Corporate Reputation And Technical Efficiency: Evidence From The Chemical And Business Services Industries

Abstract

<p class="MsoNoSpacing" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: "Times New Roman","serif"; color: black; font-size: 10pt; mso-themecolor: text1;">Recent financial scandals have created uneasiness in our financial markets. This resulting crisis of confidence increases the importance of reliably assessing firm performance. How can investors and creditors confidently assess firm performance? Can firm reputation provide signals about firm performance and efficiency? The purpose of this paper is to examine the association between corporate reputation and efficiency, a dimension of firm performance. We obtain a measure of a firm’s technical efficiency by using Data Envelopment Analysis (DEA), a non-parametric technique. We use firms from America’s Most Admired Companies list of 2006 as our measure of firm reputation. Results support the hypothesis that firms with superior reputation operate more efficiently than matched firms in the business services (SIC = 73) and chemical (SIC = 28) industries. The results should be of interest to managers who engage in behavior leading to or maintaining a positive corporate reputation. Also, the results can increase individual investors’ confidence in investing companies with superior reputation. </span></p>

Business Reputation and Labor Efficiency, Productivity, and Cost

“…While we do not find that reputation is associated with a labor cost advantage, we do find that it is positively associated with a labor productivity advantage. Our results contribute to and extend current work that finds that highly reputable firms are more efficient (Stuebs and Sun, 2009). This work is important because it expands our understanding of the benefits and importance of reputation and is useful to business.…”

“…Since reputation is currently an accepted and valued intangible asset (Schnietz and Epstein, 2005), managers seem to focus on reputation to force corporate change toward implementing CSR (Vilanova et al, 2009, p. 63). As a result, reputation acts as a fundamental driver to initiate and implement CSR (Vilanova et al, 2009, p. 64 Van Beurden and Gossling 2008;Wu 2006;De Bakker et al 2005;Allouche and Laroche 2005;Orlitzky et al 2003;Roman et al 1999 Stuebs andSun 2009;Van Beurden and Gossling 2008;Wu 2006;Roberts and Dowling 2002;Landon and Smith 1997;Fombrun 1996;Podolny 1993;Herremans et al 1993;Fombrun and Shanley 1990;Dierckx and Cool 1989; …”

“…Second, good reputation can help create cost advantages (Podolny, 1993, pp. 838-841) and is associated with firm efficiencies (Stuebs and Sun, 2009). Good reputation can improve trust and relationships with a number of stakeholders, which can lead to reduced costs and improved efficiencies.…”

“…Research (e.g., Dierickx and Cool, 1989;Fombrun and Shanley, 1990;Herremans et al, 1993;Landon and Smith, 1997) examining the relation between reputation and performance generally supports a positive relationship between reputation and various performance dimensions. Since reputation can create cost advantages and is associated with cost efficiencies (Stuebs and Sun, 2009), can a firm's reputation be used as a complementary, intangible, intrinsic approach to control, motivate, and improve labor efficiency? Literature has hypothesized that reputation can generate labor benefits because ''ceteris paribus, employees prefer to work for high-reputation firms'' (Roberts andDowling, 2002, p. 1079).…”

CSR Policies: Effects on Labour Productivity in Spanish Micro and Small Manufacturing Companies

“…CSR can improve business reputation which can in turn produce performance benefits. Good Business reputation can help create cost advantages (Podolny 1993) and is associated with company efficiencies (Stuebs and Sun 2009). A good reputation can improve trust and relationships with a number of stakeholders, which can lead to reduced costs and improved efficiencies.…”