Middle East,Corporate Reputation in

While exact geographic definitions vary, the Middle East is roughly defined to include the countries of Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Turkey, United Arab Emirates, and Yemen. Some definitions also include the North African countries of Tunisia, Algeria, and Morocco, along with Afghanistan and Pakistan (although these are often considered to be in South Asia), among others. The region has a deep history and contains a cradle of civilization, one of the locations where scholars suggest that civilization emerged, making it home to some of the world’s oldest cultures. This long history reflects not only on the reputations of the countries within the region but also on the region’s firms.

Corporate reputation is often conceptualized as being socially constructed based on the expectations of a company’s evaluators. Moreover, it is increasingly acknowledged that evaluations of a firm are influenced by the country or region within which the firm is located. A society’s institutions and culture help establish expectations regarding companies operating within a country or region, which in turn, influence assessments of corporate reputations. Given the unique history of the Middle East, we can expect evaluations of firm reputations within the region to have unique aspects stemming from the complex cultural expectations of the region. This entry examines factors specific to the region that influence the establishment of such reputations.

Also important while discussing corporate reputation in the Middle East, particularly with respect to the reputations of the region’s firms externally, is that relatively few Middle Eastern firms have strong recognition outside the region. One major conceptualization of corporate reputation refers to “being known.” However, given that the characteristic of “being known” is lacking for most firms from the region, particularly when they operate outside the region, reputation assessors of Middle Eastern firms in other parts of the world may need to rely on heuristics to evaluate firms, several of which are overviewed within this entry. A separate dynamic may coexist regarding firm evaluations within the region, which may be highly influenced by various within-region divides and conflicts, making the assessment of corporate reputation highly complex.

Israel Versus the Arab World

A major dividing point in the Middle East that intersects with several other components influencing reputations concerns the relationship between Israel and the Arab countries. Since its establishment in 1948, relations between Israel and its neighboring countries have been tense and often volatile, with numerous wars occurring throughout the short history of the country, along with several highly contentious territorial disputes. Israel differs from its surrounding countries in terms of history, culture, religion, language, ethnic composition, government type, and industrial base, among others. This division is fundamental to the social construction of expectations within the region and ultimately to the assessment of the region’s firms. Where a person’s or a country’s position lies with respect to this division will influence the opinions of a country’s firms, either positively or negatively. This Israel/Arab division also manifests itself either directly or indirectly in the other factors influencing reputation addressed in this entry.

However, it is important to recognize that while the Arab countries may generally unite against Israel, they are not a purely homogeneous group, with significant differences between them emerging at times with respect to religion (e.g., Shiite vs. Sunni Muslims) or ethnicity (e.g., Kurds vs. Arabs). While adding to the general instability in the region, these differences also contribute to the expectations of firms within specific geographic areas. Thus, for example, a Kurdish firm may be viewed positively by some and negatively by others depending on the reputation evaluator’s view of this broader societal issue.

While setting the context, the divide between the Arab countries and Israel also manifests itself in the types of companies prominent in the region. The top 100 firms in Forbes Middle East’s listing of top companies in the Arab world contain almost exclusively banks and petrochemical/energy, telecom, and real estate companies. Ten of the top 25 companies are headquartered in Saudi Arabia, 7 in the United Arab Emirates, 3 in Qatar, 3 in Kuwait, and 1 each in Morocco and Jordan. These industry and country patterns reflect the dependence of much of the region on oil, along with the huge growth in development largely funded by the oil industry. Associated with this rapid development, cities such as Dubai and Abu Dhabi in the United Arab Emirates have become known for their innovative skyscrapers, hotels, shopping malls, and other large-scale building projects. With respect to the Arab Middle East, it is also important to recognize the stark differences between the countries with and without oil. These differences manifest themselves in the types of companies present in a country and the country’s institutional development, as discussed in the next section.

In contrast, the largest firms in Israel include pharmaceutical firms, computer software and hardware firms, telecommunications equipment manufacturers, and medical equipment developers and manufacturers, among others. As such, the Israeli economy is much more technology oriented than that of its Arab counterparts. This focus on technology and high-tech manufactured products suggests that the Israeli economy is much better positioned to become integrated with the global economy than the non-oil-based Arab countries in the region. Besides “being known,” a second common conceptualization regarding reputation is “being known for something.” The contrast between prominent industries in the Arab countries of the Middle East versus Israel suggests that this “something” differs significantly, shaping the expectations of firms.

