On being bad: Why stigma is not the same as a bad reputation

Yuri Mishina The Eli Broad Graduate School of Management

Michigan State University East Lansing, MI 48824-1122

mishina@bus.msu.edu

Cynthia E. Devers A.B. Freeman School of Business

Tulane University New Orleans, LA 70118

cdevers@tulane.edu

Perhaps as a reaction to the recent spate of corporate misbehavior, scholars have

been exploring a host of actions and outcomes that organizational stakeholders tend view

in a negative light, including product recalls (Rhee & Haunschild, 2006), downsizing

(Love & Kraatz, 2009), earnings restatements or manipulation (e.g., Harris & Bromiley,

2007; Karpoff, Lee, & Martin, forthcoming; Srinivasan, 2005), corporate illegality (e.g.,

Karpoff, Lott, & Wehrly, 2005; Mishina et al., 2010), and other crises and scandals (e.g.,

Jensen, 2006; Jonsson, Greve, & Fujiwara-Greve, 2009; Semadini et al., 2008). Others

have focused not on the problematic actions and outcomes themselves, but, rather, on the

negative labels and evaluations that often attach to organizations as a result of how

stakeholders evaluate those actions and outcomes (e.g., Devers et al., 2009; Hudson,

2008; Hudson & Okhuysen, 2009; Pozner, 2008; Rhee & Valdez, 2009; Wiesenfeld,

Wurthmann, & Hambrick, 2008).

When an organization or an organizational act is evaluated negatively, scholars

often characterize the organization in question as having a bad or negative reputation

(e.g., Dollinger, Golden, & Saxton, 1997; Herbig & Milewicz, 1995; Nichols & Fournier,

1999; Rhee & Valdez, 2009), stigmatized (e.g., Devers et al., 2009; Hudson, 2008;

Hudson & Okhuysen, 2009; Pozner, 2008; Semadini et al., 2008; Sutton & Callahan,

1987; Wiesenfeld et al., 2008), or both (e.g., Fiol & Kovoor-Misra, 1997). Indeed, both

terms are frequently applied to organizations synonymously. While there is intuitive

appeal of treating bad reputation and stigma equivalently or using the terms

interchangeably, we caution that such characterizations blur important boundaries,

thereby limiting effective discussion, measurement, and estimation of these similar, but

theoretically distinct, social evaluation constructs. In this chapter, we explicate the

similarities and differences between organizational reputation and stigma, with the

purpose of allowing both to function as more complete and descriptive social evaluation

constructs in the organizational literature.

First, we draw on the considerable body of research on organizational reputation

and the more nascent organizational stigma literature to provide definitions of both and to

compare and contrast the constructs along a variety of dimensions. Second, drawing on

these differences, we explore the complex interrelationships between the two constructs

by examining how an existing reputation may prevent or exacerbate the infliction and

diffusion of a stigma and how the presence of a stigma may influence an organization’s

existing reputation. We conclude by offering a research agenda designed to allow

scholars to more completely and effectively discuss, measure, and analyze these

constructs. We begin by examining how bad reputation and stigma have been defined in

the extant literature1.

Bad Reputation and Organizational Stigma Defined

Scholars have examined the reputation construct for decades. Although some

debate exists about how reputation should be defined and operationalized, the most

common definition of reputation within the organizational literature is that proposed by

Fombrun and colleagues (e.g., Fombrun, 1996; Fombrun & Shanley, 1990; Fombrun &

van Riel, 1997), who defined reputation as a collective, multidimensional judgment about

a firm by its multiple stakeholders. For all of its scholarly attention, however, this

research has focused almost exclusively on the positive or favorable end of the reputation

1 We focus our examination on how these constructs have been applied to organizations, since related constructs can have substantial differences when applied at the organizational versus individual level (e.g., Devers et al., 2009).

continuum2. In the few studies that specifically mention bad or negative reputations, the

“bad” or “negative” refers to the valence attached to the reputation construct—i.e., that

the reputation is unfavorable (Rhee & Valdez, 2009).

Conversely, scholars have focused much less attention on organizational stigma,

with most studies exploring the effects of events such as financial distress and bankruptcy

on organizational members’ perceptions, actions, and outcomes (Pozner, 2008; Semadini

et al., 2008; Sutton & Callahan, 1987; Wiesenfeld et al., 2008). Because these studies

have focused on how such events impact organizational members, the term “stigma” is

often used more as a label or a descriptor for a negatively evaluated event (e.g.,

bankruptcy), rather than a specific organizational-level construct. Further, these studies

have tended to conceptualize stigma fairly abstractly, often paraphrasing Goffman’s

(1963: 3) definition of a stigma as “an attribute that is deeply discrediting” that reduces

the individual “from a whole and usual person to a tainted, discounted one” (Link &

Phelan, 2001)3. Examples include: stigma as “an attribute that is deeply discrediting”

(Sutton and Callahan, 1987: 406), a “mark of social disapproval” (Fiol & Kovoor-Misra,

1997: 148), “anything that detrimentally segregates individuals” (Semadini et al., 2008:

558), “the denigration or stain the person experiences, which negatively impacts his or

her image and reputation” (Wiesenfeld et al., 2008: 232), “spoiled image” (Hudson,

2008: 252), and “negative social evaluations” (Hudson & Okhuysen, 2009: 134).

