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The Impact of Corporate Reputation and Information Sharing on Value Creation for Organizational Customers

The Impact of Corporate Reputation and Information Sharing on Value Creation for Organizational... The importance of corporate communication to build, protect and maintain corporate reputation has been ad- vocated in numerous publications in recent years. The main goal of this paper is to provide an understanding of the impact of corporate reputation and information sharing on value creation. Both reputation and information sharing represent signals that customers observe in the process of value creation, which is seen as the end focus for corporate marketing. The paper draws on signaling theory and corporate marketing literature from the European and American schools of thought. The empirical test of the hypothesized model focuses on the banking industry. Organizational customers from a South East European country shared their views about banks they currently cooperate with. The research instrument contained multi-item scales adapted from the existing literature. An analysis using structural equation modeling con- firmed that corporate reputation positively and significantly influences customer perceived value. The effect of infor - mation sharing on customer perceived value is not direct but mediated by corporate reputation. This finding contrib - utes to the existing discussion on the role of corporate reputation and communication as antecedents in the process of value creation. Keywords: corporate communication, information sharing, corporate reputation, customer perceived value JEL Classification: M30 INTRODUCTION Many researchers have focused on different aspects Several market models, each holding specific assump - and portions of creating value proposition for corporate tions and dilemmas, are created in microeconomics using stakeholders in the last couple of decades. Knowledge and signaling theory (e.g. Vermaelen 1981; Banerjee and Gaston tools for creating and improving stakeholders’ perceived 2004). However, little is known about the role of market value have turned out to be highly desired in firms. Based signaling for marketing discipline, particularly from the on signaling theory (Spence 1973; Kirmani and Rao 2000), stakeholders are sensible to both strategic and uncontrolled * Vesna Žabkar, PhD signals sent by companies. Signals are regarded as “things… Professor that would carry information persistently in equilibrium Marketing Department, Faculty of Economics Ljubljana from sellers to buyers, or more generally from those with E-mail: vesna.zabkar@ef.uni-lj.si more to those with less information” (Spence 2002, p. 434). Signaling theory implicitly explains the situation in which Maja Arslanagić-Kalajdžić, MA a customer is faced with an investment decision under un- Senior Teaching Assistant certainty, and therefore interprets differently the signals a Marketing Department, School of Economics and company transmits, depending on his/her expectations and Business Sarajevo the market situation. E-mail: maja.arslanagic@efsa.unsa.ba 42 Copyright © 2013 by the School of Economics and Business Sarajevo The impact of corporate reputation and information sharing on value creation for organizational customers perspective of provider-customer relationships. One exam- relationships between customer perceived value and its an- ple is a theory on signaling an unobservable product quality tecedents and establishes the sequence of effects between (Wernerfelt 1988; Kirmani and Rao 2000), where reputation these constructs, and (3) it offers empirical support for rela- is acknowledged as important, together with other market- tionships analyzed. ing-relevant signals. We proceed with our paper as follows: based on a critical This research regards decisions of organizational cus- literature review we develop the conceptual framework for tomers to choose a specific service company and to build the research, present the research design for the empirical and maintain a relationship with this company as a real section of the paper and present our empirical findings. We investment decision that encompasses all risk elements. conclude with a discussion and conclusions, together with Therefore, the proposal is that sharing information through implications and the limitations of our research. communication channels signals from supplier to customer. This proposal broadens the already acknowledged function of information sharing: an element of relational governance LITERATURE REVIEW between the parties (Noordewier, George and Nevin 1990) to the new, signaling one. Information sharing is well re- Information Sharing and Corporate Reputation in searched and defined in the supply chain literature (e.g. Lee, the Framework of Corporate Marketing So and Tang 2000), and it is seen as “…an important factor in a supply chain participant’s expectation of maintaining relationship continuity…” (Tai and Ho 2000, p. 1387). Here The corporate marketing framework was first introduced information sharing is defined as “the extent to which the by Balmer (1998), wherein several important constructs supplier openly shares information about the future that were placed under the same umbrella. They are presented may be useful to the customer relationship” (Cannon and through the corporate marketing mix, also known as the six Homburg 2001, p. 32), as its role in the frame of signaling C’s (Balmer and Greyser 2006): character (corporate iden- theory and its significance for the development of corporate tity), culture (organizational identity), covenant (corporate communications is debated. branding), communication (corporate communications), Conceptually, a wide framework of corporate marketing conceptualizations (corporate reputation and corporate im- is analyzed (Balmer and Greyser 2006), where information age), and constituencies (marketing and stakeholder man- sharing is regarded as one part of corporate communica- agement). Therefore, corporate marketing gathers multiple tion. Corporate reputation and corporate communications exchange relationships with multiple stakeholder groups are distinct elements of the corporate marketing mix (six and networks, both internally (e.g. with and between own- C’s), which should result in creating recognition and ac- ers, managers and employees) and externally within various ceptance of the value proposition offered by a company. constituencies (Powell 2011). However, Balmer’s proposals According to the stakeholder perspective (Freeman 1984; remain at the conceptual level. There is no empirical analy- Donaldson and Preston 1995; Gummerson 2008; Frow and sis that combines the elements of a corporate marketing Payne 2011), companies need to balance between persons/ framework and evaluates their role (neither internally, nor groups that have an interest in or influence corporate activi- externally). These elements are of critical importance for ties and persons/groups that are interesting to or influenced this framework to “become alive” in practice. Our research by companies. Within the present research, the focus is on a makes one step in that direction. specific stakeholder group – organizational customers. Corporate reputation and corporate communication The aim of the paper is to examine the influence of two belong to two distinct elements of the corporate market- corporate marketing constructs, corporate reputation and ing mix. Corporate communication includes information information sharing on customer perceived value (CPV) in sharing explained through the communication effect of an organizational customer setting. Value perception is a management and employees (Balmer 2006; Balmer and concept that has greater importance and effects on organi- Greyser 2006; Balmer 2009; Balmer 2011). The theoretical zational customers than on individual customers (Eggert background for both concepts is outlined in the following and Ulaga 2002). Therefore, it is substantial to understand paragraphs. the way perceived value is related to other marketing con- Corporate communication has several definitions and a structs, especially to those contributing to its formation. We very wide domain and scope. For Van Riel (1995, 26), cor- focus on service companies for which, due to the intangibil- porate communication represents ‘’an instrument of man- ity of services, customers face problems of service quality agement by means of which all consciously used forms of assessment before the purchase (Hansen, Samuelsen and internal and external communication are harmonized as Silseth 2008) and evaluation of service during the encoun- effectively and efficiently as possible so as to create a fa- ter and service delivery, e.g. due to a lack of knowledge. Our vorable basis for relationships with groups upon which objective is to test to what degree corporate reputation and the company is dependent’’. In spite of such an explicit information sharing help customers in their assessment. definition, the term communication is used with different This research contributes to the existing literature on prefixes: marketing communication, organizational com- several grounds: (1) it interprets corporate marketing efforts munication or management communication (Christensen (corporate reputation and information sharing) in terms and Cornelissen 2010). It has been posed by different au- of signaling theory, (2) it contributes to the discussion on thors that corporate communication is a common term for South East European Journal of Economics and Business, Volume 8 (2) 2013 43 The impact of corporate reputation and information sharing on value creation for organizational customers all communication efforts (e.g. Shelby, 1993; Argenti, Howel within service-dominant logic. With this in mind, they state and Beck 2005; Christensen and Cornelissen 2010). This is that information sharing should be symmetric and imply how Balmer (2009) explains one of his Cs and says that “cor- that ‘’one does not mislead customers … by not sharing porate communications relates to the totality of controlled relevant information that could enable them to make bet- messages from the organization directed towards custom- ter and more informed choices…’’ (Lusch, Vargo and Malter ers, employees and stakeholders.” 