Common Grounds in the Perception of Corporate Reputation? A Comparison of Three Stakeholder Groups

Common Grounds in the Perception of Corporate Reputation? A Comparison of Three Stakeholder Groups by Sabrina Helm Witten/Herdecke University Strategic Marketing Alfred-Herrhausen-Strasse 50 58448 Witten, Germany Phone: ++49 2302 926 526 Fax: ++49 2302 926 527 E-mail: sabrina.helm@uni-wh.de

Common Grounds in the Perception of Corporate Reputation? A Comparison of Three Stakeholder Groups Abstract In recent publications, corporate reputation has been interpreted as a stakeholder-related construct. While some authors state that according to stakeholder group affiliation a specific set of criteria is relevant to validly evaluate the reputation of a firm, others call for comparability of data and favour standardised measures. Empirical evidence on stakeholders perception of corporate reputation has remained scarce. Therefore, the objective pursued by this paper is to analyse and discuss the process and implications of building a stakeholder-related measure of corporate reputation. The findings of a study among German customers, employees, and private investors of a consumer goods producer are used for illustration. 1 Introduction Corporate reputation captures a combination of social and economic contributions that a firm makes to its different stakeholders. Besides other favourable outcomes, a positive reputation allows a firm to bond customers and charge premium prices, attract better applicants for its workforce, lower costs of capital by attracting investors (Little and Little 2000; Eberl and Schwaiger 2005). Thus, reputation is an important asset in the diverse markets of a firm. Whether all types of stakeholders base their perceptions of reputation on the same fundamental set of dimensions, or on specific expectations, is still seen controversially (Bromley 2002; Fombrun et al. 2000; Gatewood et al. 1993), leading to a variety of research questions such as Do firms have one reputation or many? (Fombrun and Shanley 1990, p. 254). Do stakeholder groups use different criteria to evaluate a firm s reputation? Is there an alignment process to reconcile those different perceptions to what we call a firm s corporate reputation? What does variance between those reputations mean for the achievement of the firm s goals, the measurement of reputation, and its management? 1

The present paper cannot provide answers to all these questions, but focuses one central issue: Do individuals who belong to different stakeholder groups use different sets of criteria when evaluating a firm s reputation? In order to address the research question, the paper is composed of five sections. In the next section, the theoretical background of the research is presented. In section three, the results of focus group interviews and the conceptualisation of the reputation constructs will be outlined, followed by a description of the empirical design of the study and its results in section four. In section five, I discuss major findings. Finally, limitations of the present study and future research opportunities are dealt with in section six. 2 Definitions and conceptual background of the study 2.1 Corporate reputation defined from a stakeholder perspective With regard to a stakeholder-oriented interpretation of corporate reputation, a number of researchers interpret it as an attitudinal construct that only exists in the minds of individuals. As Wartick (2002, p. 374) emphasises, reputation, be it corporate or otherwise, cannot be argued to be anything but purely perceptual. He defines it as the aggregation of a single stakeholder s perceptions of how well organizational responses are meeting the demands and expectations of many organizational stakeholders (Wartick 1992, p. 34). While this interpretation indicates that each individual may hold a specific view of a firm, other authors assume that reputational perceptions are matched within stakeholder groups. Examples for this understanding are provided by Scholes and Clutterbuck (1998, p. 234) who explain that rather like the man in the hall of mirrors, the company can find itself surrounded by different images held by different 2