2 Although some have focused explicitly on bad or unfavorable reputations, this work is almost exclusively at the individual level. For example, Fine and colleagues (e.g., Bromberg & Fine, 2002; Ducharme & Fine, 1995; Fine, 1996, 2002a, 2002b), for example, have done numerous studies on bad reputations (what they often term “difficult” reputations; Fine, 2002a), but these are focused on the historical reputations of individual actors, such as Benedict Arnold (Ducharme & Fine, 1995) or Hitler (Fine, 2002b). 3 Interestingly, the lack of definitional clarity is also a critique of the individual-level stigma literature (Link & Phelan, 2001).

This research has advanced understanding of the life consequences individual

organizational members and affiliates encounter when enmeshed in a stigmatized

organization, but given the focus, stigma is implicitly conceptualized as an organizational

analogue to an individual-level stigma. More recently, however, some scholars have

offered definitions of stigma that are more explicitly organizational-level in nature. For

example, Pozner (2008: 144) argues that stigma is “an emergent property, determined

through the process of social interaction, whereby specific meanings are attached to

categories of behavior and individuals.” She further proposes that a stigma is an

“organizational stigma” only when observers view the organization as being at fault,

either due to the failure of organizational systems or through endorsement of a violation.

Hudson (2008) proposes that two distinct types of organizational-level stigmas may exist:

event stigmas that result from a “discrete, anomalous, episodic” event (p. 253) and core-

stigmas that are based on the “nature of the organization’s core attributes—who it is,

what it does, and whom it serves” (p. 253). Finally, Devers and colleagues (2009: 157)

explicitly define organizational-level stigma as “a label that evokes a collective

stakeholder group-specific perception that an organization possesses a fundamental,

deep-seated flaw that deindividuates and discredits the organization.” The authors further

argue that organizational-level stigmas differ from individual-level stigmas in the types

of conditions that stigmatize, how preventable or removable the stigma is, and how

pervasive the stigmatizing categories are across contexts.

Given that little research has focused on negative reputations and that stigma is

frequently defined abstractly (e.g., Devers et al., 2009; Link & Phelan, 2001), it’s not

surprising that scholars often conflate bad reputation and stigma. In the following sections,

building from Fombrun’s (1996) frequently used definition of reputation and the more

recent organizational-level conceptualizations of stigma, we explicate the similarities and

differences between organizational reputation and organizational stigma.

Theoretical Roots

The primary theoretical roots of reputation are signaling theory (e.g., Milgrom &

Roberts, 1986; Shapiro, 1982, 1983; Spence, 1974) and game-theory (e.g., Kreps &

Wilson, 1982; Milgrom & Roberts, 1982; Rosenthal, 1981). Although both focus on

information asymmetries, are often used together, and frequently use similar arguments

and methodology, both have been used to examine different aspects of reputation. The

signaling literature defines reputation as consumer expectations of directly unobservable

product quality (e.g., Milgrom & Roberts, 1986; Shapiro, 1982, 1983) and uses

mathematical proofs to focus on such questions as when a firm’s reputation might impact

buyer choices. The game theoretic literature, on the other hand, defines reputation as

expectations about a firm’s behavioral tendencies, with the notion that the behavioral

tendencies are directly reflective of the firm’s underlying utility function and payoff

structure (e.g., Kreps & Wilson, 1982; Milgrom & Roberts, 1982; Rosenthal, 1981).

Rather than examining buyer behavior, however, game theoretic literature generally

focuses on such things as market entry and predation (e.g., Kreps & Wilson, 1982;

Milgrom & Roberts, 1982). From its initial economic roots, others have infused

reputation research with a variety of theories from multiple disciplines, resulting in a

proliferation of reputational definitions (e.g., Barnett et al., 2006; Berens & van Riel,

2004; Brown et al., 2006; Fombrun & van Riel, 1997).

The primary theoretical basis for stigma is labeling theory from the sociology of

deviance (e.g., Erickson, 1962; Gibbs & Erickson, 1975; Kitsuse, 1962) and mental

illness (e.g., Scheff, 1974). The basic notion is that “[f]orms of behavior per se do not

differentiate deviants from non-deviants; it is the responses of the conventional and

conforming members of the society who identify and interpret behavior as deviant which

sociologically transforms persons into deviants.” (Kitsuse, 1962: 253). Following this

work, the majority of the work on stigma has occurred within social psychology (for

reviews see e.g., Link & Phelan, 2001; Major & O’Brien, 2005).

Dimensionality and Range

Dimensionality is an important difference between bad reputations and stigma.

Reputations form as multiple stakeholders try to make sense of the firm’s characteristics,

activities, and outcomes along a variety of dimensions (e.g., Fombrun & Shanley, 1990).