2006, 272). They also recognize two kinds of capabilities As a specific form of communication, information shar - that companies should build: collaborative (working with ing in organizational relationships is important to custom- others) and absorptive (absorbing new information from ers, particularly from the long-term, relational perspective others). This is recognized in further discussions about the (Noordewieret al. 1990). However, intensive discussion of in- importance of information and knowledge sharing (Frow formation sharing still remains in the supply chain literature. and Payne 2011).When it comes to services, customers are Information sharing can be operational or strategic, and ap- in constant need of information. They analyze information pears through internal or external flows of information and before the purchase, collect information during the ser- with various types of content. Research also shows that it vice encounter and still follow all of the important events should be aligned with business objectives and market ori- concerning the companies they relate to. Therefore, several entation so that all parties can make profitable use of infor - issues should be clear for companies: the purposes of in- mation sharing (Tiedemann, Van Birgele and Semeijn 2009; formation sharing and its primary purpose; the type of in- Tai and Ho 2010; Kolekofski and Heminger 2003). Therefore, formation that should be shared with customers; when they information sharing is significant both to organizational should share information; and how the information should suppliers and to organizational customers, and adds value be delivered. Otherwise, the importance of information to both the product/service and relationships. Several stud- sharing is acknowledged by companies, although not actu- ies investigate this phenomenon in terms of inter-firm com- ally implemented. Due to these characteristics, information munication, commitment, relationships, customer satisfac- sharing might not have the ability to bind to firms’ perfor - tion and customer loyalty intention (Krause 1999; Cannon mance as strong as other signals (Ippolito, 1990). However, and Perreault 1999; Tai 2011). The importance of informa- as signaling costs may be regarded as relatively low for tion sharing is also analyzed through the evaluation of the providers, they may quickly learn the benefits of informa- need for investment in the ongoing organizational relation- tion sharing. In this sense, questions related to information ship (Jonsson and Lindbergh 2010). Tai (2011) analyzes dif- sharing are connected to customers’ perceptions of value, ferent perspectives on the value of information sharing for which emerge through the relationship and service delivery organizational relationships. He concludes that companies process. benefit in terms of increased competitive advantage and The second key concept in our research is corporate rep- performance, as well as in terms of alignment of decision utation. In the economic and business senses, the concept making processes between the company and the organiza- of corporate reputation was first introduced by Bourdieu tional customer. On the other hand, information sharing can (1986) in his seminal piece “The form of capital”, where rep- also provide significant cost savings for companies (Lee, So utation was aligned with social capital as an “aggregate of and Tang, 2000). Therefore, information sharing has an im- the actual or potential resources which are linked to pos- portant role for both sides of the organizational relationship. session of a durable network of more or less institutional- To the authors’ knowledge, apart from one study ized relationships of mutual acquaintance and recognition” (Hansen, Samuelsen and Silseth, 2008), there are no pub- (Bourdieu 1985). Among the many attempts to define cor - lished or available empirical findings on the influence of porate reputation, the definition offered by Fombrun and information sharing on customer perceived value. Other Van Riel (1997, 10) is the most frequently used: ‘’Corporate research has also neglected the possible signaling power of reputation is a collective representation of a firm’s past ac - information sharing per se. Information sharing was usually tions and results that describes the firm’s ability to deliver analyzed theoretically from the resource based view (as a valued outcomes to multiple stakeholders’’. Recently, Walker competitive advantage) or from the relational perspective. (2010, 370) added features to previous definitions and de - Although we do not question the use of these established fined ‘’overall corporate reputation as a relatively stable, is- theories, we notice that the signaling potential of informa- sue specific, aggregate perceptual representation of a com- tion sharing in services has been neglected. As service qual- pany’s past actions and future prospects compared against ity usually may not be observed prior to the purchase, and some standard’’. This represents an important contribution as clients are faced with information asymmetry, providers’ to defining the overall characteristics of corporate reputa- openness in information sharing may help clients evaluate tion that came out of Walker’s (2010) extensive review of service quality and other service benefits, and hence con- new developments in the corporate reputation field. The tribute to the creation of value perception. new features of the definition could be regarded as the Information sharing was given additional importance continuation of Fombrun’s and Van Riel’s definition in terms and a new angle with the emergence of service-dominant of time span, perceptions, relativity of reputation and the logic (Vargo and Lusch 2004; 2007). Information flow is re - issues treated. However, it is obvious that the definition of garded as the primary flow and service is perceived as a pro - overall reputation is not convenient for operationalization vision of information to customers. Lusch, Vargo and Malter of any kind. Hardly any research could encompass all of the (2006) underline the focus on the symmetric exchanges elements necessary to measure overall reputation. Current 44 South East European Journal of Economics and Business, Volume 8 (2) 2013 The impact of corporate reputation and information sharing on value creation for organizational customers research usually takes one standpoint (e.g. perception of to theoretical outline (lack of common theory) and practi- experts and managers when it comes to official formative cal implications (contradictory findings). According to La, rankings). We have made an attempt to do so by computing Patterson and Styles (2005), limited attention is given to the reputation quotient (Fombrun, Gardberg, and Server perceived value in the context of professional business-to- 2000) as a multi-stakeholder measure.This research treats business services. Their research proves the mediating ef- corporate reputation as it is perceived by organizational fect of customer perceived value (CPV) on the relationship customers. between perceived performance and customer satisfaction. The importance of reputation is increased in services, In research on customer value, significant efforts were especially in the pre-purchase phase, but also in maintain- put in defining value drivers. Lapierre (2000) attempts to ing relationships once they are already built (Zeithaml 1988; identify value drivers in customer perceived value formu- Stahl, Matzler and Hinterhuber 2003). Research shows that lated as the “difference between the benefits and the sac - offers from a company that already has a good corporate rifices perceived by customers in terms of their expecta- reputation in the market are preferred over offers from an tions, i.e. needs and wants”. Through qualitative research, he unknown company (Bengtsson and Servais 2005). This identifies ten different value drivers and classifies them as means that corporate reputation helps customers in eval- product-, service- and relationship-related. He shows that uating alternatives before their purchase. Reputation is customers in different segments assess most of the value hence a well established signal with a strong bonding ef- drivers in a similar way. This research also found that flexibil- fect (Kirmani and Rao, 2000). When it comes to the purchase ity and responsiveness (service-related drivers) are impor- and post-purchase experience, it is advised that corporate tant as perceived value drivers. reputation should be built by using current customers/ Roig et al. (2006) analyzed customer perceived value in clients as spokespersons and therefore utilizing the effect banking services. Together with a number of authors (e.g. of word-of-mouth. Relationships between current and po- Lin, Sher and Shih 2005) they support a multidimensional tential customers, other stakeholders and corporate repu- perception of value through its functional (practical or cog- tation are hence evident through network principles or by nitive) and additional dimensions (emotional and social). using so-called customer reference relationships (Helm and However, when it comes to customer value for organiza- Salminen 2010). According to Fombrun (1996), services are tional customers, a uni-dimensional approach is more often goods based on trust and purchased based on reputation. advocated. Eggert and Ulaga (2002, 110) define value as Therefore, service companies should make creating, main- ‘’the trade-off between the multiple benefits and sacrifices taining and defending their reputation one of their main of a supplier’s offering, as perceived by key decision-makers strategic determinants. in the customer’s organization, and taking into considera- When it comes to the previous research on reputation, tion the available alternative suppliers’ offerings in a special much of it focused on the importance of customers and oth- use situation’’. They also proved that despite there being a er stakeholders. Wiedmann and Buxel (2005) showed that strong interaction between customer value and customer the influence of the general public on corporate reputation satisfaction, perceived value is not a substitute for satisfac- has increased. One of the possible reasons for this could be tion and that they should be conceptualized and measured in the increased speed of information flow in today’s society. as two distinct constructs. A wide range of different constructs was used in research As organizational customers purchase primarily based on reputation, from the company’s performance and stra- on rational, not emotional reasons, this research regards tegic benefits to its effects on customer loyalty, satisfaction, customer perceived value as a ratio of benefits and sacrifices word-of-mouth and search for alternatives (Fornell et al. perceived by customers (Zeithaml 1988; Hansen, Samuelsen 1996; Deephouse 2000; Helm 2007; Shamma and Hassan and Silseth 2008) or as a uni-dimensional construct. 2009; Walker 2010; and more). All of these efforts under - line the importance of the corporate reputation construct within the corporate marketing framework. However, little CONCEPTUAL FRAMEWORK research focuses on the relationship of corporate reputation with customer perception of value, which is the focus of this Corporate reputation and information sharing are seen research. as intangible drivers/ antecedents of customer perceived value. The model that is analyzed in this research study is shown in Figure 1. The corporate reputation of service companies is direct- Customer Perceived Value in Organizational ly related to benefits (an increase in corporate reputation Relationships is associated with an increase of perceived benefits) and at The customer value construct is regarded as one of the pri- the same time inversely related to customer sacrifices (an orities in marketing research and practice. Although its im- increase in corporate reputation is connected to a decrease portance has been recognized (Holbrook 1994; Eggert and in perceived costs and sacrifices). Corporate reputation de - Ulaga 2002), discussions of its definition, the usage of uni- creases purchase risk (Helm and Salminen 2010; Sheehan or multi- dimensional formulation and its representation and Stabel 2010) and when the relationship between com- are still open. There is surprisingly little agreement between pany and customer is already established, it increases trust researchers in the area of value research when it comes both and identification (Keh and Xie 2009), as well as attitudinal South East European Journal of Economics and Business, Volume 8 (2) 2013 45 The impact of corporate reputation and information sharing on value creation for organizational customers METHODOLOGY and behavioral outcomes (e.g. Bartikowski and Walsh, 2011), thus it is positively related to increased perceived benefits Measurement Development and Data Collection and perceived