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    INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS

    COPY RIGHT 2013 Institute of Interdisciplinary Business Research 730

    MAY 2013VOL 5,NO 1

    Developing an Alternative Measurement of Corporate Reputation within

    the Malaysian Context

    Dwi Sunu KantoUniversitas Trilogi

    12760, Jakarta, Indonesia

    Ernest Cyril de RunUniversiti Malaysia Sarawak

    94300, Sarawak, Malaysia

    Abu Hassan bin Md IsaUniversiti Malaysia Sarawak

    94300, Sarawak, Malaysia

    Abstract

    The measurement of corporate reputation is a growing issue for practitioners and academics. The corporate

    reputation measurement literature concentrates on the United States and European countries. There is an obvious

    lack of studies especially on the development of corporate reputation measurement in Malaysia. While interest

    in the development of corporate reputation measurement has gained momentum in the last thirteen years, a

    precise commonly agreed upon the measurement is still unclear. Therefore, this paper set out to develop a

    conceptual model for developing an alternative measurement of corporate reputation within the Malaysian

    context. Literature review, conceptual model, hypotheses development and research methodology are discussed.

    These will allow companies in Malaysia to develop a new measurement of corporate reputation.

    Keywords: Corporate Reputation Measurement, Malaysian Context, Conceptual Model.

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    1. IntroductionThe identification of drivers of sustainable competitive advantages has gained momentum in the

    increasing competition in a globalized economy (Schwaiger, 2004). The widespread search for these

    drivers is no longer limited to tangibles, but also arrived at the field of intangibles. This fact is rather

    surprising, since related surveys show that in the United States most executives consider corporate

    reputation to be one of the most substantial drivers of firms success (Dunbar & Schwalbach, 2001;Hall, 1992).

    Corporate reputation is vitally important. The importance of corporate reputation as one of intangible

    assets has grown rapidly within the last two decades. A favorable corporate reputation can lead to

    numerous strategic benefits to a company, such as creating market entry barriers (Deephouse, 2000;

    Fombrun, 1996; Milgrom & Roberts, 1982), fostering customer retention (Fombrun, 1996; Fombrun &

    Pan, 2006), and strengthening competitive advantages (Barney, 1991; Roberts & Dowling, 1997).

    Creating and exploiting corporate reputation allows companies to drive markets, rather than to bemarket driven (Schwaiger, 2004). At the present time, there is no general agreement on the

    measurement of corporate reputation. However, its condition is generally acknowledged by many

    researchers in the area of corporate reputation measurement (Brady, 2003; Craven et al., 2003;

    Schwaiger, 2004; Fombrun et al., 2000; Gabbioneta et al., 2007; Gardberg, 2006; Groenland, 2002;

    Helm, 2005).

    A practical measurement of corporate reputation would welcome by the Malaysian businesses and

    academics. They will use it in numerous ways. To Malaysian companies, the measurement would

    provide information on how to make them improved able to discharge their duties (Goldsmith, 2004).

    Therefore, this paper set out to review the literature of corporate reputation measurement, develop a

    conceptual model for developing an alternative measurement of corporate reputation, hypotheses

    development and research methodology. The rest of this paper is organized as follows: Section 2

    reviews related literature on corporate reputation measurement, Section 3 discusses the conceptual

    model, and the hypotheses development is given in the Section 4. Section 5 describes the methodology

    used and Section 6 is the conclusion of this paper.

    2. Literature ReviewAn examination of the pertinent literature on the advantage of corporate reputation indicates that

    companies with bad reputation require a long time to obtain gains (Roberts & Dowling, 1997; Vergin

    & Qoronfleh, 1998). On the contrary, companies with good reputation are thought to be trusted by

    stakeholders and it only requires relatively a shorter time to obtain gains because of the competitive

    advantage and higher output of such companies (Roberts & Dowling, 1997). They are also thought tohave good market performance (Joneset al., 2000; Srivastavaet al., 1997). Despite this evidence on

    the positive effect of good corporate reputation on companys performance, it is important to know a

    fundamental question: In the Malaysian context, what are the measurements that make up a good

    corporate reputation? It seems clear that without knowing measurements of corporate reputation,

    academics and practitioners cannot effectively or efficiently advance research on corporate reputation

    in Malaysia.