Because different types of stakeholders have different priorities and, thus, attend to

different aspects of the firm, reputation is necessarily multidimensional (Fombrun, 1996).

For example, some stakeholders may focus on the financial performance, others on the

social responsibility, and still others might focus on how the organization treats its

employees.

Reputation is also continuous (e.g., Deephouse & Suchman, 2008; Fombrun &

Shanley, 1990) and valenced, ranging from highly favorable to highly unfavorable (e.g.,

Brooks et al., 2003; Deephouse 2000; Deephouse & Carter, 2005). A variety of related

terms are used to discuss the valence of a reputation, including good/bad,

positive/negative, and favorable/unfavorable. Importantly, however, good and bad are

merely relativistic terms used for convenience, not “absolute, dichotomous reputational

evaluation[s],” but rather a “relative, nonbinary evaluation” (Rhee & Valdez, 2009: 157).

Due to its multidimensional nature, an organization may have a favorable reputation

along one dimension and simultaneously have an unfavorable one along anothe(Rhee &

Valdez, 2009).

Unlike reputation, organizational stigma is inherently unidimensional, as it

reflects that an organization possesses a “fundamental, deep-seated flaw” (Devers et al.,

2009: 157). Although the stigma may be based on a particular practice, structure, or

action, as Goffman (1963) notes, the stigma is not about the particular practice, structure,

or action, but rather about the negative inferences made about the organization’s core

essence. These inferences permeate every aspect of the organization’s being, such that it

is no longer viewed as having “merely behaved in a problematic manner,” but is seen as

“a dangerous deviant” that is “the embodiment of everything that the stakeholder group

considers ‘wrong’” (Devers et al., 2009: 162). A stigma thus deindividuates by stripping

the organization of its unique identity and imputing an alternative one based on the

stereotypes ascribed to the stigmatized category. As a consequence, even though the

organization might objectively be unique along many dimensions, stakeholders will view

stigmatized organizations primarily in terms of the stereotyped attributes.

Organizational stigma is thus a dichotomous evaluation—those who lack a stigma

are viewed as normal or usual and those possessing a stigma are viewed as tainted and

less than whole (Pozner, 2008). This is not to say, however, that organizations can not

differ in regards to the number of different types of audiences that they are stigmatized by

or in the severity of the sanctions that they face (Fiol & Kovoor-Misra, 1997; Hudson,

2008; Hudson & Okhuysen, 2009). Nevertheless, an organizational stigma is an all-or-

nothing proposition—the organization is either stigmatized or not, but an organization

cannot be stigmatized along only a single dimension.

Levels of Analysis

A third way in which reputation and stigma differ is in the level of analysis at

which each is applied. Reputation is applied at the level of the organization and entails a

unique assessment of a specific organization in terms of its ability to meet the financial

and social expectations of various constituents (e.g., Fombrun, 1996; Fombrun &

Shanley, 1990). Although some evidence suggests that organizations within the same

strategic group may have similar reputations (Ferguson, Deephouse, & Ferguson, 2000),

reputations tend to set an organization apart from others and allow it to be perceived as a

unique entity with distinct characteristics and behaviors (e.g., Deephouse & Suchman,

2008; Jensen & Roy, 2008).

An organizational stigma, on the other hand, is not about any particular

organization, per se, but instead about whether or not the organization belongs to a larger,

stigmatized category (Wiesenfeld et al., 2008). Hence, while reputations are based on

distinctness from other organizations, stigmas are based on broad categorizations (Frable,

1993), somewhat akin to an industry categorization. Unlike an industry categorization,

however, membership in the stigmatized category is always the relevant and salient

reflection of the organization in the minds of stakeholders, because a stigma imputes a

deindividuated identity based on the stereotypes associated with the stigmatized category

(Devers et al., 2009).

Antecedents

Reputations and stigma also differ in their antecedents. Reputations form as

stakeholders use existing industry recipes (Spender, 1989) and competitive ontologies

(Porac et al., 1995) to make sense of the organization and its activities (Porac, Ventresca,

& Mishina, 2002). In order to develop a favorable reputation, firms must provide

demonstrations of performance and quality (e.g., Deephouse & Carter, 2005; Rindova et

al., 2005), consistent and reliable behavior (e.g., Clark & Montgomery, 1998; Fombrun,

1996; Ganesan, 1994; Herbig & Milewicz, 1995), and generalized success at fulfilling

stakeholders’ expectations over time (e.g., Barnett et al., 2006; Fombrun & Shanley,

1990; Fombrun & van Riel, 1997).

Organizational stigma, on the other hand, does not necessarily develop from a

history of behaviors or outcomes, per se. Instead, as Kitsuse (1962) notes, “the critical

feature of the deviant-defining process is not the behavior of individuals who are defined

as deviants, but rather the interpretations others make of their behaviors, whatever those

behaviors may be” (p. 255). Hence, an important antecedent to an organizational stigma

is that stakeholders perceive that an organization threatens the existing social order

because its values are globally and completely incongruent with the values of the

stakeholder group (generalized value incongruence) (Sitkin & Roth 1993). However,

given that it is a collective phenomenon, in order for a stigma to arise, the perception that

the focal organization is a dangerous deviant must diffuse across a critical mass of

members to the point in which it becomes self-sustaining within the stakeholder group

(Devers et al., 2009).