groups, or Brown (1998, p. 216) who elucidates that there are multiple audiences for any particular company. Each of these audiences may see a company in more or less similar ways (eg, the image of Microsoft Corporation may be the same for most financial analysts), but the image will likely be based on different kinds of information for different audiences. Bromley (2002, p. 36) states that commercial and industrial companies, like political candidates and other reputational entities, have as many reputations as there are distinct social groups (collectives) that take an interest in them. Following this stream of reasoning, a firm does not have one distinct reputation. While an aggregation of different individuals (or groups ) perceptions can be interpreted as an average reputation, this does not represent the reputation of that firm. Taking a different angle, other authors suggest that corporate reputation should not be seen on an individual level at all, but on a meta-level. It is taken to signify a collective s view of a firm which tends to revolve around broad dimensions (Fombrun et al. 2000). This interpretation is in accordance with the etymological root of the word reputation. According to Webster s Collegiate Thesaurus (1976, p. 671) it means the estimation in which one is generally held, implying a consensus within a larger group of people. This point of view is illustrated by the following definitions: A corporate reputation is a collective construct that describes the aggregate perceptions of multiple stakeholders about a company s performance (Fombrun et al. 2000, p. 242), it is a synthesis of the opinions, perceptions, and attitudes of an organization s stakeholders (Post and Griffin 1997, p. 165), an attitude-like construct that exists and operates in the general public s mind (Eberl and These authors treat image and reputation as synonymous constructs. Gray and Balmer (1998) discuss the two constructs in more detail. 3

Schwaiger 2005, p. 844), and it is to be interpreted as a collective phenomenon and a product of social processes, and not as an impression in the head of any single individual (Emler 1990, p. 171). Gardberg (2001, p. 160) explains that a consensus on a firm s reputation results because stakeholders attend to information beyond the traditional boundaries and do not reduce their evaluation of reputational attributes to the ones most relevant to their own stakeholder role. 2.2 Corporate reputation measured from a stakeholder perspective In case reputation is interpreted as a collective construct, the aggregate cannot be measured utilising common survey procedures. As Bromley (2002, p. 36) stresses, reputations, which are socially shared impressions, are based on collectives, not on heterogeneous collections of people. He concludes that using a survey approach and randomly selected respondents generates data that represent a sort of meta-reputation a fusion of a large collection of personal judgments about a standard set of corporate attitudes (Bromley 2002, p. 36), but not the true state of a firm s overall reputation. The latter, in consequence, might be impossible to measure. In that case, reputation would remain an ethereal phenomenon to its custodians: Without conceptualisation and measurement, strategies to develop a firm s reputation remain nebulous and managers bereft of any enthusiasm to deal with it. Taking a more utilitarian stance, it is helpful to interpret reputation as a perceptual phenomenon that can be measured by gathering information from its beholder. This seems viable because reputation is believed to lead to a variety of positive effects. Customers are expected to become more loyal and less price conscious, highly skilled job applicants join the firm, investors provide capital more readily (Fombrun 1996; Gardberg 2001). According to behavioural theories, all of 4

these positive behavioural effects are triggered by perceptions and attitudes. Reputation needs to be interpreted as a perceptual, that is subjective, construct, when taken as an explanans for stakeholders favourable activities, and this calls for a survey based measurement approach. Amongst those authors supporting the perceptual view of reputation, some doubt that the diverse reputations of a firm are comparable. For instance, Dowling (1988, p. 28) cautions that investigations of reputation call for an adaptive approach: it is necessary to customize the set of factors (and attributes) used to describe a company [ ]. The roles of people and their norms and values will determine which types of factors should be selected. In conclusion, a measurement model for reputation needs to be adapted to each stakeholder group, making it impossible to compare results. This is also pinpointed by Scholes and Clutterbuck (1998, p. 237) who assert that there is no effective vehicle for comparing, say, customer perceptions of company reputation with employees perceptions. Gatewood et al. (1993) claim that using the widely discussed Fortune criteria to measure reputation is not appropriate for all stakeholder groups (Fortune s Most Admired Companies = FMAC; Fombrun 1998). For instance, job applicants perception of corporate reputation is not correctly captured by the set of criteria. The authors conclude that any perception is a function of the information that is available to an individual at a given time. This would of course mean that any standardised measurement model of reputation is not reliable, possibly even invalid. With a view to the measurement approach used by the Reputation Institute, the Reputation Quotient (RQ), Riel and Fombrun (2002) explain that it was designed for use with any stakeholder group. So far, the collected RQ data are only focused on the general public (Wartick 2002). Fombrun and Wiedmann (2001) assume that there are no large differences between the perceptions of individuals belonging to different stakeholder groups. They suggest that, in a 5

