Europe,Corporate Reputation in

Corporate reputations in the 28 countries of the European Union (EU) are influenced by historical, cultural, and political factors within the region that affect how societal members perceive firms. The EU is highly influential in homogenizing viewpoints regarding firms through its establishment and maintenance of political and economic institutions. Institutions play a strong role in the development of expectations regarding firms in a country or region. Politically, the establishment and enforcement of common laws through the European Commission, the Council of the EU, the European Parliament, and the Court of Justice of the EU create a common basis on which firms are judged. Similarly, economic integration through the European Central Bank and the euro, which as of July 2015 was used by 19 EU countries, further reinforces commonalities within the region, again influencing regionwide attitudes toward firms.

Corporate reputation is often defined as being socially constructed, and it is increasingly being recognized that among other factors, firm reputational assessments depend on the country or region within which a firm resides. In particular, institutions within a society along with the society’s culture help establish expectations regarding companies operating within country and regional boundaries, and by extension their corporate reputations. Thus, examining the factors influencing corporate reputation on a regional level is worthwhile to supplement most reputation research, which either explicitly or implicitly assumes national or regional context as constant. To this end, this entry briefly reviews several factors potentially influencing corporate reputations in Europe as a whole, as well as variations across the European continent. In particular, these include a country’s institutional development, its national culture, nations’ corporate social responsibility (CSR) policies, and differences between foreign and domestic firms.

Institutional Development

A country’s institutional development has been shown to influence the expectations of firms. In general, the more developed the institutions of a country, the higher the expectations that firms must meet to achieve a good reputation. While the EU has created a degree of institutional commonality in Europe, significant variation in the institutional development of EU countries remains, and this variation has been reinforced with the admission of a number of eastern European countries since 2004. Within eastern Europe, the relatively lower economic development level combined with remnants of the former Soviet Union’s history, such as worker incentive systems based on quotas instead of systems based on output quality, which might be necessary to compete in more open economic settings, may influence expectations of firms. In addition, institutional voids may be more prevalent in eastern Europe, creating more favorable views of corporations as engines of development.

In the more developed countries in Europe, the contributions of companies to society may be less recognized, leading to greater expectations being placed on companies with relatively lower reputations. Less developed institutional contexts also lead to greater uncertainty in the reputation formation process, since societal norms and expectations of companies promulgated by institutions are relatively lacking.

Stakeholder power has been shown to affect assessments of corporate reputation, as expressed through institutional differences in the legal rights and protections afforded to shareholders, creditors, and workers across countries. The relatively strong creditor rights and worker protections in western Europe should have a marked influence on corporate reputation assessments. Additionally, it is not just creditor rights that are important in Europe but also court processing speeds that affect their effectiveness, with wide variation in both evident across Europe.

Culture

While research in this area is limited, national-level cultural dimensions have been shown to significantly influence reputation assessments. While much of Europe shares several common cultural elements, such as a dominant Christian religion and a history involving some type of monarchy that was replaced by democratic government, large cultural differences remain. For example, language differences are significant, with the EU recognizing 24 official languages within its borders, while numerous others coexist in the broader European setting. Cultural studies demonstrate considerable variation across the region on multiple dimensions, which could affect the assessment of company reputations throughout the region.

Corporate Social Responsibility Policies

CSR was one of the most common correlates of firm reputation in past research, although variation exists regarding the nature of this relationship. Prior studies have found that CSR is a strategic asset that helps firms build legitimacy, which can both generate company support and buffer a firm from crisis. Moreover, there are reported differences between the CSR practices of European and U.S. firms. For example, European and U.S. firms differ in the means they use to convey their social responsibility image, in their usage of codes of ethics, in the clarity of CSR policies, and in the amount of CSR information they provide. These results suggest that CSR may be particularly influential in evaluations of firm reputations in Europe.

Foreign Versus Domestic Firms

Finally, a significant literature stream suggests that foreign firms are often perceived differently than domestic firms, often creating a liability, which can extend into overall firm reputations as well as reputations in specific areas. However, more recent research suggests that at times foreignness can also be an advantage. Within Europe, national firms generally have been found to have better reputations than foreign ones. However, wide variation exists, and these prior studies have predominantly examined western European firms. Perceptions may be very different in eastern Europe, where foreign firms may be seen to bring advantages that local firms lack.