    Previous studies on corporate reputation had been conducted by using affective (Fombrun, 1996),cognitive (Gray & Ballmer, 1998), a combination of cognitive and affective components (Hall, 1992;

    Schwaiger, 2004), and others have used perception approach (Larkin, 2003). Studies on the

    measurement of corporate reputation are mainly conducted in developed countries such as the United

    Kingdom (Chunget al., 1999), United States (Brady, 2003; Craven et al., 2003; Fombrun et al., 2000,

    Gardberg, 2006), Germany (Dunbar & Schwalbach, 2000; Helm, 2005; Schwaiger, 2004), Netherlands

    (Groenland, 2002), and Italy (Gabbionetta et al., 2007). There is no study on corporate reputation that

    develops its measurement within the Malaysia context.

    A review of existing models of corporate reputation measurement reveals a relatively small number ofwidely used models. The most prominent one seems to be variations of Fortunes America Most

    Admired Companies (AMAC) from the practical side and the Reputation Quotient (RQ) from the

    academics side (Fombrun & Van Riel, 2004; Fombrun, 1996). Also popular, but to a lesser extent

    models such as the Corporate Personality (Davies et al., 2003) and the Stakeholder PerformanceIndicator and Relationship Improvement Tool (SPIRIT) (MacMillan et al., 2004). These models

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    differed considerably in terms of their underlying approach, the stakeholder they surveyed, and what

    they measured (Mahon, 2002).

    The Reputation Quotient (RQ) as the most popular in academic approach can be applied to obtain data

    on companys reputation from the point of views of the multiple stakeholders. Although, in practice,

    survey with the normative, functional, customers, and diffused groups of stakeholders have been the

    main focus of research. The RQ model measures perceptions of an organization in terms of socialexpectations of six dimensions such as products and services, emotional appeal, vision and leadership,

    financial performance, workplace environment, and social responsibility (Fombrunet al., 2000).

    The RQ has been tested within a cross-cultural setting among countries within the United States,

    Europe, and Australia (Gardberg, 2006). It also has been validated in the Netherlands (Groenland,

    2002). Nonetheless, the applicability of the RQ remains questionable in the Eastern societies. However,

    the possibilities that these differences may stem from the Eastern societies were less explored, even in

    Malaysia, such differences were never explored, thus leaving a significant contextual gap in theexisting literature. This requires an empirical investigation within the Malaysia context. Therefore, as

    an initial approach this paper use six dimensions/factors of the RQ by Fombrun et al. (2000) to develop

    an alternative measurement of corporate reputation within the Malaysian context.

    There were a variety of measures used to assess corporate reputation. In western societies, thedimensions/factors of corporate reputation showed that they differ by nations (Chung et al., 1999;Fombrun et al., 2000; Gabbioneta et al., 2007; Groenland, 2002; Schwaiger, 2004). Although a cross-

    cultural study has shown that the Reputation Quotient (RQ) was used as a supporting scale for

    corporate reputation among countries in United States, Europe, and Australia (Gardberg, 2006),

    however, there is no reliable evidence that the Reputation Quotient (RQ) is suitable for Malaysia. This

    leaves a significant gap, not only contextually but also conceptually. Therefore, this would require an

    empirical investigation on the dimensions/factors of corporate reputation that would be suitable for

    Malaysia companies.

    3. Conceptual Model

    The general objective of this paper is to develop an alternative measurement of corporate reputationthat suitable for Malaysia companies. The general research objective is further broken down into

    specific objectives. With regards to this main objective, this paper has to set out a conceptual model to:

    (1) Identify the factors of corporate reputation, (2) Validate the Corporate Reputation (CR) model

    resulting from this paper as an alternative measurement of corporate reputation, (3) Evaluate the

    existing Reputation Quotient (RQ) model, and (4) Compare the CR model and the RQ model.

    The first objective of this paper is to identify factors of corporate reputation that reflect corporate

    reputation within the Malaysian context. Stakeholders attitude towards the corporation is manifested in

    the six factors/dimensions of the Reputation Quotient (RQ) construct presented by Fombrun et al.

    (2000), namely: emotional appeal, products and services, vision and leadership, financial performance,

    social and environmental responsibility, and workplace environment; and other factors resulting from aqualitative study. A qualitative study through in-depth interviews is used in this paper in order to

    capture the Malaysian view of the factors of corporate reputation that may not be included in the sixfactors/dimensions of the RQ. The factors of corporate reputation are presented in Figure 1.