value. This also means that if its reputation is good, a company does not need to spend additional re- Based on the literature review and conceptual framework, sources in overlooking the relationship (Hansen, Samuelsen an empirical test of the hypothesized model was done. and Silseth 2008) which lowers sacrifices and therefore in- Organizational customers from a South East European coun- creases perceived value. Therefore: try shared their views about banks they selected to build a relationship with and currently cooperate with. Variables H1: Corporate reputation has a positive and significant in- for the model were operationalized on the basis of existing fluence on customer perceived value. operationalizations with modifications and developments in the context of business services. The research instrument The paths of information sharing and customer per- contained multi-item scales and was adapted from the exist- ceived value are conceptualized in a manner similar to that ing literature (Selnes 1993; Noordewier et al. 1990; Hansen, for corporate reputation. If a company is open towards its Samuelsen and Silseth 2008). The corporate reputation and clients and offers all important information in order to cre - information sharing scale consisted of 3 items each, while ate a better relationship, it is establishing more trust in their the customer perceived value scale consisted of 6 items. relationship (Tai and Ho 2010; Zaheer, McEvily and Perrone Additional descriptive questions were posed to the respon- 1998) and therefore helping to increase perceived benefits. dents. The questionnaire was refined through two stages of Frequent and relevant information sharing also decreases pre-testing with two academic and three practice experts. the costs for the client to collect such information on its own For control variables, the number of employees (EMP), legal (Lee, So and Tang 2009). Therefore: status (STAT), domestic/foreign business activity (ACT), size (SZ), number of customers (NOC), and number of products/ H2: Information sharing has a positive and significant influ- services (NOP) were used. ence on customer perceived value. Data were gathered through online and e-mail sur- veys, and a convenience sampling method was used. The Information sharing is the communication effect that sample framework included firms listed on the Register of nurtures the partners’ relationship. Corporate communica- Business Entities of the Foreign Trade Chamber of Bosnia tion creates corporate reputation (Gray and Balmer 1998), and Herzegovina. A total of 646 were successfully reached and as information sharing is part of the corporate commu- and 104 questionnaires were returned with a response rate nication set, it should therefore influence perceived corpo - of 13%. Data were gathered from the managers responsible rate reputation as well. In line with previous relationships for finance and/or accounting in 104 companies from dif- we propose the following hypothesis: ferent industry sectors. At the beginning of the survey, we stated that the key informant from the company should be H3: The effect of information sharing on customer per - the person who has day-to-day relationships with the se- ceived value is mediated by corporate reputation. lected bank they evaluate. These were finance/accounting managers in all of the cases. The context of bank services was chosen because it provides a good representation of Figure 1: Impact of corporate reputation and information sharing organizational customers of the specialized professional on customer perceived value service industry and includes a wide continuum of relation- ships from short to long term providing the desired vari- ability of relationships (Tellefsen and Thomas 2005). The re- spondents were instructed to answer questions about the specific bank, bearing in mind the entire relationship they had had with that provider. Information about the characteristics of the sample is presented in Table 1. Companies engaged in services repre- sent 34% of the sample, while production companies repre- sent only 19% of the sample. Most of the companies (64%) have less than 50 employees; company size was assessed by number of employees and also by self-reported size of the revenue, hence large companies in terms of revenue repre- sent 28% of the sample. The companies are mostly engaged in foreign trading (58%), and 50% of the exporters are pre- sent at more than four foreign markets. In industry struc- ture, most of companies are in wholesale and retail trading (21%); followed by the construction sector (14%) and IT sec- tor (8%). The rest of the sample is fragmented along a wide spectrum of industries such as the food industry, chemical industry, media, transport, real-estate, or agriculture. 46 South East European Journal of Economics and Business, Volume 8 (2) 2013 The impact of corporate reputation and information sharing on value creation for organizational customers Table 1: Sample Characteristics Sample Characteristics Type of Buseiness Activity Legal status Production 19.23% limited liability 85.58% Trade 27.88% joint stock company 14.42% Services 33.65% Combination 19.23% Number of Employees Ownership Less than 50 64.42% Domestic 73.08% 50 to 100 12.50% Foreign 15.38% 101 to 500 18.27% Domestic and Foreign 11.54% More than 500 4.81% Size/Revenues Number of Customers Small (less than 2 mio EUR) 37.50% Less than 1,000 73.08% Medium (2 mio-20 mio EUR) 34.62% 1,001 to 10,000 19.23% Large (more than 20 mio EUR) 27.88% 10,001 to 100,000 1.92% More than 100,000 5.77% Domestic/Foreign Trading Number of Products/Services Domestic and Foreign 57.69% Less than 10 26.92% Domestic 43.27% 10 to 50 24.04% 51 to 100 10.58% Number of Foreign Markets More than 100 38.46% Up to 2 25.00% 2 to 4 25.00% More than 4 50.00% In order to ensure the generalizability of results on the (SRMR) = 0.05 and GFI = 0.91) indicated a good fit, as well as country level, we used company size as a proxy. We scanned incremental fit measures (NFI = 0.93, NNFI = 0.99, GFI =.91) the structure of bank clients using available public reports and parsimonious fit measures (CFI = 0.99), which are ac - for the year when the research was conducted. The top ceptable values of fit indices according to Bollen (1989). three banks hold 45% of the market share in the country We then tested the item and construct reliability (Table (CBBH, 2011; Deloitte, n.d.), and the cumulative size of their 2). All items were reliable and all values for composite re- business segments is approx. 7,500 clients for the corporate liability were above the critical limit (0.60). According to segment and 20,000 clients for the SME segment (Raiffeisen a complementary measure for construct reliability, aver- bank, 2011; UniCredit bank, 2011; Hypo-Alpe-Adria bank, age variance extracted (AVE), all constructs demonstrated 2011). The ratio between large enterprises and SMEs is good reliability. We also tested the model for convergent 27:72, which is in line with the structure of companies in the and discriminant validity. Convergent validity was assessed sample. by examining the t-test values of indicator loadings in the measurement model (Anderson and Gerbing 1988). All the t-values of the loadings of measurement variables on re- spective latent variables were statistically significant. Thus, Data Analysis convergent validity was supported. Discriminant validity We first performed a confirmatory factor analysis (CFA) to was assessed with a chi-square test for pairs of latent vari- test the measurement model. We used the covariance ma- ables constraining the correlation coefficient between the trix as an input to LISREL 8.8. The goodness-of-fit indices for two latent variables to 1 (Anderson and Gerbing 1988). All the CFA for the model was within an acceptable range: mea- unconstrained models had a significantly lower value of chi- sures of absolute fit (χ2 =82.93, df =60, p =0.08; χ2/df=1.3), square than the constrained models (Bagozzi and Phillips the root mean square of error of approximation (RMSEA) 1982), hence we can conclude that the latent variables were = 0.03, and the standardized root mean square residual not perfectly correlated and that discriminant validity exists. South East European Journal of Economics and Business, Volume 8 (2) 2013 47 The impact of corporate reputation and information sharing on value creation for organizational customers Table 2: Item and construct reliability Item C.R. AVE λ t-value Customer perceived value It is more valuable to us to do business with the bank than with other banks. 0.803 - We consider it very advantageous to be a customer of the bank. 0.74 0.49 0.675 5.642 As a customer of the bank we get more value for money. 0.599 5.097 Corporate reputation The bank has a good reputation among your colleagues and friends. 0.820 - The bank has a good reputation compared to their competitors. 0.88 0.71 0.911 9.470 The bank has a good reputation in the market in general. 0.786 8.097 Information sharing We are often informed by the bank about issues that might relate to our 0.780 - relationship. The bank informs us rapidly on issues that might influence our future relationship. 0.90 0.74 0.915 9.956 The bank informs us rapidly on issues that might influence our day-to-day 0.883 9.828 performance. Model fit Chi-Square = 82.926 (P = 0.0266), d.f. =60, RMSEA = 0.03, CFI = 0.99, Standardized RMR = 0.05 Note: C.R.= composite reliability, AVE= average variance extracted, λ =indicator loadings. Data were also tested for common method bias parsimonious measure of fit (CFI = 0.99) showed a good fit. (Podsakoff and Organ 1986). We tested the presence of com- Therefore, the overall fit of the model is good. mon method bias using Harman’s single factor test. We ran Table 3 shows the standardized path coefficients for the a confirmatory factor analysis loading all items on one fac - structural model. The parameter estimates for the relation- tor and compared the model fit. In both cases, the resulting ship between corporate reputation and customer perceived one-factor measurement model had much worse fit indices value (H1) is statistically significant and consistent with the than the proposed measurement model. Common method proposed direction in the hypotheses. The second hypoth- bias is therefore not present. esis (H2) on the effect of information sharing on customer Structural equation modeling was used next, follow- perceived value is not confirmed. To test for mediation (H3), ing the two-step approach (Anderson and Gerbing 1988), we followed the procedure outlined in Holmbeck (1997). and using LISREL 8.8 (see Table 3). The fit statistics for the The fit of the direct effect (information sharing – perceived model indicate that the overall model has a statistically sig- value) is adequate. Since the overall model (information nificant value for the chi-square test (χ2 = 92.51, df =66, p sharing-corporate reputation-customer perceived value) = 0.02), and the proportion between the chi-square value provides an adequate fit, path coefficients (information and degrees of freedom were within an acceptable range sharing-corporate reputation and corporate reputation- (χ2/df =1.4). RMSEA (0.03) shows a good and standardized customer perceived value) are examined. The fit of the RMR (0.05), which is an acceptable fit. Among other abso - model (information sharing-corporate reputation-customer lute measures of fit, GFI (0.90), NFI (0.92), NNFI (0.98) and perceived value) is examined under two conditions: when Table 3: Standardized path coefficients HYPOTHESIZED PATHS Standardized Path Coefficients H1: Corporate reputation - > Customer perceived value 0.616 *** H2: Information sharing - > Customer perceived value 0.154 H3: Information sharing - > Corporate reputation 0.518 *** Control variables: Number of employees 0.208 Legal status -0.159 ** Domestic/foreign business activity 0.074 Size -0.107 Number of customers 0.026 Number of products/services -0.024 Note: ** p <0.01, *** p < .001. 