Acknowledgements: We would like to thank Editor Richard Bettis and the anonymous SMJ referees for their many helpful comments and suggestions. We would also like to thank Matt Bloom, Scott Graffin, Mayu Mishina, Tim Pollock, Jo-Ellen Pozner, and Violina Rindova, who have provided us with insightful comments on an earlier version of this paper.
The Path Dependence of Organizational Reputation: How Social Judgment Influences Assessments of Capability and Character
ABSTRACTDrawing upon theory on social judgments and impression formation from social psychology, this paper explores the socio-cognitive processes that shape the formation of favorable and unfavorable organizational reputations. Specifically, we suggest that stakeholders make distinctions between an organization's capabilities and its character. We explain the nature and function of each and articulate the manner in which judgment heuristics and biases manifest in the development of capability and character reputations. In doing so, this research explores both the positive and negative sides of organizational reputation by examining the manner in which different types of reputations are built or damaged, and how these processes influence the ability of managers to enhance and protect these reputations.
1In the past two decades, there has been considerable scholarly interest in the topic of firm reputation (e.g., Fombrun and Shanley, 1990;Rindova et al., 2005;Weigelt and Camerer, 1988). This research has significantly expanded our understanding of what constitutes an organizational reputation and the host of benefits that may result from enjoying a favorable reputation (e.g., Fombrun and Shanley, 1990;Rindova, Petkova, and Kotha, 2007;Rindova et al., 2005). However, we still know relatively little about how stakeholders make these reputational judgments about an organization or how such judgments might be adjusted in light of new information. Specifically, scholars are just beginning to examine these socio-cognitive processes-the social judgments through which stakeholders translate information about an organization into a particular reputation (Love and Kraatz, 2009). Given the impact of heuristics and biases on the judgments and decisionmaking of both individuals (e.g., Tversky and Kahneman, 1974) and organizations (e.g., Carpenter, Pollock and Leary, 2003;Mishina et al., 2010), it stands to reason that these biases may also shape the manner in which organizational reputations form and change.Examining the socio-cognitive processes involved in the formation and revision of organizational reputations is important for at least three reasons. First, in the absence of perfect information about a firm's characteristics and future behavior, stakeholders use its reputations as a proxy in order to make decisions. However, there can often be gaps between a firm's reputation and its objective characteristics. We can begin to uncover when and how these gaps may occur and persist by delineating why evaluators focus, and place greater credence, on certain cues 1 whi...