    The first, and the most important, step in this investigation of corporate reputation is to empirically

    determine the factors of corporate reputation. To obtain the reliable measures of the factors of

    corporate reputation, conventional practices from the descriptive aspect of the stakeholder theory are

    applied to measure the factors of corporate reputation. The descriptive stakeholder theory refers to the

    managements consideration of the different stakeholder groups when making a decision (Donaldson &

    Preston, 1995; Freeman et al., 2010). Although some studies apply a variant of this theory to the

    stakeholder management (Baumhart, 1968; Brenner & Molander, 1997; Clarkson, 1991; Halal, 1990;Posner & Schmidt, 1984), there were less studies on corporate reputation that systematically apply the

    descriptive stakeholder theory to link it to corporate reputation (Freeman et al., 2010, Shamma, 2007).

    Figure 1 depicts the descriptive aspect of the stakeholder theory (all arrows from corporate reputation

    to their factors). This figure directs the scale development for each of the constructs/concepts andexamines their interrelationships.

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    The second, third and fourth specific objectives are to validate the corporate reputation (CR) model,

    evaluate the existing Reputation Quotient (RQ) model (Fombrun et al.,2000), and compare the CR

    model with the RQ model. The best result from this paper is used as an alternative measurement of

    corporate reputation within the Malaysian context.

    To accomplish these objectives, a range of aspects of the factors of corporate reputation resulting from

    qualitative study and combined with the six dimensions/factors of corporate reputation as presented inFigure 1 are subjected to empirical tests.

    4. Hypotheses Development4.1 Hypotheses Developed for Corporate Reputati on Factors

    The hypotheses in this area aim to test how the proposed factors of corporate reputation relate to the

    corporate reputation itself. These hypotheses are developed to answer the first objective. Previous

    studies have shown that the six dimensions/factors of corporate reputation, which are emotional

    appeal, products and services, financial performance, vision and leadership, workplace environment,

    and social and environmental responsibility; is positively related to corporate reputation (Fombrun et

    al., 2000). Nevertheless, it is also widely held that those six factors have been cross-culturally testedamong countries in the United States, Europe, and Australia (Gardberg, 2006). Based on the results of

    the qualitative study, in addition to the aforementioned factors, this thesis also tests other factors

    proposed from the exploratory qualitative research (Study 1). In line with past researches and the result

    of the qualitative study, this thesis hypothesizes the following 7 (seven) or more proposed factorsoffered for the hypotheses testing:

    H1a: Corporate reputation will be reflected by Emotional Appeal.

    H1b: Corporate reputation will be reflected by Products and Services.

    H1c: Corporate reputation will be reflected by Vision and Leadership.

    H1d: Corporate reputation will be reflected by Financial Position and Performance.

    H1e: Corporate reputation will be reflected by Workplace Environment.

    H1f: Corporate reputation will be reflected by Social and Environmental Responsibility.

    H1g: Corporate reputation will be reflected by Other Factor(s).

    Corporate

    Reputation

    Products and

    Services

    Emotional

    Appeal

    Financial

    Perforrmance

    Vision and

    LeadershipWorkplace

    Environment

    Social

    Responsibility

    Others *

    Fi ure 1: The Conce tual Model of Cor orate

    Source:Adapted from Fombrun et al.

    * determined later by qualitative research through in-depth interviews

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    4.2 Hypothesis Developed for Vali dating the Corporate Reputation (CR) M odel

    This hypothesis is developed to answer the second objective. Past researches provide various models

    for measuring corporate reputation (Chung et al., 1999; Fombrun et al., 2000; Gabbioneta et al., 2007;

    Groenland, 2002; Schwaiger, 2004). Their results empirically showed that the dimensions/factors of

    corporate reputation differ by nations. Nevertheless, it is also widely held that in the Malaysia context

    there may be different factors of corporate reputation. Based on the results of this qualitative study,and combined with the quantitative study, it is possible to develop a new measurement of corporate

    reputation, namely the corporate reputation (CR) model. As a result, the CR model is offered to test itsvalidity. Therefore, supported by results from the qualitative studies and the theory and past empirical

    research, the following research hypothesis is offered:

    H2: The Corporate Reputation (CR) model will fulfill all the criteria of validity for the measurement

    model of corporate reputation

    4.3 Hypothesis Developed for Evaluati ng the Reputati on Quotient (RQ) Model

    This hypothesis is developed to answer objective number 3. Prior studies in the United States had

    validated the Reputation Quotient (RQ) model for measuring corporate reputation (Fombrun et al.,

    2000). The RQ develops a companys rating among competitors based on 20 (twenty) attributes

    comprising of the six dimensions/factors of corporate reputation, which are emotional appeal, productsand services, financial performance, vision and leadership, workplace environment, and social andenvironmental responsibility (Fombrun et al., 2000). Though the six factors have been cross-culturally

    tested among countries in United States, Europe, and Australia (Gardberg, 2006), no studies have been

    done in Malaysia to confirm this RQ. Therefore, supported by the theory and past empirical research,

    the following research hypothesis is offered:

    H3: The Reputation Quotient (RQ) Model will fulfill all the criteria of validity for the measurement

    model of corporate reputation.