Turkey, Iran, Afghanistan, and Pakistan

Apart from Israel and the countries of the Arab world, it is important to recognize other important countries and ethnic influences within the region. For example, Turkey and Iran have long histories, including those of the Ottoman and Persian empires, that influence the expectations and reputations of firms both within the region and outside. Turkey is a founding member of the Organisation for Economic Co-operation and Development as well as one of the G-20 economies, giving the country important connections to the major world economies, which are lacking for most other countries in the region. It is also commonly included among lists of emerging markets, indicating a general expectation regarding the country’s future economic advancement that may influence the reputations of its firms. Iran is home to one of the world’s oldest civilizations, while also being known for its theocratic republic form of government since the 1979 Islamic Revolution, which has created severe tensions between Iran and the Western world and with other countries in the region; these tensions may shape perceptions of Iranian firms. Other countries associated with broader definitions of the Middle East, such as Afghanistan and Pakistan, add further diversity to the region, adding to the various tensions noted elsewhere in this entry, along with additional complications in developing a uniform prescription regarding the factors affecting corporate reputation in the region.

Changing Institutional Settings

Institutions within a country affect the expectations of firms. Recent research suggests that the expectations of firms increase along with the institutional development of a country, which in turn affects evaluations of reputations. Institutional development differs significantly across the countries of the Middle East. For example, World Bank data indicate that the 2013 gross national income figures per capita were about $3,000 for Egypt, $4,000 for Yemen, and $5,000 for Jordan. In contrast, the gross national income per capita is approximately $34,000 for Israel and $86,000 for Qatar. These stark differences across the region suggest different expectations of members of individual countries and, in turn, different assessments of company reputations. The perceptions regarding companies in wealthy oil-producing countries such as Saudi Arabia, United Arab Emirates, and Qatar will certainly differ from those of companies in more economically challenged countries, such as Egypt and Jordan. These stark differences have served as catalysts for significant institutional change in the region, which has been evidenced by activities, events, and movements, such as the so-called Arab Spring, beginning in Tunisia in December 2010 but eventually involving at least 15 other countries in the broader region.

Country of Origin Connected With Political Affiliations

The Middle East is among the most politically contentious places on the globe, which affects the reputations of its companies. Country-of-origin effects refer to generalizations made regarding a country, and in this case, its companies, when specific information regarding a company is difficult or costly to obtain. Given the relatively low awareness of firms and brands from the Middle East outside the region, reputation assessments of Middle Eastern firms are likely to reflect perceptions regarding a specific firm’s headquarter country or possibly the overall region or subregion (e.g., the Arab countries or the Kurdish areas of several countries).

In the case of the Middle East, these generalizations are often associated with political affiliations, which may reflect specific dyadic relationships between countries. For example, the United States does not have formal diplomatic relations with Iran. This may influence the assessments of Iran and its firms within the United States. Similarly, specific country relationships with and even formal recognition of Palestine, within the West Bank and Gaza Strip and subject to disputed land claims by Israel, may affect whether Palestinian firms will be viewed positively or negatively within a country. The association of country-of-origin effects in the Middle East with political issues is similar to that in some other emerging markets, such as Russia, where political issues such as Russia’s relationship with the Ukraine may strongly influence public opinions. However, this situation also differs in many other countries, where political issues are present but do not necessarily dominate the company reputation landscape. Thus, when considering company reputation, Brazil is thought of for its natural resources more so than for its government type, and China is primarily associated with low-cost, manufactured goods.

Interconnections Between State-Owned and Family-Owned Firms

Both state-owned firms and family-owned firms are common within emerging markets and developing countries. However, within the Arab countries of the Middle East, where governments are often run by leading families, the less common interconnection of a firm being both state owned and family owned occurs frequently. This differs, for example, from China, where state-owned firms are connected to the Chinese government but not directly to a specific family that is directly part of the government (although the company CEO may gain his or her position indirectly through government connections). This also differs from the large family-owned business groups in Latin America and India, which may have power to influence the government but nonetheless are separate entities. The dual state-owned and family-owned nature of many Middle Eastern firms suggests that the reputations of many firms will be highly connected to both their governments and the families that control them.

Religious Birthplace and Spiritual Center

An examination of the impacts on reputation assessments in the Middle East would not be complete without mentioning religion. The Middle East is the origin point for three major world religions—Christianity, Islam, and Judaism—while also having connections to numerous others. Given that several countries in the region operate as theocracies, religious practices often directly affect the laws governing corporations and accordingly will affect expectations regarding firms and their reputations as well. For example, Islamic banking principles strictly regulate interest and fee payments associated with bank loans. Depending on the dominant religion in a country or region, this will affect the perceptions of a bank, and banking is one of the dominant industries in the Middle East. However, even when religious principles are not mandated for firms, given the strong religious connections to the region, firm expectations will logically be affected by religious principles. This may affect the expectations of firms when viewed from both within and outside the region.

Overall, the issues presented in this entry demonstrate the complex nature of assessing corporate reputations in the Middle East. Given the importance of context in influencing expectations of firms, these factors are likely to significantly influence the reputations of firms—viewed from both within the region as well as externally. Moreover, the dynamic nature of several of these factors suggests the potential for expectations to change over time.