The process by which stakeholders’ perceive a generalized value incongruence

may be fairly automatic for a preexisting stigma category, such as organizational failure

(Pozner, 2008; Semadini et al., 2008; Sutton & Callahan, 1987; Wiesenfeld et al., 2008).

However, particular organizational characteristics or outcomes may also trigger the

application of a stigma (Hudson, 2008; Hudson & Okhuysen, 2009) if those attributes

are, or become, viewed as deviant or threatening to an existing social structure (e.g.,

Goffman, 1963). Even in these instances, however, stigma emergence is less about

whether or not a organization has actually experienced a particular outcome or possesses

a particular characteristic but, instead, about the inferences made by observers (e.g.,

Kitsuse, 1962).

Ease of Acquisition or Removal

A good reputation takes time to develop because it requires a consistent ability to

satisfy stakeholder concerns (Barnett et al., 2006; Fombrun, 1996; Fombrun & Sahnley,

1990). However, research documents that they are fragile and fleeting (e.g., Hall, 1993;

Love & Kraatz, 2009; Rhee & Haunschild, 2006) because good reputations “sit on the

slippery ground of their constituents’ fickle interpretations” (Fombrun, 1996: 388).

Therefore, a favorable reputation can shift from good to bad much more quickly than it

can shift from bad to good (e.g., Nichols & Fournier, 1999) because stakeholders assess

new signals with the expectation that questionable organization will behave in a

questionable manner (Fombrun, 1996).

Organizational stigmas are somewhat similar to bad reputations in this regard

because stigmas can be acquired fairly easily, as stigmatization only depends on

collective perceptions of generalized value incongruence (Devers et al., 2009), which

may be activated by a particular event or organizational characteristic (Hudson, 2008).

However, stigmas tend to be very difficult to remove because they are not confined to the

stigmatizing aspect but are about the inferences made regarding the underlying

fundamental characteristics and core essence (Goffman, 1963) of the organization.

Hence, merely changing surface structures or behavior may not be enough for

redemption—a stigmatized organization is likely to remain stigmatized unless it is able to

change stakeholders’ interpretations and beliefs about its very nature. Unfortunately for

stigmatized organizations, favorable behavior is often viewed merely as an indication of

conformance with societal expectations and norms and, thus, seen as conveying relatively

ambiguous information about underlying attributes (Hamilton & Huffman, 1971;

Hamilton & Zanna, 1972). The implication, then, is that the deviant conduct that caused

the stigma tends to be weighed heavier than subsequent positive efforts to try to cleanse

one’s character. As a result, although more avenues exist for organizations to remove

stigmas relative to individuals (e.g., isolating and removing the problematic parts or

members of the organization - Devers et al., 2009), once applied, stigmas at any level are

often “almost irreversible” (Erickson, 1962: 311).

Social Uses and Organizational Consequences

Reputation reflects a signal of quality and likely organizational behaviors (e.g.,

Fombrun & Shanley, 1990; Jensen & Roy, 2008; Weigelt & Camerer, 1988). Hence, the

primary function of reputation is to reduce uncertainty in the minds of stakeholders by

providing them with relevant expectations about the firm (e.g., Rindova et al., 2005).

Reputations are thus likely to play a central role in any potential interactions that both

individuals and other parties consider with the focal organization. Consequently, a

favorable reputation leads to a host of organizational benefits, including sustained

financial performance (Roberts & Dowling, 2002), market dominance (Shamsie, 2003),

ability to charge price premiums (Rindova et al., 2005), greater benefits to positive

earnings surprises (Pfarrer, Pollock, & Rindova, 2010), and increased attractiveness as a

transaction partner (Dollinger et al., 1997). Not only are organizations with unfavorable

reputations unable to enjoy these benefits, they may also suffer price discounts relative to

organizations with similar quality products (Nichols & Fournier, 1999).

The primary social use for an organizational stigma is social control (Erickson,

1962; Kitsuse, 1962), and an organizational stigma leads to a variety of social and

economic sanctions for the organization and its members. By demonstrating the

differences between acceptable and unacceptable behavior and characteristics,

organizational stigma can be used to promote social stability (Erickson, 1962). A stigma

and its aftermath unfold through a sociopolitical process driven by a variety of factors,

including a desire for social justice, schadenfreude, and self-serving behavior

(Wiesenfeld, et al., 2008), and results in various types of symbolic activity, including

impression management and scapegoating (Fiol & Kovoor-Misra, 1997; Pozner, 2008;

Sutton & Callahan, 1987). As an organization becomes stigmatized, many of its

stakeholders begin to cognitively disidentify with the organization (e.g., Bhattacharya &

Elsbach, 2002; Elsbach & Battacharya, 2001), leading both clients (Jensen, 2006) and

organizational members (Semadini et al., 2008) to defect from the organization, as well

as to act in a specifically counter-organizational manner. In a study on the stigma of

chapter 11 bankruptcy filings, for example, Sutton and Callahan (1987) found that

various stakeholders reduced the quantity and quality of interactions with the stigmatized

organization, bargained for more favorable exchange relationships, spread malicious

rumors, and even directly insulted the organization and its managers, all of which directly

threatened organizational survival and success. Additionally, certain organizational

members are often blamed for the stigma and, thus, singled out for punishment (Pozner,

2008; Wiesenfeld et al., 2008).

