Brand, Identity and Reputation: Exploring, Creating New Realities ...

The Formation of Reputations in Business Markets
Chunyan Xie, Stord/Haugesund University College, Norway
Sven Haugland, Norwegian School of Ecnomics and Business Administration, Norway
Introduction
Corporate reputation is usually studied from a communication perspective. A firm‘s reputation as it is judged by external
stakeholders is assumed to be formed on the basis of direct and indirect experiences and the information received (e.g., Fombrun &
Shanly, 1990; Yoon, Guffey, & Kijewski, 1993). The focus in this perspective is on the information signals that a company sends to
actors in the environment, and how this information is perceived and interpreted by external stakeholders. A limitation is that it does
not take into account how a company organizes and manages its continuous interactions with core stakeholders such as suppliers and
customers, and how such interactions impact reputation. We argue that in business-to-business contexts, a customer‘s judgment of a
supplier‘s reputation cannot be properly explained from an information perspective, but rather we need to take into account certain
characteristics of the relationship between the actors.
This study therefore addresses reputation from a relationship perspective by arguing that how a company (e.g., customer) evaluates
the reputation of another company (e.g., supplier) is influenced by the continuous interaction between the two companies. While
reputation has been widely studied in consumer markets, this construct has received less attention in business markets. One reason
may be that trustworthiness serves some of the same purposes in business-to-business relationships as reputation in business-toconsumer
relationships. However, reputation and trustworthiness are different constructs, and the fact that we have limited
knowledge about the formation of reputation in business markets underlines the importance of studying reputation in B2B contexts,
and how reputation and trustworthiness are linked to each other.
The purpose of this study is first to analyze how customers evaluate supplier reputations based on what kind of relationships they
have with their suppliers. We test the impact of specific relationship characteristics on reputation. Second, we analyze how the same
characteristics are related to trustworthiness to get a better understanding of the differences and similarities between reputation and
trustworthiness, and third, we study how reputation and trustworthiness are related to each other.
Theoretical Background and Hypotheses
Concepts like identity, image and reputation are commonly used to describe what individuals or other actors know or believe about
an organization. Fombrun, Gardberg, and Sever (2000, p. 243) defined corporate reputation as ―a collective representation of a
firm‘s past behaviour and outcomes that depicts the firm‘s ability to render valued results to multiple stakeholders‖. We are in this
study especially concerned about the formation of such collective representations by studying how customers evaluate the reputation
of key suppliers.
We take the view that reputations are formed not only on the basis of communication and information, but also on the basis of direct
interactions between companies. In order to unpack possible relationship characteristics that may have an impact on reputation, we
take a broad perspective and include dimensions both at the inter-firm level and at the inter-personal level. Particularly, we examine
two firm-level dimensions; (1) dependence between the actors and (2) reliance on relational norms, and two inter-personal
dimensions; (1) common knowledge and (2) inter-personal trust, and we study the impact of these dimensions on reputation.
Furthermore, these dimensions will also be linked to trustworthiness to explore if the same or different factors impact reputation and
trustworthiness.
Inter-firm characteristics are related to the overall structuring and management of the relationship. Dependence between customer
and supplier indicates how important the actors are for each other in terms of performing their operations. We include both
customer‘s dependence on supplier and supplier‘s dependence on customer. Dependence causes the actors to be attached to each
other, and it is reasonable to believe that the actors will develop positive evaluations of each other because of such attachments. Thus,
we propose:
H1a. Customer dependence on supplier will be positively related to reputation and trustworthiness.
H1b. Supplier dependence on customer will be positively related to reputation and trustworthiness.
Relational norms imply that the actors are expected to follow certain patterns of behaviour (Rousseau, 1995) developed in the
relationship on the basis of shared norms and values (Dwyer, Schurr, & Oh, 1987). Relational norms represent an informal, selfenforcing
way of governing inter-firm interactions. Relying on relational norms as a governance mechanism requires that the actors
are able to develop well-functioning working relations for handling the day-to-day interaction between the actors, and we argue that
relational norms will result in a favourable judgment of the partner‘s reputation and lead to a trust-based relationship.
H2. Relational norms will be positively related to reputation and trustworthiness.
With inter-personal characteristics we refer to the relationship between the contact persons in the customer and the supplier firm. In
this study, we focus on common knowledge about mental models (Sande, 2007), which refers to the contact persons‘ knowledge
about each other in relation to how they judge market conditions and company opportunities, perform internal coordination and make
decisions in relation to their respective companies. If the customer contact person has good knowledge about the working conditions
of the supplier contact person, and vice versa, this common knowledge is likely to result in favourable evaluations of reputation and
trustworthiness.
H3. Common knowledge will be positively related to reputation and trustworthiness.
Inter-personal trust captures the customer representative‘s level of trust to the contact person in the supplier firm. Developing high
levels of trust between the company representatives is usually considered to be important for developing well-functioning inter-firm
276