holistic sense, reputation can and should be measured using the same set of indicators for all stakeholder groups, but that the weights of the indicators might vary for each group. For example, the RQ dimensions vision & leadership or financial performance might be more important to investors than to customers (see also Reynolds et al. 1994; Caruana 1997). However, they do not use the collected data to empirically test this assumption. The idea of divergent weights of reputation indicators has also not been investigated empirically and has been criticised itself. As Wartick (2002, p. 379) points out: A weighting system really does little more than raise new issues relating to the weightings themselves. What are solutions to the problem of appropriate stakeholder adaptation of reputation measures? As suggested by Gatewood et al. (1993), inconsistent perceptions across stakeholder groups might be attributed to different correlates of reputation, whereas consistent perceptions indicate that reputation is a general construct. In the first case, reputational analysis needs to be limited to specific roles of a firm: reputations such as a firm s reputation as a supplier to customer needs, as an investment choice, or as an employer, might be investigated. Still, as the discussion of recent research in the field illustrates, the notion of a general construct of corporate reputation remains prevalent. This aggregate, general reputation exists besides the specific role-confined reputations, as depicted in Figure 1 (adapted from Meffert and Bierwirth 2002, p. 190). 6

consumerspecific reputation investorspecific reputation employeespecific reputation supplierspecific reputation reputation specific to the general public consumers investors employees suppliers general public emotional appeal product- and service quality vision and leadership financial performance workplace environment social responsibility general reputation Figure 1: General and stakeholder-specific concepts of corporate reputation In the latter case, researchers interested in measuring general reputation could ask respondents for their overall view of a firm s reputation, blinding out the building blocks of the construct. An example is the approach chosen by Nguyen and Leblanc (2001, p. 311) who suggest items such as ABC has a good reputation and I believe that the reputation of ABC is better than other companies. Bypassing the issue of stakeholder-specific reputational criteria does not provide the managerial insights for reputation management that a multi-faceted (or -dimensional) measure might offer. From a managerial standpoint, the conceptual disadvantages of using an identical measure of reputation for all stakeholder groups are possibly outweighed by the opportunity to compare stakeholder groups perceptions and, subsequently, to work towards a consistent reputation. Therefore, an empirical survey on the stakeholder-specificity of reputational perceptions is called for. The further analysis will be motivated by the following hypotheses: 7

Hypothesis 1: The criteria used to evaluate general reputation across individuals belonging to different stakeholder groups are heterogeneous. Hypothesis 2: The reputational perceptions of individuals belonging to different stakeholder groups differ significantly a. using a single-item measure of overall general reputation, b. using a multi-faceted measure of general reputation. 3 Reputation scale development The first step in building a measure for a hypothetical construct is content specification. Besides an analysis of existing scales and the literature on reputation, in-depths interviews with individuals representing one out of three stakeholder groups were conducted; they lasted about 45 minutes on average. 40 interviewees were contacted who were customers, employees, or private investors of large German firms. They were to find definitions of reputation, corporate reputation and to name the characteristics of firms with a bad or good reputation. It was expected that respondents in the role of customer might name different characteristics of reputable firms than employees or private investors. But this was not the case: all three groups of interviewees used comparable terms to describe companies with a good or a bad reputation, especially emphasising the quality of products, treatment of employees, and treatment of the environment. Independent of stakeholder group affiliation, the consensus was that reputation can be defined as the individual s perception of the general estimation in which a firm is held. The results of two focus group interviews including students and fellow researchers from different academic backgrounds, also did not support the notion that the interpretation of 8

