. Next I describe the family

of reputation-like constructs that compete for prominence

in the extant literature. This discussion focuses on the

conceptual frontiers of the reputation construct. The next

section reviews multiple competing definitions of

corporate reputation. A key issue that emerges from this

review is whether corporate reputation is an individual

or a collective construct. Following this discussion I then

present the structure of a well-formed definition, that is,

one capable of guiding a valid m easure of a construct.

Here it becomes evident that few extant definitions of

corporate reputation are well-formed. Thus, many

measures derived from these definitions are poorly

constructed. To illustrate how this conceptual domain

might progress I then propose a new definition of

corporate reputation and a set of new measures that are

underpinned by this definition.

Historical overview

The concept of reputation has existed for centuries. My

dictionary says that the first known use of the old

Anglo-French and Latin words for reputation was in the

14th century. Reputation is derived from the Latin verb

reput are meaning to reckon. Thus a reputation is an

assessment made by a person of another person or entity.

Jackson (2004) says that in traditional Chinese society

reputation is like the notion of ‘face’. Here there are two

senses of face. One of these is Lian that stands for

society’s confidence in the integrity of one’scharacter.

A person cannot operatesuccessfully in the society if they

have lost this face. The other is Mian-zi that denotes

distinction earned from having achieved success in life.

This affords onestatus, dignity and respect. Asnoted later

in this paper, many modern notions of corporate

reputation align with these ancient ideas.

In the early years of business it was the reputations of

the people involved that facilitated many commercial

transactions. In the latter half of the 19th century when

business became more geographically dispersed and the

face-to-face contact of business people diminished,

institutional agencies like banks emerged to complement

and sometimes supplant the primary role of personal

reputation in commerce. With the rise of the limited

liability company, the notion of corporate reputation

became particularly important. To many people these

companies were ‘faceless’entities that were difficult to

regulate and punish for their misbehavior. Hence,

governments were motivated to introduce rules and

regulations to govern the behavior of the modern

corporation. Over time this institutional framework set

some of the standards for what constituted good and bad

corporate behavior. Other standards emerged as

companies competed against each other for the patronage

of customers, employees and shareholders.

Corporate reputations are important because they

facilitate economic transactions by providing incentives

for organizations to behave in acceptable ways. In

situations where there is ample opportunity for an

organization to be opportunistic in its dealings with other

parties a good reputation acts as a signal of probity and a

performance bond in the sense that an episode of poor

behavior will put this good reputation at risk. The area of

professional service firms is a good example of this type

of situation. Here, the buyers of services from consulting

firms are often uncertain about the capabilities and

competence of the firms they engage. And even when the

engagement is finished it may be difficult to judge the

quality of what has been delivered. The Oxford handbook

of corporate reputations describes other situations where

corporate reputations operate to facilitate or hinder

exchanges (Barnett and Pollock, 2012). Hence, in

situations characterized by uncertainty and information

asymmetry a good reputation provides a source of trust

and confidence in the behavior of the organization

involved. In contrast, a bad reputation signals that parties

should avoid the organization or seek better information

about its true character or take precautions when dealing

with it.

From an academic perspective corporate reputations

have attracted attention because they are thought to

operate in the markets for employees (e.g., Auger et al.,

2013), customers (e.g., Gatti et al., 2012), investors

(e.g., Roberts and Dowling, 2002). In these markets a

good reputation is thought to help the organization attain

and retain these so-called stakeholders. For the general

public and the government a good reputation is thought

to help protect the modern corporation’s social license to

operate, or at least to deflect the attention of a disaffected

special interest group to another member of the industry

(e.g., Fombrun and Barnett, 2000). Because of the wide

ranging ambit of the construct it has been studied in the

fields of marketing, human resource management,

general management, economics, strategy, corporate

social responsibility and the emerging field of corporate

reputations with its specialist journal Corporate Reputation

Review.

Scanning these various literatures reveals a variety of

different perspectives of corporate reputations. One

perspective is that different groups of people evaluate an

organization differently. For example, investors identify

208 G.R. Dowling

©2016 European Academy of Management