Interrelationships between Organizational Reputation and Stigma

The differences discussed above can have important implications for the

interrelationships between organizational reputation and stigma. In this section, we

examine how those interrelationships may influence how susceptible an organization is to

a stigmatizing claim and how broadly a stigma might spread and how a stigma may

influence an organization’s existing reputation.

Reputation and Susceptibility to Stigmatizing Claims and the Spread of Stigma.

Extending Goffman’s (1963) argument that actors who are held in high regard are

able to engage in some deviant behaviors without fear of sanction (see also Hollander,

1958, 1960), we argue that a organization’s existing reputation influences the stickiness

of a stigmatizing claim. This is largely because stakeholders use the focal organization’s

existing reputation as a filter to determine whether or not a stigmatizing claim appears to

be consistent with what they “know” about the firm (e.g., Fiol-Kovoor-Misra, 1997).

Given the presumption that reputable organizations will behave in reliable, credible,

trustworthy, and responsible ways (e.g., Fombrun, 1996; Love & Kraatz, 2009), a strong

positive reputation may bolster an organization’s ability to defend against a stigmatizing

label.

Nevertheless, because reputation is comprised of stakeholder evaluations along a

multitude of dimensions, an organization’s reputation is only likely to influence its

credibility if it is relevant to the domain of the potentially stigmatizing claim (e.g.,

environmental responsibility, product quality). If the targeted organization’s reputation is

supportive of its counter-claims then it is likely to be viewed as more credible, while a

reputation that is contrary to its counter-claims (or is supportive of the labeler’s claims)

increases the likelihood that stakeholders will accept the validity of the stigmatizing

label.

A targeted firm’s reputation may also influence whether other groups perceive it

as deviant and how broadly the stigma may spread. Specifically, although a stigma is

both stakeholder- and context-specific (Devers et al., 2009), the organization’s reputation

is likely to affect the symbolic value of the organization as a target, as well as the

reactions of other actors, and thereby influence whether or not the targeted organization is

stigmatized by a wider range of stakeholder groups or in multiple contexts.

On one hand, because public attention is a scarce resource (Hilgartner & Bosk,

1988), anything that captures attention increases the symbolic value of s target. If a

targeted organization has a favorable reputation, the potential for a compelling, dramatic

conflict increases, thereby enhancing its symbolic value. However, because the reactions

of other actors depend on both political considerations and schadenfreude (e.g., Pozner,

2008; Wiesenfeld et al., 2008), a favorable reputation may also help to protect the firm.

As Feather and Sherman (2002) found, schadenfreude, or pleasure at another’s

misfortune, is based on resentment about an actor’s undeserved favorable outcomes, and

hence a desire to correct the injustice. If an organization has a favorable reputation, other

actors may believe that the deviant label has been unjustly applied, and thus refrain from

acting against the organization. If the organization is already viewed in an unfavorable

light, however, observers may naturally conclude that any misfortune that befalls the

organization is justified and that it deserves sanctioning (e.g., Feather & Sherman, 2002),

thereby, increasing piling on behavior (Wiesenfeld et al., 2008).

Stigma and Reputational Loss

Once an organization is stigmatized, its uniqueness is stripped away in the eyes of

its stakeholders (Link & Phelan, 2001). In order to reconcile prior beliefs about a newly

stigmatized firm, members of the stigmatizing stakeholder group are likely to reinterpret

the target organization’s characteristics and actions that were heretofore evaluated

positively (Ducharme & Fine, 1995). Reinterpreting occurs when stakeholders attribute

positive outcomes to external causes, negative outcomes to internal causes, and generally

impute nefarious motives and structures to the organization (e.g., Devers et al., 2009).

During this process, the organization is, thereby, transformed into an entity that is seen as

“fully, intensely, and quintessentially evil” (Ducharme & Fine, 1995: 1311). For

example, strong performance of a stigmatized firm might be recast as resulting from blind

luck or unethical activities (e.g., Mishina et al., 2010), and corporate social responsibility

behaviors may be viewed as instrumental attempts at ingratiation (e.g., Godfrey, 2005).

Although this implies that the stigmatizing stakeholder group is likely to view the

target in a very unfavorable light, this may be more or less catastrophic for the firm—the

degree of reputational damage would depend on the relative importance of the

stigmatizing stakeholder group in the overall calculus that is used to determine the “net

assessments across constituents” (Fombrun, 1996: 396). Hence, if the stigmatizing group

is both few in number and relative influence, the stigmatized firm may suffer only minor

reputational loss, but if the stigmatizing group is influential and/or numerous relative to

other constituents, a stigma may cause severe reputational damage.

