Character, Conformity, or the Bottom Line? How and Why Downsizing Affected Corporate Reputation

Abstract

The aim of this study is to illuminate reputational change processes and identify the underlying theoretical mechanisms. We draw upon extant literature to develop three distinct explanations for reputational change, respectively emphasizing criteria of organizational "character," symbolic conformity, and technical efficacy. We evaluate these explanations by examining the reputational consequences of corporate downsizing. Our results show that downsizing exerted a strong, negative effect on reputation, consistently with the character explanation. However, significant moderation of this negative effect by other factors, including stock market reaction and downsizing's overall prevalence, indicates the need for a multitheoretical approach to reputational change.

What’s In The Name Of Management Consultancies? How Celebrity And Reputation Shape Intervention Effectiveness

“…Following prior research on firm reputation (e.g., Fombrun & Shanley, 1990;Gardberg & Fombrun, 2002;Love & Kraatz, 2009;Roberts & Dowling, 2002), we obtained data concerning the reputations of consulting firms by examining the rankings that have been published in leading business magazines. Specifically, we used the "management consulting" ranking and the "hidden champions" ranking published by manager magazin and Capital.…”

“…Two types of such assets have attracted particular attention in recent studies: a firm's reputation and its celebrity. Several studies have indicated that the possession of these assets affects the activities of organizations from a wide range of industries, such as manufacturing, investment banking, accounting, health care and education (e.g., Fang, 2005;Hibbard, Stockard & Tusler, 2005;Love & Kraatz, 2009;Pfarrer et al, 2010;Rauterkus & Song, 2005;Rindova, Williamson, Petkova & Sever, 2005). Surprisingly, little attention has been paid to the role of reputation and celebrity in an industry in which the actors claim to give valuable advice to nearly all of the world's most reputable and admired companies (e.g., McKinsey & Company, 2012): management consultancy.…”

Essays on Corporate Reputation: Antecedents and Consequences

“…Observers evaluate a firm based on its congruence to socially constructed standards and criteria that are context-specific rather than universal (Love & Kraatz, 2009;Rao, 1994;Staw & Epstein, 2000). Firms and observers are embedded in a cultural system (Rao, 1994) and thus form a mutual understanding about local standards, expectations, and beliefs about which business practices are legitimate and desirable (Deephouse & Carter, 2005).…”

“…Since its focus has been primarily on the firm, the reputation literature often implicitly treats the determinants of corporate reputation as being universal across countries (e.g., Love & Kraatz, 2009). The impact of national institutions on corporate reputation assessment has received comparatively less attention and is not fully understood (Gardberg, 2006).…”

“…Besides their direct effects on reputation, firm-level determinants are influenced by industry-level characteristics which are dependent on country-level factors. Reputation literature, which has primarily focused its analysis at the firm-level, implicitly assumes determinants of reputation are universal (see Love & Kraatz, 2009). The impact of national institutional, legal/political, and cultural differences that influence the way the general public evaluates corporate reputation has received comparatively less attention and is not fully understood (Gardberg, 2006).…”