48 South East European Journal of Economics and Business, Volume 8 (2) 2013 The impact of corporate reputation and information sharing on value creation for organizational customers the path (information sharing-customer perceived value) to satisfaction and loyalty, corporate reputation can have an is constrained to zero and when it is not constrained. The indirect influence also on customer satisfaction and loyalty second model does not provide a significant improvement (Eggert and Ulaga 2002; Chi, Yeh and Jang, 2008). The influ- in fit over the first model (the difference in chi-square tests ence of corporate reputation on CPV could also be analyzed is 1.56 (1 d.f.), hence not significant). Therefore, the previ- separately in the pre-purchase and purchase phases in the ously significant path (information sharing-CPV) is reduced service delivery process. Before purchase, customers often to insignificance when the mediator of corporate reputation do not have enough competences to estimate quality and is taken into account. An additional Sobel test (Sobel, 1982) the advantages of a specific bank’s service and often rely yielded significant results (test statistic is 3.56, std. error = on reputation, especially if they are using the service for 0.068, p=0.0003). In sum, the analysis revealed that reputa- the first time. Therefore, corporate reputation could serve tion mediates the effect of information sharing on CPV. In customers as an instrument for decreasing perceived risk terms of predictive power, exogenous variables of reputa- and for decreasing the “fear” of unwanted consequences. tion and information sharing together with control vari- During the purchase, or in the case where long-term busi- ables (number of employees, legal status, domestic/foreign ness relationships and networks already exist, good corpo- business activity, size, number of customers, and number of rate reputation implies that there is a mutual trust and that products/services) explain 51% of the variance in customer established relationships will be maintained. In both cases, perceived value. The dependent variable of customer per- we see that corporate reputation leads to an increase of cus- ceived value is therefore well explained by the independent tomer perceived value (through decreasing perceived costs/ and control variables. sacrifices and increasing perceived benefits). We argue that established corporate reputation represents a competitive advantage for the company and a significant barrier to entry for new competitors. DISCUSSION AND CONCLUSIONS Contrary to our expectations, the direct relationship Reputation and information sharing are seen as signals that between information sharing and CPV is not significant. customers observe in the process of value creation, which Although we expected that information sharing as a form of is the end focus for corporate marketing. In this research direct communication is crucial for customer value creation, we take the standpoint of signaling theory and empirically we could not find any significant direct effect in this regard. investigate the influence of providers’ information sharing We argue that this finding is even more relevant for future and corporate reputation on customer perceived value. research than the findings related to the first hypothesis. Our proposed conceptual framework hence contributes to It is in line with the assumption that the bonding effect of the theoretical knowledge for both signaling and customer information sharing is a weaker signal relative to corporate perceived value research. Both observed signals are tied to reputation. The lack of significant results for the second hy - corporate communications. This research points out that pothesis leads us to additional questions: What is the pur- customer perceived value in the context of business service pose of information sharing as a special form of corporate relationships is to a large degree a consequence of commu- communication? In what ways is information shared? What nication efforts. is the content of the information that is provided? Previous research suggests that corporate reputation From the results obtained we cannot claim that infor- and information sharing are important corporate market- mation sharing directly influences the perceived increase ing concepts that help increase value for a company’s stake- of benefits and decrease of costs from a service. However, holders, in our case for organizational customers (Eggert when we check for indirect influence, a relationship be - and Ulaga 2002; Hansen, Samuelsen and Silseth 2008; Powel tween customer perceived value and information sharing 2011). This analysis enabled us to propose a model where is indeed mediated by corporate reputation. We may even both of the observed corporate marketing mix elements are say that corporate reputation assumes a significant part of hypothesized to have a positive influence on customer per - information sharing’s signaling power. This result also brings ceived value (CPV). Additionally, an indirect effect of infor - a new understanding of the order of customer perceived mation sharing on CPV, through corporate reputation as a value antecedents. Information sharing and corporate repu- mediator, is evident from our empirical research. In this way tation are not in the same line of order. This contrasts with we help in better understanding cause and effect relation- the findings of Hansen et al. (2008), who propose the same ships between value antecedents and CPV. line of order in their study. At the same time, all antecedents According to empirical testing and in line with our hy- except for corporate reputation are reported as either insig- pothesis, corporate reputation has a positive and signifi- nificant or with low loadings. cant influence on customer perceived value. This finding We controlled our model for different firmographic char - could be interpreted to suggest that corporate reputation acteristics: number of employees, legal status, domestic/for- evolves as an important intangible antecedent of custom- eign business activity, size, number of customers, and num- er perceived value. The influence of corporate reputation ber of products/services. None of the variables except for comes as no surprise and is in line with previous research. legal status turned out to be significant in our model. This A bank’s corporate reputation therefore influences organi- shows that the proposed model relationships are consistent zational customer perception about the value of the bank’s across different groups in the sample, except for the legal service. Furthermore, as customer perceived value is linked status related groups. Our sample was comprised of limited South East European Journal of Economics and Business, Volume 8 (2) 2013 49 The impact of corporate reputation and information sharing on value creation for organizational customers liability and joint stock companies. Joint stock companies Balmer, J. M.T. 1998. Corporate identity and the advent of corporate perceive the signals from banks differently than limited li- marketing. Journal of Marketing Management 14(8): 963-996. ability companies. We conclude that the influence of cor - Balmer, J. M.T. 2006. Comprehending corporate marketing and the porate reputation on customer perceived value and the in- corporate marketing mix. Working Paper Series, working paper direct effect of information sharing on customer perceived 06/08. Bradfort School of Management. Bradford: University of value are lower for joint stock companies than for limited Bradford. liability companies, which is interesting due to the fact that Balmer, J. M.T. and Greyser, S. A. 2006. Corporate marketing: in- banks tend to devote much more attention to joint stock tegrating corporate identity, corporate branding, corporate companies (constituting the so-called “corporate” section in communications, corporate image and corporate reputation. banks) than to limited liability companies. We may conclude European Journal of Marketing 40(7/8): 730-741. that joint stock companies to a higher degree take corpo- Balmer, J. M.T. 2009.Corporate marketing: apocalypse, advent and rate reputation and information sharing signals for granted epiphany. Management Decision 47(4): 544-572. and hence the effect of these signals is not as strong as it is Balmer, J. M.T. 2011. Corporate marketing myopia and the inexo- in the case of limited liability companies. rable rise of a corporate marketing logic: Perspectives from The practical implications of this paper for service com- identity-based views of the firm. European Journal of Marketing panies are multiple: when creating a strategy and through- 45(9/10): 1329-1352. out its implementation based on elements of the corporate Banerjee, D. S., & Gaston, N. (2004). Labour market signalling and marketing framework, it is necessary to take into account job turnover revisited. Labour Economics, 11(5), 599-622. customer perceived value. Customers, both individual and Bartikowski, B., & Walsh, G. (2011). Investigating mediators betwe- organizational, assess what they receive and compare it en corporate reputation and customer citizenship behavi- with what they invest. Service companies should evaluate ors. Journal of Business Research, 64(1), 39–44. doi:10.1016/j. whether this assessment is in line with what is aimed at jbusres.2009.09.018 from the company’s side. This is especially important be- Baron, R. M., and Kenny, D. A. 1986. The moderator-mediator vari- cause CPV is also used as a basis for the decision whether to able distinction in social psychological research: Conceptual, stay with the company or to search for alternatives (Hansen, strategic and statistical considerations. Journal of Personality Samuelsen and Silseth 2008). Based on our empirical find- and Social Psychology, 51: 1173-1182. ings we can argue that the influence of corporate reputa- Bengtsson, A. and Servais, P. 2005. Co-branding on industrial mar- tion on CPV is unquestionable and that service companies kets. Industrial Marketing Management 34(7): 706-713. should put maximum effort into building, managing, main- Bollen, K. A.1989. Structural equations with latent variables. New York: John Wiley & Sons. taining and improving their reputation. On the other hand, Bourdieu, P. (1985). The forms of capital. In J.G. richardson information sharing is not significant for CPV directly, which (Ed.),  Handbook of Theory and Research of for the Sociology of poses several additional questions outlined in the discus- Education (p.p. 241-258). New York: Greenwood. sion. Certainly, finding answers to these questions requires Cannon, J. P. and Homburg, C. 2001. Buyer-Supplier Relationship more research and additional qualitative insights. and Customer Firm Costs. Journal of Marketing, 65(1): 29–43. Although we were able to explain a significant amount Cannon, J. P. and Perreault, W. D. Jr. 1999. Buyer-seller relation- of variance in CPV and controlled for the size of companies ships in business markets. 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The Impact of Corporate Reputation and Information Sharing on Value Creation for Organizational Customers

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de Gruyter
