Asia,Corporate Reputation in

It is convenient but misleading to think of Asia as a monolithic entity. Indeed, the historical, cultural, political, economic, and religious differences between Asian nations—even those within a single economic bloc, such as ASEAN (Association of Southeast Asian Nations)—are significant. Nonetheless, there are several characteristics that define corporate reputation in Asia. This entry discusses the importance of corporate reputation in Asia, challenges for multinational companies operating in Asia, challenges for Asian companies in maintaining a good reputation, and effects of a good corporate reputation on companies in the region.

Compared with the West, corporate reputation research in Asia is still in its infancy: At the time of this writing, there had been only one book published on the topic. In practice, on the other hand, a number of consulting firms have been measuring corporate reputations in Asia for several years. While some frameworks (e.g., RepTrak) presume a common set of reputation drivers, others (e.g., Reputation Management Associates’ Corporate Reputation Index) reflect the audience- and attribute-specific nature of corporate reputation.

While corporate reputation is often seen as the domain of the corporate communication function in the West, it is not typically associated with corporate communication by senior management in Asia. Instead, according to a 2014 report by VMA Group, senior executives in Asia view corporate communication first and foremost as “branding,” followed by “media relations,” “internal communications,” “marketing/marketing communication,” “investor relations,” and “digital communication.”

In the West, the 2008 financial crisis played a pivotal role in placing corporate reputation firmly on the boardroom agenda. In Asia, which has been less affected by the financial crisis, consumer health scandals and environment-related crises have played a key role in affecting corporate reputation. In China, the melamine milk scandal and subsequent food-related fiascos have severely undermined trust in the country’s food supply chain, which has had serious consequences for the reputation of China-made food products worldwide. In Japan, the failure of Tokyo Electric Power Company to prepare for, and its seriously inadequate response to, the Fukushima nuclear power plant disaster resulted in loss of human lives, social displacement, and economic losses. In addition, the crisis galvanized public opposition to nuclear power not only in Japan but also elsewhere around the world.

Nonetheless, corporate reputation does matter in Asia. According to a study by Ran Zhang and Zabihollah Rezaee, more reputable and credible firms have been shown to outperform (i.e., show better financial and market performance) firms with low ratings in Asian markets such as China. Moreover, Zhe Zhang, Ming Jia, and Difang Wan have shown that in emerging Asian markets, with weak legal systems that offer little protection to contract signatories, a good corporate reputation enhances cooperation effects between business partners. This relationship may be amplified when there are strong formal or informal contracts in place.

The central role that many Asian governments play in managing the country’s economic affairs and industrial development translates into an imperative for companies to earn and maintain their license to operate with governmental stakeholders. In this context, reputation management involves engaging and collaborating with key stakeholders to achieve outcomes that benefit both society and the firm. Many Western firms operating in China, for example, have endeavored to show their alignment with China’s 12th five-year plan, announced in 2011 by introducing “socially responsible” or “sustainability” programs aimed at benefiting Chinese society and communities.

A 2009 study by Doug Chen, William Newburry, and Seung Ho Park shows that stakeholders in emerging Asian markets are increasingly expecting multinational foreign firms to play roles and assume responsibilities that extend beyond being providers of capital and technology. Moreover, they argue that foreign firms are expected to respect local sensibilities but act according to global standards. Consequently, firms with major discrepancies in operating standards between their home and host countries may get punished and suffer reputational damage.

Asia has one of the world’s highest Internet and mobile penetration rates. This high level of connectivity has made the task of building, protecting, and recovering corporate reputations extremely challenging. Several studies have shown the Internet to be a fertile environment for the social amplification of risk. For example, Ji Bum Chung shows that in South Korea the ubiquity of wireless Internet access and the presence of a strong “Internet democracy” provided the conditions for the unprecedented public protests against the import of U.S. beef in 2008 (against the backdrop of mad cow disease).

Asian countries have some of the world’s largest workforces. As employees are among the most important trusted sources of information about the company (according to the Edelman Trust Barometer 2014), building reputation from the inside out—through employee engagement—is critical to a strong corporate reputation. A good corporate reputation may in turn spur employee engagement—reputation was ranked as the fourth most important employee engagement driver in Asia Pacific in a 2013 study by Aon.

Given Asia’s rapid ascent as an economic powerhouse, many large Asian companies have embarked on international mergers and acquisitions. Several of these forays have made headlines for running into strong regulatory or public resistance in Western countries. For example, the Chinese telecommunications firm Huawei has had a number of proposed acquisitions of U.S. companies dismissed by U.S. regulators. Hence, increasingly, Asian corporations will need to be cognizant of how they are perceived overseas to achieve their strategic goals. This will accordingly involve understanding the impact of specific country reputations on firm reputations.