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Albert Caruana: Lecturer in the Department of Marketing, University of Malta
Introduction
Providers of professional services "have long been concerned about developing and maintaining a high quality reputation" (Hite and Bellizzi, 1986). Such concern also extends to other firms where it has been argued that a positive corporate reputation has a number of beneficial consequences. It has been linked to intention to purchase a service (Yoon et al., 1993); the attitude of buyers to salespersons and products in the organization buying situation (Brown, 1995); perceived product quality and to deterring competitor entry when a tough stance is adopted (Weigelt and Camerer, 1988); contributing to performance differences between firms (Rao, 1994); attracting investors, lower cost of capital and enhancing the competitive ability of firms (Fombrun and Shanley, 1990); and, to enabling strong organization identification by employees and "inter-organizational co-operation or citizenship behavior" (Dutton et al., 1994).
A firm with a good overall reputation owns a valuable asset. Yet unlike other assets, reputation cannot easily be traded on the open market as it represents a "higher order" rather than a "mobile" resource (Hunt and Morgan, 1995). The topic of accounting for corporate reputation is beginning to receive increased attention (e.g. Belkaoui and Pavlik, 1992). Firms, however, are realizing that the dissemination of favorable accounting information is not sufficient. Reputation cannot be judged on performance alone. For a number of years Fortune has published an annual corporate reputation index. The index is based on research carried out, in the USA, among some 10,000 senior executives who are asked to rate the ten largest companies in their industry. This index attempts to broaden the reputation variables considered by respondents beyond financial performance. Each firm is assessed on eight attributes: quality of management; quality of products or services; innovativeness; long-term investment value; financial soundness; ability to attract, develop and keep talented people; responsibility to the community and the environment and wise use of corporate assets. Fryxell and Wang (1994) rightly criticize the Fortune index and point out that four of the eight variables in the index refer to performance while constructs like innovation; corporate social responsibility; and management quality; are being measured by single items. Using confirmatory factor analysis, they are able to show that: "All but one of the...