Agenda-Setting Theory

Agenda-setting theory explains how news media influence the public’s attention and perceptions of certain objects or issues. Publics need to get information to know what is happening in the world, to understand the world, and to make decisions to better their lives. Due to the limitation of first-hand information from direct experience, people obtain much of their information from second-hand sources. News media are one of the major sources from which people can get the information they need. According to agenda-setting theory, when people use the information from news media to know and understand the world and to make decisions, news media will have influences on them. Agenda-setting theory explores these influences and argues that news media have the power to focus public attention on a few key objects and issues and affect their perceptions of these objects and issues.

Agenda-setting theory was first proposed and has been developed primarily in the political communication settings. It has been increasingly applied in business communication settings because scholars believe that the central tenet of this theory works equally well there. This entry first briefly introduces the development of agenda-setting theory. Then, it elaborates on the application of agenda-setting theory in the exploration of the relationship between media coverage and corporate reputation.

The Development of Agenda-Setting Theory

Agenda-setting theory was developed from Walter Lippmann’s idea of a “pseudo-environment,” which argues that news media determine people’s cognitive maps of the world. It was first proposed by Maxwell McCombs and Donald Shaw based on the finding of a high correlation between the issues (a problem or series of events) the public considered important and those covered in news media. They labeled this finding as the agenda-setting function of news media. What they found is the transfer of the salience of a public issue from media agenda to public agenda.

Scholars have extended this kind of exploration to other objects, such as political candidates and companies. They have found cumulative evidence for agenda-setting theory and suggested that news media have two kinds of effects on public attention. One is to focus public attention on certain objects and issues; the other is to focus public attention on certain attributes (characteristics or traits) of the objects and issues. Furthermore, scholars found that different tonalities of news will have different influences on the emotional perceptions of audiences about objects, issues, and attributes.

In sum, media scholars have developed agenda-setting theory by differentiating different levels and dimensions of agenda-setting effects. The media’s influence on the salience of an object or issue in public opinion is called the first level of agenda setting. It suggests that news media have the power to tell people what objects and issues to think about. The media’s influence on the salience of attributes of an object in public opinion is the second level of agenda setting. There are two types: (1) cognitive, also called substantive, and (2) affective, also called evaluative. The two dimensions of the second-level agenda setting suggest that news media have the power to tell people how to think about the objects and issues in the world.

More recently, a third level has been specified that focuses on the configurations of issues and attributes and the types of associations people make in their minds regarding these configurations. Three types of associations are identified at this level. The first type involves the configurations of the linkage between two objects, attributes, or actors. The second type involves the configurations of two linkages connecting three objects, attributes, or actors. The third type involves the configurations of three linkages or more connecting a network of objects, attributes, and actors. Most recent research on third-level agenda setting has occurred with the third type of associations using the network agenda-setting model.

Scholars in the agenda-setting tradition also have found that the agenda-setting effects are contingent on several factors. The most common contingency examined is the audience’s need for orientation. This contingency depends on two factors, relevance and uncertainty. People will have less need for orientation if they feel a media issue is less relevant to their lives, and vice versa. People will have more need for orientation if they feel more uncertainty about the issue, and vice versa. The stronger the need for orientation of the public, the stronger agenda-setting effects the news media will have. Another contingency is obtrusiveness, which reflects the varying extent to which people rely on mass media. The issues with which people have direct contact and experience are obtrusive issues. The issues with which people have no direct contact and experience are unobtrusive issues. The more unobtrusive an agenda issue is, the stronger agenda-setting effects the news media will have.

Application of Agenda-Setting Theory to Corporate Reputation Research

Scholars in the management discipline have alluded to agenda-setting theory to argue for media influence on corporate reputation. Craig Carroll and Maxwell McCombs developed the framework for extending agenda-setting theory to corporate reputation. Support for agenda-setting theory was strongest when individual dimensions of agenda-setting theory were matched with media content to particular dimensions of corporate reputation. This framework consists of four major hypotheses. The first hypothesis argues that the amount of news coverage a firm receives is positively correlated with the organizational prominence (top-of-mind awareness or brand name recognition) of the firm. This proposition is rooted in the first level of agenda-setting theory and argues for the transfer of the salience of a company from media agenda to public agenda. Multiple empirical studies provide cumulative evidence for this proposition and demonstrate a significant and positive correlation between media coverage of a firm and its public recognition (top of mind), after controlling for companies’ previous levels of reputation and advertising expenditures.

