Building Intangible Resources: The Stickiness of Reputation

Abstract

The notion that reputation takes significant time and effort to build is well recognized by researchers in the field. This study tests the effects of consistency and change in relative financial performance on subsequent firm reputation. Based on reputation data from Fortune magazine's annual survey of corporate reputation, we find that firms that perform relatively better tend to have better reputation. In addition, firms that perform consistently better also have better reputation than those that are less consistent in their superior performance. Conversely, firms that perform consistently worse have worse reputations than those that are less consistent in their inferior relative performance. Finally, the change in reputation as a result of a change in positive performance follows an exponential rather than a linear function. These results suggest the sticky nature of reputation and have implications for firms attempting to build intangible resources for competitive advantage.