Contemporary, Debates and New Directions: A Future Research Agenda

A number of debates currently exist within both the reputation and organizational

stigma literatures. Two primary debates within the reputation literature are how the

reputation construct should be defined and whether an organization has one reputation or

many. For stigma, the debates concern the role of legitimacy, the range of audiences, and

the notion of multiple types of stigma.

Reputation

The first debate, how reputation should be defined, has been explored by

numerous scholars (e.g., Barnett et al., 2006; Berens & van Riel, 2004; Brown et al.,

2006; Fombrun & van Riel, 1997), but has never been fully resolved. As these authors

have pointed out, the main culprit behind the proliferation of different definitions is the

fact that reputation research occurs in many different disciplines. Berens and van Riel

(2004), for example, identify three separate conceptual streams that offer three

conceptualizations of reputation: reputation as a social expectation, reputation as

corporate personality, and reputation as trust. They do not suggest that these differences

can necessarily be reconciled and instead suggest that researchers base their

conceptualizations on “theoretical and practical considerations” (p. 175). Barnett and

colleagues (2006), on the other hand, distinguish between portrayals of reputation as

awareness or representation, assessment or judgment, and economic asset. Arguing that it

is impossible to reconcile the three streams, per se, they propose that scholars use the

term reputation in reference to judgments and advocate a definition of reputation as,

“Observers’ collective judgments of a corporation based on assessments of the financial,

social, and environmental impacts attributed to the corporation over time.” (p. 34).

Barnett and colleagues (2006) definition is thus very similar to Fombrun’s (1996;

Fombrun & Shanley, 1990) definition of reputation, which, as we noted earlier, is

commonly used within the organizational literature.

The second debate within the reputation literature concerns whether reputations

reflect a single, cross-stakeholder evaluation of an organization (e.g., Fombrun, 1996;

Fombrun & Shanley, 1990) or if an organization has a different reputation with respect to

each stakeholder group (e.g., Carter & Deephouse, 1999; Rindova et al., 2005). Many

reputation scholars appear to believe that different stakeholders may hold very different

views of a particular organization. Some empirical evidence suggests that stakeholder-

specific reputations are important predictors of organizational outcomes (e.g., Ganesan,

1994; Rindova et al., 2005). Consequently, some have suggested that scholars

conceptualize and examine reputation as specific to a stakeholder group (e.g., Carter &

Deephouse, 1999; Rindova et al., 2005).

Others, however, argue that, although different stakeholders may have different

views, it is still more meaningful to examine reputation across all stakeholders (Fombrun,

1996; Fombrun & Shanley, 1990). Fortune’s Most Admired Company list has most often

been used to capture this type of reputation and has been found to impact both sustained

financial performance (e.g., Roberts & Dowling, 2002) and earnings surprises (e.g.,

Pfarrer, Pollock, & Rindova, 2010). Unfortunately, as Fombrun (1996) notes, the Fortune

measure does not adequately capture all constituents’ perceptions because it is based only

on the views of “senior executives, directors, and analysts” (p. 397). The Fortune

measure has also been criticized as reflecting only financial performance and, thus, not

multidimensional (e.g., Brown & Perry, 1994; Fryxell & Wang, 1994).

To advance the reputation literature, we suggest scholars attempt to build

consensus around one or two common definitions of reputation (e.g., Barnett et al., 2006;

Fombrun & van Riel, 1997). We also urge scholars to focus on identifying and validating

reputation measures capable of adequately capturing the complexities of the construct4.

Unless scholars can identify measures that are both multidimensional (c.f., Brown &

Perry, 1994; Fryzell & Wang, 1994) and capture the evaluations of the entire range of a

firm’s constituents (e.g., Fombrun, 1996), the debate regarding whether reputations

should be stakeholder-specific or aggregated across stakeholders cannot be resolved.

Organizational Stigma

Due to the paucity of research, a number of debates exist within the emerging

literature on organizational stigma. The first concerns the relationship between stigma

and legitimacy/illegitimacy. Some have suggested that an organizational stigma

represents the “farther end of the spectrum of illegitimacy—the result of contestation that

leads important social audiences to a negative evaluation of the organization,” or

“negative legitimacy” (Hudson, 2008: 255). Although Hudson appeared to be equating

stigma with illegitimacy for illustrative purposes5, we caution that such a comparison

4 Recently, Rindova, Petkova, and Kotha (2007) have suggested that reputation has multiple components, prominence, evaluative favorability, strategic content, and exemplar status, thereby adding additional complexity to the reputation construct. 5 Hudson criticizes the illegitimacy construct as “poorly defined, inconsistently operationalized, and genuinely overbroad in usage,” thus suffering from, “1) the lack of a consistent definition or operationalization and 2) a confounded definition.” (Hudson, 2008:252).

may lead those who are not sufficiently familiar with both sets of literatures to incorrectly

assume that stigma and illegitimacy refer to the same construct.