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2233-1999
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10.2478/jeb-2013-0009
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Abstract

The importance of corporate communication to build, protect and maintain corporate reputation has been ad- vocated in numerous publications in recent years. The main goal of this paper is to provide an understanding of the impact of corporate reputation and information sharing on value creation. Both reputation and information sharing represent signals that customers observe in the process of value creation, which is seen as the end focus for corporate marketing. The paper draws on signaling theory and corporate marketing literature from the European and American schools of thought. The empirical test of the hypothesized model focuses on the banking industry. Organizational customers from a South East European country shared their views about banks they currently cooperate with. The research instrument contained multi-item scales adapted from the existing literature. An analysis using structural equation modeling con- firmed that corporate reputation positively and significantly influences customer perceived value. The effect of infor - mation sharing on customer perceived value is not direct but mediated by corporate reputation. This finding contrib - utes to the existing discussion on the role of corporate reputation and communication as antecedents in the process of value creation. Keywords: corporate communication, information sharing, corporate reputation, customer perceived value JEL Classification: M30 INTRODUCTION Many researchers have focused on different aspects Several market models, each holding specific assump - and portions of creating value proposition for corporate tions and dilemmas, are created in microeconomics using stakeholders in the last couple of decades. Knowledge and signaling theory (e.g. Vermaelen 1981; Banerjee and Gaston tools for creating and improving stakeholders’ perceived 2004). However, little is known about the role of market value have turned out to be highly desired in firms. Based signaling for marketing discipline, particularly from the on signaling theory (Spence 1973; Kirmani and Rao 2000), stakeholders are sensible to both strategic and uncontrolled * Vesna Žabkar, PhD signals sent by companies. Signals are regarded as “things… Professor that would carry information persistently in equilibrium Marketing Department, Faculty of Economics Ljubljana from sellers to buyers, or more generally from those with E-mail: vesna.zabkar@ef.uni-lj.si more to those with less information” (Spence 2002, p. 434). Signaling theory implicitly explains the situation in which Maja Arslanagić-Kalajdžić, MA a customer is faced with an investment decision under un- Senior Teaching Assistant certainty, and therefore interprets differently the signals a Marketing Department, School of Economics and company transmits, depending on his/her expectations and Business Sarajevo the market situation. E-mail: maja.arslanagic@efsa.unsa.ba 42 Copyright © 2013 by the School of Economics and Business Sarajevo The impact of corporate reputation and information sharing on value creation for organizational customers perspective of provider-customer relationships. One exam- relationships between customer perceived value and its an- ple is a theory on signaling an unobservable product quality tecedents and establishes the sequence of effects between (Wernerfelt 1988; Kirmani and Rao 2000), where reputation these constructs, and (3) it offers empirical support for rela- is acknowledged as important, together with other market- tionships analyzed. ing-relevant signals. We proceed with our paper as follows: based on a critical This research regards decisions of organizational cus- literature review we develop the conceptual framework for tomers to choose a specific service company and to build the research, present the research design for the empirical and maintain a relationship with this company as a real section of the paper and present our empirical findings. We investment decision that encompasses all risk elements. conclude with a discussion and conclusions, together with Therefore, the proposal is that sharing information through implications and the limitations of our research. communication channels signals from supplier to customer. This proposal broadens the already acknowledged function of information sharing: an element of relational governance LITERATURE REVIEW between the parties (Noordewier, George and Nevin 1990) to the new, signaling one. Information sharing is well re- Information Sharing and Corporate Reputation in searched and defined in the supply chain literature (e.g. Lee, the Framework of Corporate Marketing So and Tang 2000), and it is seen as “…an important factor in a supply chain participant’s expectation of maintaining relationship continuity…” (Tai and Ho 2000, p. 1387). Here The corporate marketing framework was first introduced information sharing is defined as “the extent to which the by Balmer (1998), wherein several important constructs supplier openly shares information about the future that were placed under the same umbrella. They are presented may be useful to the customer relationship” (Cannon and through the corporate marketing mix, also known as the six Homburg 2001, p. 32), as its role in the frame of signaling C’s (Balmer and Greyser 2006): character (corporate iden- theory and its significance for the development of corporate tity), culture (organizational identity), covenant (corporate communications is debated. branding), communication (corporate communications), Conceptually, a wide framework of corporate marketing conceptualizations (corporate reputation and corporate im- is analyzed (Balmer and Greyser 2006), where information age), and constituencies (marketing and stakeholder man- sharing is regarded as one part of corporate communica- agement). Therefore, corporate marketing gathers multiple tion. Corporate reputation and corporate communications exchange relationships with multiple stakeholder groups are distinct elements of the corporate marketing mix (six and networks, both internally (e.g. with and between own- C’s), which should result in creating recognition and ac- ers, managers and employees) and externally within various ceptance of the value proposition offered by a company. constituencies (Powell 2011). However, Balmer’s proposals According to the stakeholder perspective (Freeman 1984; remain at the conceptual level. There is no empirical analy- Donaldson and Preston 1995; Gummerson 2008; Frow and sis that combines the elements of a corporate marketing Payne 2011), companies need to balance between persons/ framework and evaluates their role (neither internally, nor groups that have an interest in or influence corporate activi- externally). These elements are of critical importance for ties and persons/groups that are interesting to or influenced this framework to “become alive” in practice. Our research by companies. Within the present research, the focus is on a makes one step in that direction. specific stakeholder group – organizational customers. Corporate reputation and corporate communication The aim of the paper is to examine the influence of two belong to two distinct elements of the corporate market- corporate marketing constructs, corporate reputation and ing mix. Corporate communication includes information information sharing on customer perceived value (CPV) in sharing explained through the communication effect of an organizational customer setting. Value perception is a management and employees (Balmer 2006; Balmer and concept that has greater importance and effects on organi- Greyser 2006; Balmer 2009; Balmer 2011). The theoretical zational customers than on individual customers (Eggert background for both concepts is outlined in the following and Ulaga 2002). Therefore, it is substantial to understand paragraphs. the way perceived value is related to other marketing con- Corporate communication has several definitions and a structs, especially to those contributing to its formation. We very wide domain and scope. For Van Riel (1995, 26), cor- focus on service companies for which, due to the intangibil- porate communication represents ‘’an instrument of man- ity of services, customers face problems of service quality agement by means of which all consciously used forms of assessment before the purchase (Hansen, Samuelsen and internal and external communication are harmonized as Silseth 2008) and evaluation of service during the encoun- effectively and efficiently as possible so as to create a fa- ter and service delivery, e.g. due to a lack of knowledge. Our vorable basis for relationships with groups upon which objective is to test to what degree corporate reputation and the company is dependent’’. In spite of such an explicit information sharing help customers in their assessment. definition, the term communication is used with different This research contributes to the existing literature on prefixes: marketing communication, organizational com- several grounds: (1) it interprets corporate marketing efforts munication or management communication (Christensen (corporate reputation and information sharing) in terms and Cornelissen 2010). It has been posed by different au- of signaling theory, (2) it contributes to the discussion on thors that corporate communication is a common term for South East European Journal of Economics and Business, Volume 8 (2) 2013 43 The impact of corporate reputation and information sharing on value creation for organizational customers all communication efforts (e.g. Shelby, 1993; Argenti, Howel within service-dominant logic. With this in mind, they state and Beck 2005; Christensen and Cornelissen 2010). This is that information sharing should be symmetric and imply how Balmer (2009) explains one of his Cs and says that “cor- that ‘’one does not mislead customers … by not sharing porate communications relates to the totality of controlled relevant information that could enable them to make bet- messages from the organization directed towards custom- ter and more informed choices…’’ (Lusch, Vargo and Malter ers, employees and stakeholders.” 