reputation largely differs between stakeholder groups. Respondents used a restricted and interindividually comparable set of attributes to describe highly reputed companies. Taking into account these initial qualitative findings, hypothesis 1 cannot be supported. There seems to be a consensus about what a good or bad reputation means in a general sense, no matter which stakeholder group respondents belong to. Although more empirical evidence is certainly needed to finalise any verdict on the content of reputation, the findings do not corroborate a necessity to build stakeholder-specific measures for general reputation. Against this background, a standardised multi-faceted measure of reputation was developed as outlined below. It will serve to investigate whether opinions about reputation and its determinants differ in regard to a specific firm (hypotheses 2, a and b). Potential indicators for the multi-faceted measure were identified taking into account the results of the interviews. All in all, a list of 59 possible indicators was gathered from both types of interviews. As not all of them are equally useful for construct development, a three-step pretest was conducted. In the first step, students and colleagues at the research institute were asked to check for overlaps between the suggested items. Also, they were to determine on a 4-point scale how important the remaining 25 items are in explaining whether a firm has a good or bad reputation. These items are listed in Table 1; ten of them were mentioned by representatives of all of the three stakeholder groups and therefore included in the final measurement model. Furthermore, a single-item measure for overall reputation was included. In a final test, questionnaires were personally administered to 20 representatives of each stakeholder group who were asked for detailed verbal comments. Concerning the epistemic structure of the construct (Bollen and Lennox 1991; Jarvis et al. 2003), the multi-faceted measure of corporate reputation was modelled with formative indicators. This 9

means that reputation is interpreted as an aggregation of all its indicators such as product quality, quality of management, and so forth. Partial least squares (PLS) was used for data analysis (Chin 1998). 4 Empirical studies 4.1 Research design and sample structures The aim of the empirical study was to explain variance resulting from different levels of perceived reputation and to compare stakeholder groups; it was not to explain variances resulting from differences of reputation in different industries or firms. Therefore, the study could be restricted to one firm and three of its stakeholder groups: customers, private investors, and employees. A well-known international consumer goods producer (fast-moving consumer goods such as detergents and cosmetics) was willing to cooperate and to provide the addresses of 1,120 individual investors in Germany, 700 employees, and to conduct a survey of German consumers; all of these possible respondents were provided a standardised questionnaire. The response rates amounted to 56 percent (952 cases) in the consumer sample. Respondents had to be knowledgeable about the firm s reputation and to have (actual) experience with it. They were qualified by filter questions accordingly. This led to an effective sample size of 762 usable questionnaires. In the investor sample, the response rate came up to 59 percent (665 cases) and in the employee sample, 69 percent (484 cases) were achieved. 4.2 Analysis of results 10

In a first step, it will be investigated whether perceptions of individuals belonging to different stakeholder groups vary concerning the overall reputation of the firm (hypothesis 2a). Therefore, the ratings of the stakeholders on the single-item measure will be compared and tested for significant differences. 60 percent 50 40 30 20 consumers (mean: 2.03) investors (mean: 1.71) employees (mean: 1.81) 10 0 Reputation is 1 = very good 2 = good 3 = rather good 4 = neutral 5 = rather bad 6 = bad 7 = very bad Figure 2: Relative frequencies for the single-item measure of overall reputation A comparison of the stakeholders perception of overall reputation is shown in Figure 2. It depicts the frequency distribution of ratings across the three stakeholder groups. As presumed by Fombrun and Wiedmann (2001), who suggest that employees rate reputation more positively than any other stakeholder group because of their multiple bonds and better knowledge of the firm, employees in the study at hand hold a more positive view of reputation than consumers. The highest ratings come from the group of private investors, though. The significance of these differences can be tested by a single-factor ANOVA. I test the hypothesis whether the variable reputation has the same means within the different stakeholder groups (Hair et al. 1998). Variance analysis shows a significant result (F=38.1; p<0.001). The Duncan-Test leads to three 11