We believe that the main reason for any potential confusion between the

constructs is that illegitimacy has rarely been defined explicitly. Instead, illegitimacy is

generally implicitly defined as the lack or absence of legitimacy (e.g., Deephouse &

Suchman, 2008; Pfeffer & Salancik, 1978; c.f., Glynn & Marquis, 2004). Although non-

institutionalists may assume that there is a tripartite distinction between organizations

that are viewed as appropriate, those that are neither appropriate nor inappropriate, and

those that are inappropriate, legitimacy/illegitimacy is actually a dichotomous condition

(e.g., Deephouse & Suchman, 2008). By definition, then, any organization that is not

legitimate is illegitimate, and thus there is no distinction between lacking appropriateness

and being specifically inappropriate within the neoinstitutional literature.

This brings up the second debate, which centers on the range of audiences

required to stigmatize an organization. In suggesting that stigma should be thought of as

“negative legitimacy” (2008: 255), and that “perhaps all organizations are stigmatized by

some social audiences at one time or another” (p. 254), Hudson appears to suggest that

merely dichotomizing support for the organization as present or absent is overly

simplistic. Indeed, if all organizations can be thought of as stigmatized, it becomes

unclear how useful or meaningful it is to talk about a stigma. Instead, perhaps

organizational support and acceptance should be conceptualized as a continuum, with

support by all constituents at one end and support from none at the other. One way to

resolve this issue may be to consider the characteristics of stakeholder groups. For

example, Link and Phelan (2001) state that power is necessary for the social production

of stigma. The implication may be that only stakeholder groups that that are powerful

relative to a target organization can stigmatize.

The third debate relates to the notion of multiple types of stigmas. Hudson (2008)

suggests that there are two different types of organizational stigmas: event stigmas that

are based on “discrete, anomalous, episodic” event and core stigmas that are based on the

“nature of the organization’s core attributes—who it is, what it does, and whom it serves”

(p. 253). The stigma literature is very clear on the idea that stigmatized individuals are

viewed as fundamentally and essentially flawed and, thus, less than whole (Goffman,

1963). In this sense, a stigma is always about the core of an organization—an event or

action that is not ascribed to some fundamental flaw in the “nature of the organization’s

core attributes - who it is, what it does, and whom it serves” (Hudson, 2008: 253) can not

produce a stigma. As such, it may be more useful to think of the core/event distinction as

referring to antecedents, rather than distinct types of stigma. This would be akin to how

the individual-level stigma literature considers different sources of stigma, such as those

that arise from physical conditions and characteristics (e.g., physical deformities,

illnesses), tribal stigmas based on group membership (e.g., race, religion, gender), and

stigmas based on deviant behavior (Goffman, 1963), as well as through association with a

stigmatized group or individual (Page, 1984).

We suggest that for this body of research to advance, scholars must determine

how to effectively measure organizational stigmas (Hudson, 2008), particularly since the

majority of the extant literature on organizational stigma have been theoretical treatments

(e.g., Devers et al., 2009; Fiol & Kovoor-Misra, 1997; Hudson, 2008; Pozner, 2008;

Wiesenfeld et al., 2008). Most empirical studies have inferred that organizations that

have experienced failure were stigmatized, as opposed to directly measuring stigma, per

se. (e.g., Semadini et al., 2008; Sutton & Callahan, 1987). However, a notable exception

is Hudson and Okhuysen’s (2009) study of gay men’s bathhouses, in which these authors

used census data, congressional voting records, and local and state legal statutes as

proxies for hostility toward gay and lesbian individuals, and consequently, the likelihood

that a bathhouse would become stigmatized. As they illustrate, the choice of measures is

likely to be highly context specific, although Hudson (2008) also states that a less

context-specific way to obtain information on stigmatization may be to use surveys.

Once researchers begin to uncover appropriate ways of measuring stigma, they

may begin to resolve some of these existing debates in the organizational stigma

literature. For example, the exact relationship between stigma and legitimacy, as well as

other social evaluations, can be explored, perhaps by following an approach similar to

Jensen and Roy’s (2008) study on how status and reputation influenced auditor firm

selection. Improved measures may also allow researchers to examine what factors

determine the differences in the number and/or range of stigmatizing stakeholder groups,

as well as how stigmatization impacts the survival of organizational forms. Finally, in

considering the notion of event and core stigmas (e.g., Hudson, 2008; Hudson &

Okhuysen, 2009), researchers could compare stigmas based on events versus those that

are based on core characteristics to determine whether they play out in different ways.

For example, are they viewed as differentially controllable or preventable (e.g., Goffman,

1963)? Is one type more or less likely to diffuse to additional contexts than the other? Is

one type more likely to lead to a courtesy stigma (Page, 1984) than the other? Because

we see the core/event distinction as meaningful only as antecedents rather than as distinct

types of stigma, our intuition is that most of the differences come into play before the

stigma arises; nevertheless these are empirical questions.

