Reputation Building by New Ventures: Three Essays on Processes and Performance

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2006-05-24

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Management scholars have established the importance of reputation for firm performance but the mechanisms through which reputation can be accumulated are still to be explored. While some researchers have proposed that reputation accumulates through causally ambiguous social processes and can be built through continuous investments over time, there is little evidence regarding the nature of firm activities that may serve as strategic investments in reputation building. Prior research has focused primarily on studying reputation in large established firms that have both their prior performance, which can guide public perceptions and opinions, and substantial resources to make costly investments in product quality and advertising, which serve to increase their reputation. The tendency to study reputation among firms that already have accumulated some reputation does not allow for examining how this critical intangible asset comes into being and what factors account for the variance in the levels of reputation among young firms in an industry. This gap in the literature can be addressed by studying the process of reputation building in the context of new ventures (NVs), because such a context allows for examining the processes and different paths that may evolve from day one in the life of a firm. Specifically, my dissertation addresses these gaps in the current state of knowledge by examining the critical factors that determine the variations among NVs in their reputation building efforts, the factors that account for the relative efficiency of these efforts, and the performance implications of reputation building activities and reputational capital at different stages of the life of NVs. The dissertation is composed of three essays. The first essay describes the exploratory stage of this dissertation and provides initial insights regarding the activities that help NVs develop reputation early in their lives. The second essay provides a theoretical framework to understand the process of reputation building by NVs. I propose that NVs can build their initial reputations by investing in symbolic activities and critical resources that serve as signals of NVs' underlying quality and potential. The patterns and efficiency of such investments are likely to vary systematically depending on the founders' entrepreneurial experience and the technology and market uncertainty faced by NVs and their stakeholders. The third essay tests and provides empirical supports to the hypothesized model of reputation building in a sample of 415 information technology NVs.

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