    4.4 Hypothesis Developed for the Compari son between the Corporate Reputati on (CR) Model and

    the Reputation Quoti ent (RQ) Model

    This hypothesis is developed to answer objective number 4. Two competing models were tested to findthe best representative model of corporate reputation for the Malaysia context. Both models and their

    measurements were based on relevant literatures. The first model, the Reputation Quotient (RQ)

    model, was based on the Fombruns et al. (2000) instruments and has been cross-culturally tested

    among countries in the United States, Europe, and Australia (Gardberg, 2006). The second model, the

    Corporate Reputation (CR) model was based on the themes that emerged from the interviews

    combined with the Fombruns et al.(2000) instruments. Therefore, supported by the theory and past

    empirical research, the following research hypothesis is offered to test both models:

    H4: The Corporate Reputation (CR) Model will have a better goodness of fit than the Reputation

    Quotient (RQ) Model

    5. MethodologyTo develop a better measures of corporate reputation, a multistage process advocated by Churchill

    (1979) that includes the following sequential steps of inquiry: (1) explicate the domain of theconstructs, (2) purify the measures, (3) assess its reliability, and (4) assess its validity. This process is

    built on reliability and validity (Churchill, 1979; Peter & Churchill, 1986). Thus, the procedures are

    incorporated into each study to enhance the reliability and generalizability of the resulting measures

    (Miyamoto & Iwasaki, 2005). In addition, the analytical procedures deemed most appropriate at each

    stages of scale development are applied to the data (Churchill, 1979; Gerbing & Anderson, 1988).

    However measures of the corporate reputation are adapted in accordance to the methodologies

    accepted in the academic practices and topic of this research. The existing literature therefore provides

    a clear guidance of both the processes and the tools necessary to complete the process. Table 1

    summarizes the research plan and outlines the goals at each stage of the research.

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    Table 1: Overview of Research Plan

    Research Stage Research Objectives Analysis Sample

    Study 1

    (Preliminary

    Investigations)

    Qualitative Study

    Identify the factors of

    corporate reputation

    In-depth interviews,

    transcribing, coding

    and summarizing

    Malaysian working

    individuals in

    Kuala Lumpur and

    Kuching who are

    identified as bankstakeholders with a

    university degree

    and at least 25

    years of age

    Study 2

    ExploratoryQuantitative

    Research

    Reduce the pools of itemsobtained from the

    preliminary results to identify

    the factors of corporate

    reputation (CR)

    Exploratory FactorAnalysis (EFA)

    Malaysia Bankingstakeholders in

    Kuala Lumpur and

    Kuching who are at

    least 25 years of

    age

    Study 3

    (Main Study)

    ConfirmatoryQuantitative

    Research

    Purify the scale for the

    factors of corporate

    reputation and assess itsdimensionality

    Compare between the

    Corporate Reputation (CR)

    model obtained from this

    study to the existing

    Reputation Quotient (RQ)

    model

    Confirmatory

    Factor Analysis

    (CFA)Confirmatory

    Factor Analysis

    (CFA)

    Malaysia Banking

    stakeholders in

    Kuala Lumpur andsurrounding areas

    who are at least 25

    years of age

    Study 1 the qualitative research and preliminary investigations are exploratory endeavors conducted to

    establish the original results of the corporate reputation factors derived from in-depth interview that

    will be tested in the official scale development process. In Study 1, as the first stage, there is a requiredto conduct an exploratory qualitative study to apply the RQ model in assessing whether Malaysian

    stakeholders agree or not to all of the RQ factors, and to explore are there any other factors beside thesix factors of the RQ which form the corporate reputation. This will allows identifying other

    dimensions or factors of corporate reputation.