The second hypothesis holds that the tone of media coverage, that is, media favorability regarding a firm and the firm’s public esteem (the degree to which the public likes, trusts, and respects a firm) are positively correlated. Empirical support has also been found for this proposition. Moreover, this relationship varied for different groups of people with different knowledge about the firm. For those who lack knowledge about the companies, peripheral media favorability had a stronger correlation. For those with knowledge of the companies, focal media favorability mattered more. A firm’s focal media favorability refers to the overall evaluation of the firm presented in the media coverage where the firm is the central theme of the news stories. A firm’s peripheral media favorability refers to the overall evaluative tone of media coverage where the firm is mentioned but is not necessarily the central theme of the news stories. These two kinds of media favorability have different theoretical foundations and reveal different influences of media coverage on people’s perceptions of firms.

The third hypothesis states that the amount of news coverage devoted to the attributes of a firm and the proportion of the public who define the firm by those attributes are positively correlated. This hypothesis is the application of the second level of cognitive/substantive agenda-setting effect in the business news setting. Based on the conceptual framework of corporate reputation of the Harris-Fombrun Annual Reputation Quotient, Carroll developed a five-attribute framework to analyze media coverage of firms: (1) executive performance, (2) workplace environment, (3) products and services, (4) financial performance, and (5) social and environmental responsibility. Experimental support for this hypothesis has been found.

The fourth hypothesis contends that there is a positive relationship between the tone of media coverage of the attributes of a firm and the public perceptions of those attributes. This hypothesis is the application of the second level of affective/evaluative agenda-setting effect, particularly for the attributes of a firm. This hypothesis found support with the existence of two conditions: (1) the media had to be the primary source of information and (2) the reputation attribute had to be something that could not directly be observed, such as corporate social responsibility or innovation.

The application of agenda-setting theory in corporate reputation research has been conducted around the globe since the relationships between corporations and publics have been increasingly mediatized by news media. Following the theoretical framework proposed by Carroll and McCombs, scholars in many countries conducted empirical research exploring the media’s influences on corporate reputation. In sum, the first-level agenda-setting effect of business news, that is, the impact of media salience on firms’ top-of-mind awareness, was strongly supported in many of the developed countries but in only one of the emerging markets. The cognitive dimension of the second-level agenda-setting effect, that is, the impact of media coverage of firms’ attributes on the attributes people associate with firms, received strong support only in a few countries, such as the Netherlands and Switzerland. Mixed results were found for many other countries. The affective/evaluative dimension of the second-level agenda-setting effect, that is, the impact of media favorability on firms’ public esteem, received support in Denmark, Finland, Italy, Switzerland, and the United States. No support was found in Asian countries, such as Japan, China, and South Korea.

Contingent Conditions of Agenda-Setting Effects of Business News

Based on the exploration of the contingent conditions in the general agenda-setting research, Carroll and McCombs argued that news media’s impacts on corporate reputation depend on a number of contingent conditions. First of all, the size and age of firms influence media coverage as well as the public’s attention. Firms with a bigger size and longer history are more likely to be reported by news media and recalled by the public than firms with a smaller size and shorter history. Second, diversification of firms also has influence on media coverage and the public’s attention. Firms having more business segments attract more media coverage and public attention than firms having fewer segments. Third, geographical proximity to news sources influences not only the amount of media coverage but also the tone of media coverage of firms. Besides these three major conditions, other factors such as the news section (whether the news item appears as a general news item or as business news), media ownership, and corporate celebrity also have an influence on media coverage and the perceptions of the public.

Carroll further advances the discussion on contingent conditions from a global perspective on the basis of multiple empirical studies across countries. He argues that (1) country characteristics, (2) media system characteristics, (3) multinational companies, and (4) organizational characteristics are the four major contingent conditions. Country characteristics include the size of the country, trust in the news media, and trust in companies. Media system characteristics include media ownership and control, media reach and penetration level, media bias and tone toward corporations, and news topics of corporations mostly covered by the media. Multinational company factors include corporate icons in their home countries and foreign countries and the degree to which a country exhibits bias against multinational companies. Organizational characteristics include whether or not a company has a direct retail presence under the company name, organizational size, and corporate communications involvement regarding advertising expenditures and corporate press releases.