Reputations in flux: How a firm defends its multiple reputations in response to different violations

Jonathan Bundy, Farhan Iqbal, Michael D. Pfarrer

Research output: Contribution to journalArticlepeer-review

Abstract

Research Summary: We examine how a firm defends its capability and character reputations in response to different violations. We develop our core theoretical mechanism—stakeholders' situational expectations—to theorize that the effectiveness of a firm's response strategy following a violation depends on the nature of the violation and the reputational judgment being made. We test our hypotheses using two longitudinal violation samples and novel media-based measures of reputation. Generally, we find that a more accommodative strategy is an effective defense following a capability violation, but it is less effective following a character violation. In supplemental analyses, we also discover that a more accommodative strategy is less effective at managing general reputation. Ultimately, our theory and findings suggest that reputation defense is more complex than previously considered. Managerial Summary: We shed light on the challenges managers face in defending their multiple reputations following a violation. We suggest that the type of violation affects stakeholders' expectations of the firm, and that these expectations differentially threaten a firm's multiple reputations as well as the efficacy of its response strategy. Using a sample of capability-based (unintentional financial restatements) and character-based (environmental malfeasance) violations, we find that a more accommodative response strategy can defend certain reputations following a capability-based violation but can be detrimental to other reputations. We also find accommodativeness to be generally harmful following a character-based violation. Ultimately, our results suggest that managers should consider both the type of reputation they are defending and the nature of the violation when implementing a response strategy.

Original languageEnglish (US)
Pages (from-to)1109-1138
Number of pages30
JournalStrategic Management Journal
Volume42
Issue number6
DOIs
StatePublished - Jun 2021

Keywords

  • corporate violations and wrongdoing
  • firm reputation
  • perception management
  • reputation defense
  • social cognition

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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