2006, 272). They also recognize two kinds of capabilities As a specific form of communication, information shar - that companies should build: collaborative (working with ing in organizational relationships is important to custom- others) and absorptive (absorbing new information from ers, particularly from the long-term, relational perspective others). This is recognized in further discussions about the (Noordewieret al. 1990). However, intensive discussion of in- importance of information and knowledge sharing (Frow formation sharing still remains in the supply chain literature. and Payne 2011).When it comes to services, customers are Information sharing can be operational or strategic, and ap- in constant need of information. They analyze information pears through internal or external flows of information and before the purchase, collect information during the ser- with various types of content. Research also shows that it vice encounter and still follow all of the important events should be aligned with business objectives and market ori- concerning the companies they relate to. Therefore, several entation so that all parties can make profitable use of infor - issues should be clear for companies: the purposes of in- mation sharing (Tiedemann, Van Birgele and Semeijn 2009; formation sharing and its primary purpose; the type of in- Tai and Ho 2010; Kolekofski and Heminger 2003). Therefore, formation that should be shared with customers; when they information sharing is significant both to organizational should share information; and how the information should suppliers and to organizational customers, and adds value be delivered. Otherwise, the importance of information to both the product/service and relationships. Several stud- sharing is acknowledged by companies, although not actu- ies investigate this phenomenon in terms of inter-firm com- ally implemented. Due to these characteristics, information munication, commitment, relationships, customer satisfac- sharing might not have the ability to bind to firms’ perfor - tion and customer loyalty intention (Krause 1999; Cannon mance as strong as other signals (Ippolito, 1990). However, and Perreault 1999; Tai 2011). The importance of informa- as signaling costs may be regarded as relatively low for tion sharing is also analyzed through the evaluation of the providers, they may quickly learn the benefits of informa- need for investment in the ongoing organizational relation- tion sharing. In this sense, questions related to information ship (Jonsson and Lindbergh 2010). Tai (2011) analyzes dif- sharing are connected to customers’ perceptions of value, ferent perspectives on the value of information sharing for which emerge through the relationship and service delivery organizational relationships. He concludes that companies process. benefit in terms of increased competitive advantage and The second key concept in our research is corporate rep- performance, as well as in terms of alignment of decision utation. In the economic and business senses, the concept making processes between the company and the organiza- of corporate reputation was first introduced by Bourdieu tional customer. On the other hand, information sharing can (1986) in his seminal piece “The form of capital”, where rep- also provide significant cost savings for companies (Lee, So utation was aligned with social capital as an “aggregate of and Tang, 2000). Therefore, information sharing has an im- the actual or potential resources which are linked to pos- portant role for both sides of the organizational relationship. session of a durable network of more or less institutional- To the authors’ knowledge, apart from one study ized relationships of mutual acquaintance and recognition” (Hansen, Samuelsen and Silseth, 2008), there are no pub- (Bourdieu 1985). Among the many attempts to define cor - lished or available empirical findings on the influence of porate reputation, the definition offered by Fombrun and information sharing on customer perceived value. Other Van Riel (1997, 10) is the most frequently used: ‘’Corporate research has also neglected the possible signaling power of reputation is a collective representation of a firm’s past ac - information sharing per se. Information sharing was usually tions and results that describes the firm’s ability to deliver analyzed theoretically from the resource based view (as a valued outcomes to multiple stakeholders’’. Recently, Walker competitive advantage) or from the relational perspective. (2010, 370) added features to previous definitions and de - Although we do not question the use of these established fined ‘’overall corporate reputation as a relatively stable, is- theories, we notice that the signaling potential of informa- sue specific, aggregate perceptual representation of a com- tion sharing in services has been neglected. As service qual- pany’s past actions and future prospects compared against ity usually may not be observed prior to the purchase, and some standard’’. This represents an important contribution as clients are faced with information asymmetry, providers’ to defining the overall characteristics of corporate reputa- openness in information sharing may help clients evaluate tion that came out of Walker’s (2010) extensive review of service quality and other service benefits, and hence con- new developments in the corporate reputation field. The tribute to the creation of value perception. new features of the definition could be regarded as the Information sharing was given additional importance continuation of Fombrun’s and Van Riel’s definition in terms and a new angle with the emergence of service-dominant of time span, perceptions, relativity of reputation and the logic (Vargo and Lusch 2004; 2007). Information flow is re - issues treated. However, it is obvious that the definition of garded as the primary flow and service is perceived as a pro - overall reputation is not convenient for operationalization vision of information to customers. Lusch, Vargo and Malter of any kind. Hardly any research could encompass all of the (2006) underline the focus on the symmetric exchanges elements necessary to measure overall reputation. Current 44 South East European Journal of Economics and Business, Volume 8 (2) 2013 The impact of corporate reputation and information sharing on value creation for organizational customers research usually takes one standpoint (e.g. perception of to theoretical outline (lack of common theory) and practi- experts and managers when it comes to official formative cal implications (contradictory findings). According to La, rankings). We have made an attempt to do so by computing Patterson and Styles (2005), limited attention is given to the reputation quotient (Fombrun, Gardberg, and Server perceived value in the context of professional business-to- 2000) as a multi-stakeholder measure.This research treats business services. Their research proves the mediating ef- corporate reputation as it is perceived by organizational fect of customer perceived value (CPV) on the relationship customers. between perceived performance and customer satisfaction. The importance of reputation is increased in services, In research on customer value, significant efforts were especially in the pre-purchase phase, but also in maintain- put in defining value drivers. Lapierre (2000) attempts to ing relationships once they are already built (Zeithaml 1988; identify value drivers in customer perceived value formu- Stahl, Matzler and Hinterhuber 2003). Research shows that lated as the “difference between the benefits and the sac - offers from a company that already has a good corporate rifices perceived by customers in terms of their expecta- reputation in the market are preferred over offers from an tions, i.e. needs and wants”. Through qualitative research, he unknown company (Bengtsson and Servais 2005). This identifies ten different value drivers and classifies them as means that corporate reputation helps customers in eval- product-, service- and relationship-related. He shows that uating alternatives before their purchase. Reputation is customers in different segments assess most of the value hence a well established signal with a strong bonding ef- drivers in a similar way. This research also found that flexibil- fect (Kirmani and Rao, 2000). When it comes to the purchase ity and responsiveness (service-related drivers) are impor- and post-purchase experience, it is advised that corporate tant as perceived value drivers. reputation should be built by using current customers/ Roig et al. (2006) analyzed customer perceived value in clients as spokespersons and therefore utilizing the effect banking services. Together with a number of authors (e.g. of word-of-mouth. Relationships between current and po- Lin, Sher and Shih 2005) they support a multidimensional tential customers, other stakeholders and corporate repu- perception of value through its functional (practical or cog- tation are hence evident through network principles or by nitive) and additional dimensions (emotional and social). using so-called customer reference relationships (Helm and However, when it comes to customer value for organiza- Salminen 2010). According to Fombrun (1996), services are tional customers, a uni-dimensional approach is more often goods based on trust and purchased based on reputation. advocated. Eggert and Ulaga (2002, 110) define value as Therefore, service companies should make creating, main- ‘’the trade-off between the multiple benefits and sacrifices taining and defending their reputation one of their main of a supplier’s offering, as perceived by key decision-makers strategic determinants. in the customer’s organization, and taking into considera- When it comes to the previous research on reputation, tion the available alternative suppliers’ offerings in a special much of it focused on the importance of customers and oth- use situation’’. They also proved that despite there being a er stakeholders. Wiedmann and Buxel (2005) showed that strong interaction between customer value and customer the influence of the general public on corporate reputation satisfaction, perceived value is not a substitute for satisfac- has increased. One of the possible reasons for this could be tion and that they should be conceptualized and measured in the increased speed of information flow in today’s society. as two distinct constructs. A wide range of different constructs was used in research As organizational customers purchase primarily based on reputation, from the company’s performance and stra- on rational, not emotional reasons, this research regards tegic benefits to its effects on customer loyalty, satisfaction, customer perceived value as a ratio of benefits and sacrifices word-of-mouth and search for alternatives (Fornell et al. perceived by customers (Zeithaml 1988; Hansen, Samuelsen 1996; Deephouse 2000; Helm 2007; Shamma and Hassan and Silseth 2008) or as a uni-dimensional construct. 2009; Walker 2010; and more). All of these efforts under - line the importance of the corporate reputation construct within the corporate marketing framework. However, little CONCEPTUAL FRAMEWORK research focuses on the relationship of corporate reputation with customer perception of value, which is the focus of this Corporate reputation and information sharing are seen research. as intangible drivers/ antecedents of customer perceived value. The model that is analyzed in this research study is shown in Figure 1. The corporate reputation of service companies is direct- Customer Perceived Value in Organizational ly related to benefits (an increase in corporate reputation Relationships is associated with an increase of perceived benefits) and at The customer value construct is regarded as one of the pri- the same time inversely related to customer sacrifices (an orities in marketing research and practice. Although its im- increase in corporate reputation is connected to a decrease portance has been recognized (Holbrook 1994; Eggert and in perceived costs and sacrifices). Corporate reputation de - Ulaga 2002), discussions of its definition, the usage of uni- creases purchase risk (Helm and Salminen 2010; Sheehan or multi- dimensional formulation and its representation and Stabel 2010) and when the relationship between com- are still open. There is surprisingly little agreement between pany and customer is already established, it increases trust researchers in the area of value research when it comes both and identification (Keh and Xie 2009), as well as attitudinal South East European Journal of Economics and Business, Volume 8 (2) 2013 45 The impact of corporate reputation and information sharing on value creation for organizational customers METHODOLOGY and behavioral outcomes (e.g. Bartikowski and Walsh, 2011), thus it is positively related to increased perceived benefits Measurement Development and Data Collection and perceived value. This also means that if its reputation is good, a company does not