Strategic Management Joumal, Vol. 18:2, 127-140 (1997)
THE EFFECT OF REPUTATION ON THE DECISION TO JOINT VENTURE
MARC J. DOLLINGER
School of Business, Indiana University, Bloomington, Indiana, U.S.A.
PEGGY A. GOLDEN
College of Business, Florida Atlantic University, Fort Lauderdale, Florida, U.S.A.
School of Business, University of Wisconsin, Madison, Wisconsin, U.S.A.
This paper focuses on the impact that reputation has on the decision to proceed with a strategic alliance. Employing reputation constructs adapted from the Fortune Corporate Reputation Survey, we manipulated a target firm's reputation in an experimental design. The subjects were placed in the role of CEO of the partner firm and asked whether they would engage in the alliance. Findings indicate that (1) reputation is a multidimensional construct, (2) the personal information-processing characteristics of the decision-maker mediate the reputation effect and may suppress the reputation information, (3) subjects may compensate weaker elements of reputation for stronger ones when making decisions, (4) product and management reputation are the most important factors, and (5) reputation is a factor affecting the decision regardless of whether the proposed target is a supplier or a competitor. @ 1997 by John Wiley & Sons, Ltd.
A positive reputation indicates that an organization is highly esteemed, worthy or meritorious; it implies a good name and high regard (Webster's Third New International Dictionary, 1961). A firm's reputation is an intangible element of its business strategy. With it the firm may signal its competitive intentions. For example, a reputation for retaliation inhibits rivalry (Caves and Porter, 1977). A positive reputation is a strategic factor that can be employed to earn above-average profit (Bamey, 1986). A firm's reputation influences trust, and that leads to alliances and other interorganizational relationships (Oliver, 1988). The reputations...