A discussion on construct definition and measurement and its relation to performance.
| Autor | Pires, Vanessa |
| Cargo | Corporate reputation |
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Introduction
The central goal of strategic business management is to understand why some organizations perform better than others (Crook et al., 2008). Thus, knowing the factors that explain the heterogeneity in companies' performance is one of the main concerns of the theorists in this field of research. One approach for this understanding is called the resourcebased view (RBV), whose unit of analysis is the resources and capabilities controlled by organizations. Barney (1991), one of the pioneers of this approach, described that resources will provide competitive advantage to the organization that holds them, as long as they are valuable, rare and difficult to be imitated and substituted.
Tangible and intangible resources present in RBV include all the attributes that enable the organization to define and implement strategies, and can be divided in four types: financial resources (equity, retained profits, third party resources, among others); physical resources (machinery and real estate, for example); human resources (experience, employees' intelligence, among others); and organizational resources (teamwork and trust, for example) (Barney and Hesterly, 2009).
Some authors argue that intangible resources are the drivers of organizational performance (Zigan, 2013). This finding confirms RBV assumptions, because due to the phenomenon of causal ambiguity--inherent to intangible resources--it becomes difficult to identify and isolate the resources, as well as to measure the performance achieved through them; thus, one competitor could hardly decode and develop resources similar to those belonging to another competitor (Fernandez et al., 2000). Therefore, intangible resources would be the most difficult to imitate and substitute, and possibly would be considered the rarest and most valuable, providing competitive advantage and superior performance to the organization (Brahim and Arab, 2011). Likewise, corporate reputation--regarded as one of the main intangible resources--is seen as a driver of organizational performance and has received attention from the academy in the last decades (Vance and De Angelo, 2007).
In the Brazilian business scenario, we identify cases that show the impact of intangible resources on organizational performance, considering the relationship between corporate reputation and the organizations' value. Investigations about activities carried out by the top management of Petrobras (one of the largest Brazilian companies) weakened the company's reputation, due to accusations of corruption, which resulted in the depreciation of its shares by more than 40 percent, between 2014 and 2016 (InfoMoney, 2016). In this context, in order to positively influence the company's reputation, top management has invested and will continue to invest in its intangible resources, through an advertising campaign launched in the first quarter of 2015, whose central theme is overcoming (Petrobras, 2015).
Conceptually, corporate reputation can be defined as the collective perception of the organization's past actions and expectations regarding its future actions, in view of its efficiency in relation to the main competitors (Fombrun, 1996; Fombrun and Rindova, 2001; Walker, 2010). Some authors state that corporate reputation affects organizational performance, while others argue the opposite: organizational performance affects corporate reputation. Flanagan et al. (2011) studied the relationship between the evaluations of Fortune Most Admired Companies (FMAC) and the economic-financial performance of the organizations, and found that the relationship between corporate reputation and performance--initially identified by Brown and Perry (1994)--still exists, even if weakened.
Besides different interpretations on the relationship between corporate reputation and organizational performance, some aspects of corporate reputation still require additional research, among which are: the definition; and the construct measurement (Barnett et al., 2006; Walker, 2010; Whetten, 1997). Thereby, the objective of this paper is to discuss the different approaches of the "corporate reputation" construct, in order to identify the most comprehensive definition that can be operationalized for measurement purposes. From there, we have examined studies on the relationship between corporate reputation and organizational performance. In addition, we have evaluated the features of national and international corporate reputation ratings, in face of the scientific production related to the subject.
To that end, the theoretical basis of the study was built from the articles published in one of the main journals of corporate reputation, the Corporate Reputation Review, and from other papers quoted in those articles, thus providing a significant set of relevant and current studies on the topic of interest.