need to spend additional re- Based on the literature review and conceptual framework, sources in overlooking the relationship (Hansen, Samuelsen an empirical test of the hypothesized model was done. and Silseth 2008) which lowers sacrifices and therefore in- Organizational customers from a South East European coun- creases perceived value. Therefore: try shared their views about banks they selected to build a relationship with and currently cooperate with. Variables H1: Corporate reputation has a positive and significant in- for the model were operationalized on the basis of existing fluence on customer perceived value. operationalizations with modifications and developments in the context of business services. The research instrument The paths of information sharing and customer per- contained multi-item scales and was adapted from the exist- ceived value are conceptualized in a manner similar to that ing literature (Selnes 1993; Noordewier et al. 1990; Hansen, for corporate reputation. If a company is open towards its Samuelsen and Silseth 2008). The corporate reputation and clients and offers all important information in order to cre - information sharing scale consisted of 3 items each, while ate a better relationship, it is establishing more trust in their the customer perceived value scale consisted of 6 items. relationship (Tai and Ho 2010; Zaheer, McEvily and Perrone Additional descriptive questions were posed to the respon- 1998) and therefore helping to increase perceived benefits. dents. The questionnaire was refined through two stages of Frequent and relevant information sharing also decreases pre-testing with two academic and three practice experts. the costs for the client to collect such information on its own For control variables, the number of employees (EMP), legal (Lee, So and Tang 2009). Therefore: status (STAT), domestic/foreign business activity (ACT), size (SZ), number of customers (NOC), and number of products/ H2: Information sharing has a positive and significant influ- services (NOP) were used. ence on customer perceived value. Data were gathered through online and e-mail sur- veys, and a convenience sampling method was used. The Information sharing is the communication effect that sample framework included firms listed on the Register of nurtures the partners’ relationship. Corporate communica- Business Entities of the Foreign Trade Chamber of Bosnia tion creates corporate reputation (Gray and Balmer 1998), and Herzegovina. A total of 646 were successfully reached and as information sharing is part of the corporate commu- and 104 questionnaires were returned with a response rate nication set, it should therefore influence perceived corpo - of 13%. Data were gathered from the managers responsible rate reputation as well. In line with previous relationships for finance and/or accounting in 104 companies from dif- we propose the following hypothesis: ferent industry sectors. At the beginning of the survey, we stated that the key informant from the company should be H3: The effect of information sharing on customer per - the person who has day-to-day relationships with the se- ceived value is mediated by corporate reputation. lected bank they evaluate. These were finance/accounting managers in all of the cases. The context of bank services was chosen because it provides a good representation of Figure 1: Impact of corporate reputation and information sharing organizational customers of the specialized professional on customer perceived value service industry and includes a wide continuum of relation- ships from short to long term providing the desired vari- ability of relationships (Tellefsen and Thomas 2005). The re- spondents were instructed to answer questions about the specific bank, bearing in mind the entire relationship they had had with that provider. Information about the characteristics of the sample is presented in Table 1. Companies engaged in services repre- sent 34% of the sample, while production companies repre- sent only 19% of the sample. Most of the companies (64%) have less than 50 employees; company size was assessed by number of employees and also by self-reported size of the revenue, hence large companies in terms of revenue repre- sent 28% of the sample. The companies are mostly engaged in foreign trading (58%), and 50% of the exporters are pre- sent at more than four foreign markets. In industry struc- ture, most of companies are in wholesale and retail trading (21%); followed by the construction sector (14%) and IT sec- tor (8%). The rest of the sample is fragmented along a wide spectrum of industries such as the food industry, chemical industry, media, transport, real-estate, or agriculture. 46 South East European Journal of Economics and Business, Volume 8 (2) 2013 The impact of corporate reputation and information sharing on value creation for organizational customers Table 1: Sample Characteristics Sample Characteristics Type of Buseiness Activity Legal status Production 19.23% limited liability 85.58% Trade 27.88% joint stock company 14.42% Services 33.65% Combination 19.23% Number of Employees Ownership Less than 50 64.42% Domestic 73.08% 50 to 100 12.50% Foreign 15.38% 101 to 500 18.27% Domestic and Foreign 11.54% More than 500 4.81% Size/Revenues Number of Customers Small (less than 2 mio EUR) 37.50% Less than 1,000 73.08% Medium (2 mio-20 mio EUR) 34.62% 1,001 to 10,000 19.23% Large (more than 20 mio EUR) 27.88% 10,001 to 100,000 1.92% More than 100,000 5.77% Domestic/Foreign Trading Number of Products/Services Domestic and Foreign 57.69% Less than 10 26.92% Domestic 43.27% 10 to 50 24.04% 51 to 100 10.58% Number of Foreign Markets More than 100 38.46% Up to 2 25.00% 2 to 4 25.00% More than 4 50.00% In order to ensure the generalizability of results on the (SRMR) = 0.05 and GFI = 0.91) indicated a good fit, as well as country level, we used company size as a proxy. We scanned incremental fit measures (NFI = 0.93, NNFI = 0.99, GFI =.91) the structure of bank clients using available public reports and parsimonious fit measures (CFI = 0.99), which are ac - for the year when the research was conducted. The top ceptable values of fit indices according to Bollen (1989). three banks hold 45% of the market share in the country We then tested the item and construct reliability (Table (CBBH, 2011; Deloitte, n.d.), and the cumulative size of their 2). All items were reliable and all values for composite re- business segments is approx. 7,500 clients for the corporate liability were above the critical limit (0.60). According to segment and 20,000 clients for the SME segment (Raiffeisen a complementary measure for construct reliability, aver- bank, 2011; UniCredit bank, 2011; Hypo-Alpe-Adria bank, age variance extracted (AVE), all constructs demonstrated 2011). The ratio between large enterprises and SMEs is good reliability. We also tested the model for convergent 27:72, which is in line with the structure of companies in the and discriminant validity. Convergent validity was assessed sample. by examining the t-test values of indicator loadings in the measurement model (Anderson and Gerbing 1988). All the t-values of the loadings of measurement variables on re- spective latent variables were statistically significant. Thus, Data Analysis convergent validity was supported. Discriminant validity We first performed a confirmatory factor analysis (CFA) to was assessed with a chi-square test for pairs of latent vari- test the measurement model. We used the covariance ma- ables constraining the correlation coefficient between the trix as an input to LISREL 8.8. The goodness-of-fit indices for two latent variables to 1 (Anderson and Gerbing 1988). All the CFA for the model was within an acceptable range: mea- unconstrained models had a significantly lower value of chi- sures of absolute fit (χ2 =82.93, df =60, p =0.08; χ2/df=1.3), square than the constrained models (Bagozzi and Phillips the root mean square of error of approximation (RMSEA) 1982), hence we can conclude that the latent variables were = 0.03, and the standardized root mean square residual not perfectly correlated and that discriminant validity exists. South East European Journal of Economics and Business, Volume 8 (2) 2013 47 The impact of corporate reputation and information sharing on value creation for organizational customers Table 2: Item and construct reliability Item C.R. AVE λ t-value Customer perceived value It is more valuable to us to do business with the bank than with other banks. 0.803 - We consider it very advantageous to be a customer of the bank. 0.74 0.49 0.675 5.642 As a customer of the bank we get more value for money. 0.599 5.097 Corporate reputation The bank has a good reputation among your colleagues and friends. 0.820 - The bank has a good reputation compared to their competitors. 0.88 0.71 0.911 9.470 The bank has a good reputation in the market in general. 0.786 8.097 Information sharing We are often informed by the bank about issues that might relate to our 0.780 - relationship. The bank informs us rapidly on issues that might influence our future relationship. 0.90 0.74 0.915 9.956 The bank informs us rapidly on issues that might influence our day-to-day 0.883 9.828 performance. Model fit Chi-Square = 82.926 (P = 0.0266), d.f. =60, RMSEA = 0.03, CFI = 0.99, Standardized RMR = 0.05 Note: C.R.= composite reliability, AVE= average variance extracted, λ =indicator loadings. Data were also tested for common method bias parsimonious measure of fit (CFI = 0.99) showed a good fit. (Podsakoff and Organ 1986). We tested the presence of com- Therefore, the overall fit of the model is good. mon method bias using Harman’s single factor test. We ran Table 3 shows the standardized path coefficients for the a confirmatory factor analysis loading all items on one fac - structural model. The parameter estimates for the relation- tor and compared the model fit. In both cases, the resulting ship between corporate reputation and customer perceived one-factor measurement model had much worse fit indices value (H1) is statistically significant and consistent with the than the proposed measurement model. Common method proposed direction in the hypotheses. The second hypoth- bias is therefore not present. esis (H2) on the effect of information sharing on customer Structural equation modeling was used next, follow- perceived value is not confirmed. To test for mediation (H3), ing the two-step approach (Anderson and Gerbing 1988), we followed the procedure outlined in Holmbeck (1997). and using LISREL 8.8 (see Table 3). The fit statistics for the The fit of the direct effect (information sharing – perceived model indicate that the overall model has a statistically sig- value) is adequate. Since the overall model (information nificant value for the chi-square test (χ2 = 92.51, df =66, p sharing-corporate reputation-customer perceived value) = 0.02), and the proportion between the chi-square value provides an adequate fit, path coefficients (information and degrees of freedom were within an acceptable range sharing-corporate reputation and corporate reputation- (χ2/df =1.4). RMSEA (0.03) shows a good and standardized customer perceived value) are examined. The fit of the RMR (0.05), which is an acceptable fit. Among other abso - model (information sharing-corporate reputation-customer lute measures of fit, GFI (0.90), NFI (0.92), NNFI (0.98) and perceived value) is examined under two conditions: when Table 3: Standardized path coefficients HYPOTHESIZED PATHS Standardized Path Coefficients H1: Corporate reputation - > Customer perceived value 0.616 *** H2: Information sharing - > Customer perceived value 0.154 H3: Information sharing - > Corporate reputation 0.518 *** Control variables: Number of employees 0.208 Legal status -0.159 ** Domestic/foreign business activity 0.074 Size -0.107 Number of customers 0.026 Number of products/services -0.024 Note: ** p <0.01, *** p < .001. 