The impact of market actions on firm reputation

Drawing on signaling theory, we hypothesize that a firm's reputation is shaped by its own market actions and the actions of its industry rivals. We view market actions as signals that convey information about the underlying competencies of firms and influence stakeholder evaluations of them. We...

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Bibliographic Details
Published in:Strategic management journal 2006-12, Vol.27 (12), p.1205-1219
Main Authors: Basdeo, Dax K., Smith, Ken G., Grimm, Curtis M., Rindova, Violina P., Derfus, Pamela J.
Format: Article
Language:English
Subjects:
Business reputation
Business strategies
Business structures
competitive dynamics
Competitiveness
Corporate image
Corporate strategies
Electrical appliances industry
Enterprises
Impact analysis
Industrial concentration
Industrial market
Industrial research
Management science
market actions
Market planning
Observational research
Organization theory
Organizational effectiveness
Reputation
Reputations
Rivalry
Signalling
Signals
Stakeholder
Studies
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Summary:Drawing on signaling theory, we hypothesize that a firm's reputation is shaped by its own market actions and the actions of its industry rivals. We view market actions as signals that convey information about the underlying competencies of firms and influence stakeholder evaluations of them. We find that the total number of a firm's market actions, the complexity of its action repertoire, the time lag in rivals' responses to its actions, and the similarity of its repertoire with those of its rivals positively affect its reputation. These results suggest that a firm's reputation is influenced both by its own actions and by its rivals' actions.
ISSN:0143-2095
1097-0266
DOI:10.1002/smj.556