homogeneous subgroups that correspond with the three groups. This means that hypothesis 2a cannot be rejected: The three stakeholder groups significantly differ concerning their evaluation of the overall reputation of the firm. In a second step, a similar procedure can be used to test for differences in the perception of the multiple facets of reputation (hypotheses 2b). First, the formative measurement models are investigated to see which indicators are most important in determining stakeholders view of reputation. Additionally, we will investigate whether respondents belonging to different stakeholder groups vary in the number of reputation characteristics they evaluate in the survey. Finally, a cluster analysis is used to find out if respondents stakeholder status can be identified by their ratings of reputation indicators. An evaluation of a formative measurement model is based on the weights and t-values of the indicators (Chin 1998, p. 307). In Table 2, the resulting values are listed with weights and t- values that are not significant at p<0.05 marked in bold type. Although no stakeholder-related differences in the creation of reputation became evident during the qualitative studies, the quantitative study reveals some noteworthy discrepancies. In each sample, some indicators have weights below 0.1, five in the consumer and investor samples, four indicators in the employee sample. One in each sample shows a negative sign. These findings might suggest scale purification. It has to be noted though, that the literature is inconsistent concerning the elimination of formative indicators (Bollen and Lennox 1991; Rossiter 2002; Helm 2005). While circumventing comparability of stakeholder group results, scale purification leads to stakeholderspecific insights and parsimonious models. 12

Concerning the consumer sample, scale purification would lead to a reputation model that includes the items quality of products, value for money of products, commitment for protecting the environment, customer orientation, and credibility of advertising claims. Considering the main interests and expectations of consumers, these might well be the most important determinants in building a firm s reputation. Respondents were urged to rate the firm s general reputation, though, not to take into account specific roles (for example, as producer of goods). In the investor sample, quality of products, value for money of products, corporate success, commitment for charitable and social issues, qualification of management, and credibility of advertising claims feature sufficient weights. Interestingly, not even in this sample was financial performance amongst the sufficiently weighted indicators. Although this attribute is certainly of prominent interest to shareholders, the respondents might not have interpreted it as important in determining a firm s general reputation. In the employee sample, commitment for protecting the environment, corporate success, treatment of employees, commitment for charitable and social issues, and qualification of management are in a statistical sense the most important reputational attributes. Surprisingly, quality of products is not amongst these. On an absolute scale, this indicator is rated most favourably in each stakeholder group and, in reality, the firm s main mission is the unparalleled quality of all its offerings. The results of the study might suggest that employees doubt that product quality (still) is the stronghold of the firm s reputation. They can only be determined by including the multi-item measurement model in a structural model. Here, this model contained reputation, satisfaction, and loyalty; the findings have been presented by Helm 2005. 13

Some stakeholders may have a more profound knowledge of a firm s reputation than others. Consumers, for instance, usually do not have detailed knowledge about numerous characteristics of a firm, leading to a rather narrow view of reputational attributes, whereas employees are better informed and consider more details when evaluating a company s reputation. This issue has also been investigated by Gardberg (2001). She tests whether stakeholder group affiliation determines the kind and/or number of reputational attributes answered by screening each respondent s answering pattern. The same procedure can be applied to the study at hand. Table 3 lists the percentages of answered items per individual in each stakeholder group (the ones below average are marked in bold type; 88.2%). For example, the item treatment of employees has been rated by 470 of the consumers, the rest chose the don t know -answer option. On average, each reputation indicator was answered by 84.5 percent of the consumers, by 88.0 percent of the investors, and 92.0 percent of the employees. Across all stakeholder groups, the item quality of products was rated by 98.4 percent of the respondents, treatment of employees only by 71.3 percent. These observations stress that individual stakeholders base their evaluation of a firm s reputation on more or less complex and subjective schemata, which can at least partly explain the differences in indicator weights noted above. Furthermore, it was tested whether the three stakeholder groups may be distinguished as individual clusters, applying Ward s clustering method (Hair et al. 1998). Taking into account the information on all respondents ratings concerning the ten indicators, a three-cluster solution results. 90.5 percent of the valid cases are correctly classified by a discriminant analysis (Hair et al. 1998). Subsequent cross-tabulation of the three clusters and stakeholder group affiliation shows significant, but weak correlation (contingency coefficient = 0.178). That means that the three clusters cannot be identified on the basis of stakeholder group affiliation. 14