48 South East European Journal of Economics and Business, Volume 8 (2) 2013 The impact of corporate reputation and information sharing on value creation for organizational customers the path (information sharing-customer perceived value) to satisfaction and loyalty, corporate reputation can have an is constrained to zero and when it is not constrained. The indirect influence also on customer satisfaction and loyalty second model does not provide a significant improvement (Eggert and Ulaga 2002; Chi, Yeh and Jang, 2008). The influ- in fit over the first model (the difference in chi-square tests ence of corporate reputation on CPV could also be analyzed is 1.56 (1 d.f.), hence not significant). Therefore, the previ- separately in the pre-purchase and purchase phases in the ously significant path (information sharing-CPV) is reduced service delivery process. Before purchase, customers often to insignificance when the mediator of corporate reputation do not have enough competences to estimate quality and is taken into account. An additional Sobel test (Sobel, 1982) the advantages of a specific bank’s service and often rely yielded significant results (test statistic is 3.56, std. error = on reputation, especially if they are using the service for 0.068, p=0.0003). In sum, the analysis revealed that reputa- the first time. Therefore, corporate reputation could serve tion mediates the effect of information sharing on CPV. In customers as an instrument for decreasing perceived risk terms of predictive power, exogenous variables of reputa- and for decreasing the “fear” of unwanted consequences. tion and information sharing together with control vari- During the purchase, or in the case where long-term busi- ables (number of employees, legal status, domestic/foreign ness relationships and networks already exist, good corpo- business activity, size, number of customers, and number of rate reputation implies that there is a mutual trust and that products/services) explain 51% of the variance in customer established relationships will be maintained. In both cases, perceived value. The dependent variable of customer per- we see that corporate reputation leads to an increase of cus- ceived value is therefore well explained by the independent tomer perceived value (through decreasing perceived costs/ and control variables. sacrifices and increasing perceived benefits). We argue that established corporate reputation represents a competitive advantage for the company and a significant barrier to entry for new competitors. DISCUSSION AND CONCLUSIONS Contrary to our expectations, the direct relationship Reputation and information sharing are seen as signals that between information sharing and CPV is not significant. customers observe in the process of value creation, which Although we expected that information sharing as a form of is the end focus for corporate marketing. In this research direct communication is crucial for customer value creation, we take the standpoint of signaling theory and empirically we could not find any significant direct effect in this regard. investigate the influence of providers’ information sharing We argue that this finding is even more relevant for future and corporate reputation on customer perceived value. research than the findings related to the first hypothesis. Our proposed conceptual framework hence contributes to It is in line with the assumption that the bonding effect of the theoretical knowledge for both signaling and customer information sharing is a weaker signal relative to corporate perceived value research. Both observed signals are tied to reputation. The lack of significant results for the second hy - corporate communications. This research points out that pothesis leads us to additional questions: What is the pur- customer perceived value in the context of business service pose of information sharing as a special form of corporate relationships is to a large degree a consequence of commu- communication? In what ways is information shared? What nication efforts. is the content of the information that is provided? Previous research suggests that corporate reputation From the results obtained we cannot claim that infor- and information sharing are important corporate market- mation sharing directly influences the perceived increase ing concepts that help increase value for a company’s stake- of benefits and decrease of costs from a service. However, holders, in our case for organizational customers (Eggert when we check for indirect influence, a relationship be - and Ulaga 2002; Hansen, Samuelsen and Silseth 2008; Powel tween customer perceived value and information sharing 2011). This analysis enabled us to propose a model where is indeed mediated by corporate reputation. We may even both of the observed corporate marketing mix elements are say that corporate reputation assumes a significant part of hypothesized to have a positive influence on customer per - information sharing’s signaling power. This result also brings ceived value (CPV). Additionally, an indirect effect of infor - a new understanding of the order of customer perceived mation sharing on CPV, through corporate reputation as a value antecedents. Information sharing and corporate repu- mediator, is evident from our empirical research. In this way tation are not in the same line of order. This contrasts with we help in better understanding cause and effect relation- the findings of Hansen et al. (2008), who propose the same ships between value antecedents and CPV. line of order in their study. At the same time, all antecedents According to empirical testing and in line with our hy- except for corporate reputation are reported as either insig- pothesis, corporate reputation has a positive and signifi- nificant or with low loadings. cant influence on customer perceived value. This finding We controlled our model for different firmographic char - could be interpreted to suggest that corporate reputation acteristics: number of employees, legal status, domestic/for- evolves as an important intangible antecedent of custom- eign business activity, size, number of customers, and num- er perceived value. The influence of corporate reputation ber of products/services. None of the variables except for comes as no surprise and is in line with previous research. legal status turned out to be significant in our model. This A bank’s corporate reputation therefore influences organi- shows that the proposed model relationships are consistent zational customer perception about the value of the bank’s across different groups in the sample, except for the legal service. Furthermore, as customer perceived value is linked status related groups. Our sample was comprised of limited South East European Journal of Economics and Business, Volume 8 (2) 2013 49 The impact of corporate reputation and information sharing on value creation for organizational customers liability and joint stock companies. Joint stock companies Balmer, J. M.T. 1998. Corporate identity and the advent of corporate perceive the signals from banks differently than limited li- marketing. Journal of Marketing Management 14(8): 963-996. ability companies. We conclude that the influence of cor - Balmer, J. M.T. 2006. Comprehending corporate marketing and the porate reputation on customer perceived value and the in- corporate marketing mix. Working Paper Series, working paper direct effect of information sharing on customer perceived 06/08. Bradfort School of Management. Bradford: University of value are lower for joint stock companies than for limited Bradford. liability companies, which is interesting due to the fact that Balmer, J. M.T. and Greyser, S. A. 2006. Corporate marketing: in- banks tend to devote much more attention to joint stock tegrating corporate identity, corporate branding, corporate companies (constituting the so-called “corporate” section in communications, corporate image and corporate reputation. banks) than to limited liability companies. We may conclude European Journal of Marketing 40(7/8): 730-741. that joint stock companies to a higher degree take corpo- Balmer, J. M.T. 2009.Corporate marketing: apocalypse, advent and rate reputation and information sharing signals for granted epiphany. Management Decision 47(4): 544-572. and hence the effect of these signals is not as strong as it is Balmer, J. M.T. 2011. Corporate marketing myopia and the inexo- in the case of limited liability companies. rable rise of a corporate marketing logic: Perspectives from The practical implications of this paper for service com- identity-based views of the firm. European Journal of Marketing panies are multiple: when creating a strategy and through- 45(9/10): 1329-1352. out its implementation based on elements of the corporate Banerjee, D. S., & Gaston, N. (2004). Labour market signalling and marketing framework, it is necessary to take into account job turnover revisited. Labour Economics, 11(5), 599-622. customer perceived value. Customers, both individual and Bartikowski, B., & Walsh, G. (2011). Investigating mediators betwe- organizational, assess what they receive and compare it en corporate reputation and customer citizenship behavi- with what they invest. Service companies should evaluate ors. Journal of Business Research, 64(1), 39–44. doi:10.1016/j. whether this assessment is in line with what is aimed at jbusres.2009.09.018 from the company’s side. This is especially important be- Baron, R. M., and Kenny, D. A. 1986. The moderator-mediator vari- cause CPV is also used as a basis for the decision whether to able distinction in social psychological research: Conceptual, stay with the company or to search for alternatives (Hansen, strategic and statistical considerations. Journal of Personality Samuelsen and Silseth 2008). Based on our empirical find- and Social Psychology, 51: 1173-1182. ings we can argue that the influence of corporate reputa- Bengtsson, A. and Servais, P. 2005. Co-branding on industrial mar- tion on CPV is unquestionable and that service companies kets. Industrial Marketing Management 34(7): 706-713. should put maximum effort into building, managing, main- Bollen, K. A.1989. Structural equations with latent variables. New York: John Wiley & Sons. taining and improving their reputation. On the other hand, Bourdieu, P. (1985). The forms of capital. In J.G. richardson information sharing is not significant for CPV directly, which (Ed.),  Handbook of Theory and Research of for the Sociology of poses several additional questions outlined in the discus- Education (p.p. 241-258). New York: Greenwood. sion. Certainly, finding answers to these questions requires Cannon, J. P. and Homburg, C. 2001. Buyer-Supplier Relationship more research and additional qualitative insights. and Customer Firm Costs. Journal of Marketing, 65(1): 29–43. Although we were able to explain a significant amount Cannon, J. P. and Perreault, W. D. Jr. 1999. Buyer-seller relation- of variance in CPV and controlled for the size of companies ships in business markets. 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Journal

South East European Journal of Economics and Businessde Gruyter

Published: Nov 1, 2013

Keywords: corporate communication; information sharing; corporate reputation; customer perceived value

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