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INTRODUCTION
Corporate reputations get built from information about firms' activities originating from the firms themselves, from the media, and from other monitors (Fombrun & Rindova, 1994). The rewards for building and maintaining a good reputation are varied. Reputation signals publics about how a firm's product quality, service, employment characteristics, strategies, and prospects compare to those of competing firms. Often corporate and public audiences rely on a company's reputation in making investment decisions, career decisions, and product choices. A corporate reputation assists in attracting good people and good partners; a poor reputation can undermine motivation within the firm.
Firms that develop reputations for attending to employee welfare may find themselves in good bargaining positions in labor markets, attracting better quality applicants and achieving lower costs or higher productivity. Other potentially favorable consequences include the ability to crystallize the firm's status within an industrial social system. Signaling product quality and service allows companies to charge premium prices. Firms do not strategize in isolation. Instead, they take strategic action with a view towards competitors' behavior and the importance of signals they provide to stakeholders concerning product and employment attributes. Reputation acts as a gauge, defining and giving a firm its sense of identity. In fact, the only way to measure organizational character is through reputation. These 'soft' or intangible assets are difficult to identify and measure by conventional means, and so are hard to manage. These soft assets do, however, impact a firm's bottom line and constitute what Fombrun (1996) has called a firm's `reputational capital.'
Over the past decade, companies were involved in incidents that had a negative impact on their corporate reputation. These incidents ranged from actions outside the firm's control, such as product tampering, to those within its control, such as quality lapses, environmental pollution, and whistle-blowing exposing internal problems through disclosure of company discrimination practices and 'unhealthy' working environments. No organization is immune to incidents that can quickly damage reputation, affect operations, impact cash flows, and reduce share price.
That firms have reputations and that reputations are important to their functioning and profitability are not in dispute. However, what is meant by reputation, how it is created and managed, and how it generates value to shareholders remain matters of debate. Our paper is directed...