Do Reputation Rankings Influence the Perception of Firms?
[We’re pleased to welcome Michael Barnett of Rutgers University. Michael recently published an article in Business & Society with co-author Shovi Leih entitled “Sorry to (Not) Burst Your Bubble: The Influence of Reputation Rankings on Perceptions of Firms.”]
I became interested in the topic of how reputation rankings affect individual perceptions of firms when I noticed all the efforts that business schools put into their rankings and the effects that these rankings have on their stakeholders. Potential students, faculty, staff, and alumni can’t really tell what goes on across business schools on a day-to-day basis, and so they must rely on these reputation rankings for insights. Yet, the corporate reputation literature assumes that what one thinks of a particular organization is based on the actions of that organization — even though most of us most of the time have no clue. As a result, in many if not most schools, rankings now drive actions, perhaps more so than actions drive rankings.
Relative to corporations, what information do people rely on to form their views? Reputation rankings from
Businessweek, the Financial Times, Fortune, US News & World Report, and other such sources have proliferated. Researchers have voiced concerns about reputation rankings; particularly the methodologies used to determine them. In this article, though, we are concerned not with the methods but with the influence of reputation rankings. How do people use rankings when forming their views of a firm? Do rankings affect or overshadow other information that one may have about a firm?
We isolate the effects of reputation rankings on individuals’ perceptions of a firm. Indeed, we find that perceptions are influenced by reputation rankings, particularly when these rankings are negative and congruent with other information about the firm. These findings suggest the need to develop a richer perspective on reputation. Corporate reputation has long been conceptualized as an aggregation of individual perceptions, but it also needs to be understood as a driver of individual perceptions. Greater focus on this latter aspect may help to explain loose linkages between a firm’s characteristics and its reputation. As a result of the influence of reputation rankings, a firm’s reputation may change even if its characteristics remain constant and, conversely, changes in a firm’s characteristics may be slow to produce change in its reputation. Additional insights into the information that individuals do and do not attend to in revising their perceptions of a firm can help better explain the connection between a firm’s behavior and its reputation and thus deepen understanding of how to effectively manage reputation.
The abstract for the article:
We measure the influence of reputation rankings on individuals’ perceptions of firms. Through experimental design, we vary whether and how participants are exposed to a reputation ranking alongside other information about a firm. We find that rankings influence perceptions when they are negative and congruent with other information about the firm. These findings help explain how a firm’s reputation can change even if its characteristics remain constant and why change in a firm’s characteristics can be slow to produce change in its reputation.
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