New Research Directions

Most studies on both reputation and stigma have examined the consequences of

these social evaluations for organizations and members, but a new direction for research

may be to explore how organizations gain a new reputation or stigma. Although Rindova,

Petkova, and Kotha (2007) have moved toward uncovering how new reputations develop

by examining the media reputations of several companies, there is room for more

research. For example, because an existing organization’s reputation is often used to

interpret subsequent information (Fombrun, 1996), the process by which an

organization’s existing reputation can be improved or damaged may be very different

from the way in which an organization develops a reputation in the first place, when

stakeholders may not have any set expectations.

Similarly, the process by which a firm becomes stigmatized or avoids such a fate

has not been studied empirically. Although Sutton and Callahan (1987) examined the

emerging reactions of various organizational stakeholders, both internal and external, to

the stigma of bankruptcy, it may also be worthwhile to examine the labeling contests

(Ashforth & Humphrey, 1997) that organizations engage in when trying to stigmatize or

avoid being stigmatized. Such work may illuminate why, out of a group of organizations

that are all at risk of being stigmatized, some firms are able to avoid stigmatization, while

others become stigmatized. Additionally, although Devers and colleagues (2009)

theorized about the process by which a new category of stigma might emerge, scholars

have yet to empirically confirm or disconfirm this theorizing. The subprime mortgage

industry may be a fertile context in which to test this argument.

We see a second productive avenue of research in examining how organizations

rid themselves of bad reputations or stigmas. Rhee and Valdez (2009) theorized about

how a firm may be able to repair a bad reputation, but this has largely escaped the notice

of reputational theorists, who have examined how negative events may damage

reputations (e.g., Love & Kraatz, 2009; Rhee & Haunschild, 2006) but not how

reputations are repaired. Similarly, how can a stigmatized organization remove the

stigma? Scapegoating (e.g., Boeker, 1992) and other forms of decoupling (e.g., Elsbach

& Sutton, 1992) are often ex ante stigma prevention tactics, but these and other tactics

may be much less effective once the stigmatizing label sticks.

A third area ripe for future research involves uncovering the unanticipated

consequences (e.g., Merton, 1936; Selznick, 1949) of both reputations and stigma. Ely

and Välimäki (2003), for example, argued that concerns about maintaining a good

reputation and avoiding a bad one might cause actors to engage in behaviors that are not

socially optimal. Additionally, Rhee and Haunschild (2006) found that severe recalls by

automobile firms caused more market share damage to high reputation than low

reputation firms. While this research underscores the unforeseen negative effects of a

positive reputation, it is possible that there may be unforeseen positive implications for

possessing a bad reputation and/or a stigma. Indeed, research on stigma at the individual

level has suggested that stigmas can sometimes have positive consequences. Shih (2004)

suggests that stigmatization may result in empowerment of a stigmatized individual if he

or she utilizes certain types of processes to overcome the consequences of stigmatization,

and members of “dirty work” professions may actually form a stronger occupational

culture as a result of having to deal with the stigma attached to their occupation (Ashforth

& Kreiner, 1999; Ashforth et al., 2007). Stigmas may also precipitate action towards

challenging and transforming societal definitions and assumptions surrounding a

stigmatizing label (e.g., Fine, 1995; Gamson, 1989; Johnston, Laraña, & Gusfield, 1994;

Kaplan & Xiu, 2000; Kitsuse, 1980). Whether and how these processes might play out

for organizational stigmas is an open question, however. Thus, exploring these processes

may offer greater understanding of the unanticipated consequences of reputations and

stigmas.

Finally, we believe that scholars may find value in considering positively deviant

organizations. Although the stigma literature provides insight on the causes and

consequences of negative deviance, some stigma researchers have noted that “[p]eople

may… mark others in favorable, nonstigmatizing ways.” and that it is possible for certain

people to be marked with “medals and awards, indicating that the individual is to be

respected and adulated.” (Neuberg, Smith, & Asher, 2000: 31). In essence, these authors

suggest that there may be a positive counterpart to a stigma, what one might think of as a

“mark of distinction” that serves as an aspirational ideal to the “normals.” To our

knowledge, this notion of a “mark of distinction” has not yet been examined in the stigma

or related literatures. The existing stigma literature applies to the presence or absence of

deviant behavior that is viewed negatively (e.g., Goffman, 1963), and the neoinstitutional

literature examines the presence or absence of conformity to accepted norms, values, and

definitions (e.g., DiMaggio & Powell, 1983; Meyer & Rowan, 1977). The relatively new

concept of firm celebrity comes closest to this notion of positive deviance, since celebrity

is about deviations from the norm (over- or under-conformance) and a positive evaluation

of that deviance (Rindova, Pollock, & Hayward, 2006). However, Rindova and

colleagues (2006) are careful to point out that the same deviance that the celebrity firm

engages in might be viewed as problematic for any other actor—the celebrity is viewed

as not subject to the ordinary rules and constraints that others face. Consequently, it may

be worthwhile to consider whether a mark of distinction is even possible, and if so, what

the antecedents and consequences of such a mark might be.

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