The proposed objectives represent relevant concerns, given the importance of intangible resources for organizations. In addition to being recognized as drivers of organizational performance, they contribute to the understanding of the difference between the market value and the book value of public companies (Amadieu and Viviani, 2010; Boj et al, 2014; Kumar, 2009; Perez and Fama, 2006; Vomberg et al, 2015; Zigan, 2013). In this sense, corporate reputation, one of the main intangible resources, plays a prominent role (Ciprian et al, 2012; Gok and Ozkaya, 2011). Besides the aspects described, it is important to mention the low density of studies on corporate reputation in Brazil, and the lack of a definition directly related to the measurement of the reputation construct--which value the proposed contributions (Feitosa and Garcia, 2016).
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Literature review
2.1 RBV
In the late 1950s, Penrose developed an analysis of the firm--as the company is often referred to by economists--based on its ability to create strategies, which can be seen as a counterpoint to the assumptions defended by neoclassical scholars, who stated that the firm only adapted itself to the market. The author claims that firm's growth is determined by managing the set of internal productive resources. This is an evolution in understanding the firm as discretionary, that is, it defines its strategy. The firm's conduct and its strategies would then be established by its internal elements/resources. Besides, the firm would change the market structure, whereas, in neoclassical economic theory, it would be guided by it (Penrose, 2006).
Penrose's analysis of internal resources emerged as an answer to the limitations of classical strategy models, stemming from the Structure-Conduct-Performance paradigm, in responding why companies in the same industry have heterogeneous performances (Kumlu, 2014; Villalonga, 2004).
Wernerfelt (1984) and Rumelt (1984) also contributed to the identification of internal resources as drivers of competitive advantage. Wernerfelt (1984), Rumelt (1984) and Barney (1991), among others, defended the assumption that organizational performance is defined by strategic resources--which are rare, valuable and difficult to imitate and substitute (Barney, 1991; Zigan, 2013). Prahalad and Hamel (1990) also collaborated in the analysis of strategic resources, by introducing the concept of core competences, which are made up of resources that are carefully allocated by management, and have heterogeneous performances.
Tables I-III present a summary of the main authors and their contributions to the RBV, according to each stage, namely, introduction, growth and maturity.
The introduction stage marks the beginning of the theoretical building of RBV, and the elaborations of key concepts as a consequence. Starting with the discussion of the internal elements of the organization (Penrose, 2006), the authors added contributions in order to build the foundations of this approach. At this stage, the relationship between strategic resources and organizational performance was not clearly addressed, unlike what is observed in the growth stage, in Table II (Coff, 1999; Miller and Shamsie, 1996; Oliver, 1997).
In the growth stage, new concepts emerge--dynamic capabilities, knowledge--and branches of RBV arise, such as the natural resource-based view (NRBV) and the knowledge- based view (KBV). NRBV argues that there are three key strategic capabilities that represent sources of competitive advantage, namely, pollution prevention, product stewardship and sustainable development. Its argument is that RBV does not explore the relationship between the organization and the natural environment (Hart, 1995; Hart and Dowell, 2011). KBV, in turn, overcomes the traditional concepts of strategy--such as strategic choice and competitive advantage--and explores fundamental concepts of the theory of the firm, such as internal management, organizational structure, innovation theory, among other aspects (Grant, 1996).
In addition, RBV starts to "talk" with other theories, like the institutional theory and the evolutionary perspective, thus becoming a multidisciplinary approach, according to Table II.
The maturity stage provides additional contributions to RBV foundations. At this stage, some authors have already considered it as a resource-based theory and not just a RBV. Researchers at this stage focused their attention on intangible resources (Gavetti, 2005; Makadok and Barney, 2001; Makadok, 2001; Teece, 2007), which are the drivers of business performance, with corporate reputation being one of its main elements. Due to their immaterial and non- physical aspect, intangible resources generally are difficult to measure. Likewise, the diversity of concepts related to corporate reputation shows the lack of a definition that allows to advance toward the measurement of the reputation construct, which is the central goal of this study.
2.2 Intangible resources
An organization is made up of tangible and intangible resources. Examples of tangible resources include real estate and...
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