    Study 1 proposes the uses of in-depth interviews as an exploratory qualitative approach. As stated by

    McCracken (1988:7), in-depth interviews call for special kinds of preparation and structure, includingthe use of an open-ended questionnaire, so that the investigator can maximize the value of time spent

    with the respondent. This paper also proposes the uses semi structured questionnaire with contains

    two main questions: (a) In your belief, what are the factors that make up a good corporate

    reputation?, and (b) In the Malaysian context, are there any other corporate reputation factors besides

    the six factors mentioned earlier?. Also, some questions probing related to the issue at hand is also

    implemented to allow detailed discussions of the topic (Goldsmith, 2004). The respondents will first

    briefed on the six factors of corporate reputation (RQ) that were introduced by Fombrun et al.(2000)

    before asking the second question.

    This qualitative study uses a convenience sampling technique with established criteria for individual

    participant selection for every stakeholder group. There are four stakeholder groups: customer group,functional group, normative group, and diffused group (Dowling, 1994). The respondents in the age

    category of 25 years or more and have possess tertiary education have been identified as sampling

    targets according to their stakeholder groups. A total of 36 respondents are suggested, nine will

    selected from every stakeholder group (Dowling, 1994; Perry, 1998; Schumann et al., 1991).

    All data are then recorded and transcribed. This extract of interview transcript is labeled to codes(Berg, 2004) and categories (Zikmund et al, 2010). The corporate reputation factors within the

    Malaysian context will be developed by summarizing the interview findings. A questionnaire will be

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    developed based on the findings from the factors of corporate reputation. This will followed by an

    exploratory quantitative study (Study2).

    Study 2 focuses on refining the scale items and the most fundamental stage in the scale development

    process. When the goal is to determine and describe the factors of corporate reputation, an exploratory

    factor analysis is a useful technique to apply (Dowling, 1988). Based on the conceptualization of the

    indicators and factors of corporate reputation, and the result from the preliminary investigations, a

    model of the factors is fitted using the exploratory factor analysis. The exploratory factor analysis

    reduces the pool of the scale items to those attributes suggestive of the unique indicators and factors ofcorporate reputation. These factors are then subjected to statistical and reliability tests, such as the

    Cronbach alpha and the item-to-total correlation. Sample of the Study 2 will be taken from Malaysian

    working individuals in Kuala Lumpur (West Malaysia) and Kuching (East Malaysia). The respondents

    should be working individuals who are identified as bank stakeholders with at least 25 years of age.

    Study 3 further purifies the scale of the factors of corporate reputation and assesses its dimensionality.The results from the qualitative study (study 1) and study 2 are used to reduce the number of scale

    items and to modify the survey instruments accordingly. The confirmatory factor analysis provides a

    more rigorous test and interpretation of the underlying data structure and is performed to verify the

    dimensionality of the factors of corporate reputation. The result from this stage is known as the

    corporate reputation (CR) model. Also, Study 3 are to validate the corporate reputation (CR) model,

    evaluate the existing Reputation Quotient (RQ) model (Fombrun et al.,2000), and compare the CR

    model with the RQ model. The goodness of fit indexes from the confirmatory factor analysis for these

    two models is employed here. The same sample respondents criteria with Study 2 will be used for this

    main study.

    6. ConclusionIn the Western societies, the widespread visibility given to the topic by the periodic publications of

    corporate reputation ratings and academic literature, it is doubtful that anyone today would argue that

    corporate reputation is not important to the firm. In the Eastern societies, where is no periodic

    publications of corporate reputation ratings and academic literature, knowing corporate reputation

    measurement are immense by both practitioners and academics. Without knowing corporate reputationmeasurement scales, however, it is difficult to move forward in this field of study and make meaningful

    contributions theoretically. Although the existing Reputation Quotient (RQ) was used as a supporting

    scale for corporate reputation among countries in United States, Europe, and Australia (Fombrun et al.,

    2000; Gardberg, 2006), however, there is no reliable evidence that the Reputation Quotient (RQ) is

    suitable for Malaysia. This paper has set out to propose a conceptual model for developing an

    alternative measurement of corporate reputation within the Malaysian context. This paper also set out

    to validate the Corporate Reputation (CR) model as an alternative measurement of corporate

    reputation, evaluate the existing RQ model, and compare the CR model and the RQ model. This paper

    has discussed literature review on corporate reputation measurement, conceptual model of corporate

    reputation, hypotheses development, and methodology. Practicing this paper instantly will allow

    Malaysian companies to develop an alternative of corporate reputation by themselves. It is a good startto help Malaysian companies to identify the corporate reputation factors/dimensions and to move

    forward in corporate reputation measurement studies in Malaysia.

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