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Living Up to Expectations: Corporate Reputation and Persistence of Firm Performance

Author

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  • Luís Cabral

    (Department of Economics, Stern School of Business, New York University, New York, New York 10012)

Abstract
I develop a theory of corporate reputation as a source of persistence in firm performance. I show how a relatively simple and reasonable assumption regarding the dynamics of corporate reputation leads to a self-reinforcing process whereby cross-firm differences in corporate reputation (and performance) are significant and relatively permanent. Numerical simulations suggest that persistence in cross-firm differences is largely due to endogenous investment incentives: firms with higher corporate reputations invest more in corporate reputation. I provide a series of examples consistent with the model’s prediction.

Suggested Citation

  • Luís Cabral, 2016. "Living Up to Expectations: Corporate Reputation and Persistence of Firm Performance," Strategy Science, INFORMS, vol. 1(1), pages 2-11, March.
    • Handle: RePEc:inm:orstsc:v:1:y:2016:i:1:p:2-11
    DOI: 10.1287/stsc.2015.0002
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    References listed on IDEAS

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    8. Phebo D. Wibbens, 2021. "The role of competitive amplification in explaining sustained performance heterogeneity," Strategic Management Journal, Wiley Blackwell, vol. 42(10), pages 1769-1792, October.

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