Assessing the Impact of Firm Reputation on Performance: An International Point of View

Abstract

In order to operationalize difficult concepts (corporate reputation, corporate social responsibility, and stakeholder orientation) researchers have generally turned to the Fortune Reputation Index (FRI) as a readily available measure. Despite the heavy reliance on the Fortune Reputation Index as a valid measure of a firm’s reputation or social responsibility, the results of a study conducted by Fryxell & Wang (1994) questioned the usefulness of the FRI as it is currently constituted. To be more specific, it has been suggested that the FRI is merely an amalgamation of financial metrics that reflects a firm’s overall financial health. In response to such an accusation, more recent research conducted by Lee & Hall (2008) that revalidates the veracity of the FRI. Even after controlling for any financial “halo” effects, the validity of the FRI as an acceptable proxy for firm reputation and social responsibility has been reestablished. In an effort to extrapolate on these more recent findings, the present study seeks to investigate corporate reputation from an international context. Results confirm a positive correlation between firm performance and firm reputation and highlight the importance of firm reputation as a critical strategic asset that needs to be managed.

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