Summarizing, these results do not support hypothesis 2b: The three stakeholder groups rate the ten reputational characteristics homogeneously. Stakeholder group affiliation does not explain the notable but insignificant differences in reputation ratings visualised in Figure 3. quality of products credibility of advertising claims 3 commitment to protecting the environment qualification of management 2 corporate success 1 financial performance treatment of employees value for money of products customer orientation consumers investors employees commitment to charitable and social issues Shortened version of original scale (7-point scale from 1=very good reputation, 7=very bad reputation). Figure 3: Differences concerning the perception of reputation indicators In a last step, an explanation is sought for the seemingly inconsistent finding that the single-item measure is rated homogeneously by the stakeholder groups, whereas the multiple-item measure is not. This evident discrepancy might result because the construct of reputation is not totally explained by the ten indicators. The relationship between the single-item measure and the multifaceted measure can be investigated using structural equation modelling (see Figure 4). The R 2 lies between 0.38 (employee sample) and 0.46 (consumer sample), which are acceptable values within the scope of PLS-modelling (Falk and Miller 1992). Still, they imply that there are additional determinants (or facets) explaining general reputation that remained outside the scope 15

of this study in spite of the thorough scale development process. In that case, divergent findings concerning hypotheses 2a and 2b are not inconsistent. quality of products commitment for protecting of the environment overall reputation R singleitem R 2 consumer sample = 0.46 R 2 investor sample = 0.43 R 2 employee sample = 0.38 γ = 0.68; t=26.40 (consumer sample) γ = 0.65; t=22.35 (investor sample) γ = 0.61; t=18.47 (employee sample) R multifacet value for money of products corporate success treatment of employees customer orientation commitment to charitable and social issues financial performance quality of management credibility of advertising claims Figure 4: Structural model combining single-item model and multi-faceted model 5 Discussion and Implications The aim of this analysis is to find out whether individuals who belong to different stakeholder groups have different impressions about a firm s general reputation and/or use different sets of criteria when evaluating the firm s general reputation. Although ambivalent, the findings of the study at hand seem to confirm that there is a common ground in interpreting the construct, but also a need to adapt measures to specific stakeholder groups. The findings of the qualitative interviews seem to suggest that there is a consensus concerning reputational criteria among members of different stakeholder groups. These criteria are not only matched within the groups, as for instance suggested by Brown (1998) and Bromley (2002), but also between them. Likewise, the quantitative analysis does not reveal significant differences 16

between the stakeholder groups when rating the multi-faceted measure of reputation. It does show that the criteria differ in their relevance for determining reputational perceptions, though. Moreover, the results of the structural equation model indicate that the facets seem not to represent the entire set of reputational criteria that are relevant to form an overall impression of reputation. Concerning perceptual phenomena, this is a common outcome that has also been observed for satisfaction and other hypothetical constructs. An overall attitudinal rating is not composed as a mental averaging or summation of the different components of the object in question. General attitudes towards the firm (or overall reputation) can function as an affective halo for the different reputational facets (Schwarz et al. 1994). An explanation for this is that comprehensive affects are mentally available much faster than the ratings on the different facets. But while the scope of interpretation is rather limited with regard to a concept such as satisfaction, reputation is a rather elusive or woolly phenomenon (Davies et al. 2003, p. 57) to a lot of individuals, emphasising that much effort is still necessary to build valid measures. While supporting comparability of results, procrustean approaches to measure reputation (such as the FMAC or RQ) that force respondents to adapt to the researcher s understanding of the construct limit the scope of scientific and managerial insights. The comprehensive formative approach to develop a multi-faceted measure that was followed in the study at hand revealed that there are common grounds in interpreting the construct. It cannot rule out that some differences still exist between respondents/stakeholder groups that are not covered by the instrument. Also, it has to be taken into account that not all stakeholders have a distinct knowledge of the attributes of the reputation of a specific firm and their parameter values although representatives of the three stakeholder groups that were the target groups for the survey did take part in developing the measure. This problem is also implied by Schultz et al. (2001) who observe that 17

respondents often use intuition when answering multi-faceted scales of reputation and that they are unable to discriminate finely between the criteria they are asked to quantify. Over time, people cannot remember firm-specific undertakings and particular endeavours get lost in general impressions of how the company performs (Schultz et al. 2001, p. 37). Gestalt psychologists confirm that holistic perceptions of the whole (overall corporate reputation) lead to a more intense mental effect than the summed perceptions of the parts (facets of corporate reputation) (Kohler 1992). As the study results indicate, a measure of overall reputation performs rather well when integrated into a structural model that links reputational perceptions to attitudinal, intentional, and behavioural outcomes. The findings have implications for the development of measures for reputation as well as for reputation management. According to the study results, the standardized measurement approach is suitable for measuring overall reputation for all stakeholder groups; it led to divergent results, though. According to Whetten (1997, p. 28), the level of agreement among relevant stakeholders regarding the content of an organization s reputation is an indicator of reputational strength. Significant differences between the stakeholder groups perceptions indicate weaknesses in reputation. A homogeneous reputation is a more valuable asset and stronghold in crises (Nguyen and Leblanc 2001). Reputation management should aim at levelling the differences in the valence of reputation and enhance reputation in those stakeholder groups that have a less favourable impression of the firm. To detect such shortcomings, single- or multipleitem measures of overall reputation are suitable. Still, it has to be pointed out as a further challenge that stakeholder group affiliation is not one-to-one, meaning that an individual can simultaneously (or consecutively) belong to several stakeholder groups. The less clear-cut the boundaries between stakeholder groups, the less probable are stakeholder group-specific 18

differences in reputational perceptions. Research has not yet covered the phenomenon of such hybrid stakeholders, but evidently, the blurring boundaries of stakeholder groups are challenging reputation management and the communicative functions of the firm. Multiple-faceted measures are necessary if information as to the formation of reputation is needed. The measure developed here was shown to perform considerably well when an average view of the reputation of the firm is needed. The ten indicators used to measure multi-faceted reputation are relevant to all the stakeholder groups and they do explain a considerable part of overall reputation. The divergent weights of the items indicate which reputational criteria are the most important levers for reputation management, should managers seek to improve reputation within the specific stakeholder groups. Although it is a general shortcoming in psychometric measurement approaches that some facets relevant to the different respondents/the different stakeholder groups are not covered, this is countervailed by the efficiency of using only one standardized measure. In order to gain detailed insight into each single stakeholder groups perceptions of reputation, measures for specific reputations need to be developed (e.g., consumer-specific reputation, supplier-specific reputation, investor-specific reputation). As no further aggregation beyond the stakeholders of the specific group is necessary, indicators need to be developed taking into account the individual stakeholder group s specific relationship to the firm. 19

6 Limitations and future research To date, cross-sectional studies of multiple stakeholder groups perceptions of reputation have rarely been published but would of course be necessary to gain further insights into stakeholderspecificity of reputational perceptions. Considerable effort is necessary, though, to determine and survey representatives of a variety of stakeholder groups within a cross-sectional design. Further studies should include multiple stakeholder groups in all the stages of the scale development process and subsequent data gathering. As long as not all stakeholder groups are represented among the respondents, the study results are biased and do not validly represent the collective construct of corporate reputation of a firm. As yet, most attempts to build reputation measures seem to focus on multi-faceted measures. Future projects should also aim at developing and validating single-item and multiple-item measures of overall reputation. The development of better measures of its facets calls for more research on the aggregation process that combines individual perceptions to form the collective construct of corporate reputation. Neither the stakeholder-specific evolution of reputation, nor the implications of possibly harmonic or conflicting reputations have been dealt with in detail in the literature yet (Davies et al. 2001). Therefore, studies might investigate whether divergent ratings between stakeholder groups do occur frequently, identify the reasons and outcomes concerning reputational strength, and possibly, corporate performance. It is often suggested that firms should strive for a consistent reputation amongst stakeholder groups (e.g. Nguyen and Leblanc 2001). These assumptions call for empirical investigation that takes into account performance effects of reputations or the reputational value of the firm. 20

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Appendix No Company characteristic Mentioned by Customers (18) Investors (12) Employees (10) 1 Corporate success x x x 2 Customer orientation x x x 3 Quality of products x x x 4 Respectability of activities on markets x x 5 Familiarity of company brands x 6 Sincerity concerning the information of the public x x 7 Market leadership x x 8 Innovation potential x x 9 Stability of market presence x 10 Value for money of products x x x 11 Superiority to competitors x 12 Service offers for customers x 13 Credibility of advertising claims x x x 14 Commitment to protecting the environment x x x 15 Consideration of consumer rights x x 16 Investment in advertising/ frequency of advertising x 17 Continuity in advertising x x 18 Corporate philosophy 19 Taking responsibility for public matters x 20 Person of CEO x x 21 Commitment to charitable causes (e.g. social or cultural causes) x x x 22 Qualification of Management x x x 23 Treatment of employees x x x 24 Financial performance of firm x x x 25 Attractiveness as investment x Table 1: Indicators of corporate reputation - aggregated statements of different stakeholders Terms marked in bold type were mentioned by most of the interviewees within all of the three stakeholder groups and were therefore chosen as indicators for the standardised multi-faceted measure. 24

Indicator Description Consumers Employees Investors weight t-value weight t-value weight t-value x 1 Quality of products 0.273 5.113 0.026 0.328 0.122 2.132 x 2 Value for money of products 0.303 6.155 0.045 0.567 0.154 2.025 x 3 Commitment to protecting the environment 0.220 3.163 0.173 2.364 0.105 1.308 x 4 Corporate success 0.018 0.325 0.016 0.185 0.392 5.588 x 5 Treatment of employees -0.024 0.292 0.137 1.687-0.090 0.890 x 6 Customer orientation 0.129 2.777 0.539 5.963 0.038 0.448 x 7 Commitment to charitable and social issues 0.100 1.430 0.223 2.574 0.263 2.682 x 8 Financial performance 0.022 0.399-0.089 1.272 0.064 0.674 x 9 Qualification of management 0.031 0.545 0.286 2.362 0.256 2.837 x 10 Credibility of advertising claims 0.302 5.745 0.078 0.800 0.216 3.135 Table 2: Information on the measurement models Question (multi-faceted measure of reputation): Question (single-item measure of reputation): Please indicate, what kind of reputation does company x have in the public concerning the following attributes? ; Scale: 1= a very good reputation, 7= a very bad reputation ; the scale was entirely verbalised. Please indicate, what kind of reputation does company x have in the public? ; Scale: 1= a very good reputation, 7= a very bad reputation ; the scale was entirely verbalised. 25

Reputational Attribute Consumers Investors Employees (N = 762) (N = 665) (N = 484) Ø quality of products 98.7 99.2 97.3 98.4 commitment for protecting the environment 80.3 84.6 89.0 84.6 corporate success 92.4 97.3 95.0 94.9 treatment of employees 61.7 60.0 92.6 71.3 customer orientation 94.8 92.5 90.5 92.6 commitment for charitable and social issues 67.6 69.4 90.3 75.8 value for money of products 98.8 95.9 94.8 96.5 financial performance 79.4 96.7 92.1 89.4 qualification of management 74.8 89.0 84.7 82.8 credibility of advertising claims 96.2 95.6 93.8 95.2 Ø 84.5 88.0 92.0 88.2 Table 3: Percentage of responses to reputational attributes