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Investigate how leaders of illegal organizations build and maintain positive reputations and how the deaths of these firms impact groups of external stakeholders.

We conduct a forensic analysis of nine firms in eight different countries by leaders who appeared to be highly successful corporate citizens but who turned out to be operating illegal Ponzi ventures.

These illegal firms built positive reputations by engaging in activities that enhanced perceptions of their firms’ perceived quality, gaining certifications and approvals from influential external individuals/organizations, engaging in philanthropic activities, and affiliating with high-status actors. Death of these nine firms had profoundly impacted external stakeholders resulting in investor devastation, a toxic environment of mistrust, damage to reputations of anyone affiliated with these illegal firms, and a major earthshake to the philanthropic community.

Extends Rindova et al.’s (2005) research on how leaders use signals of quality and prominence to build reputations in the context of illegal organizations. Philanthropic activities are added as a reputation-building mechanism used by illegal organizations. The results draw attention to the need to examine how the death of illegal organizations affects a variety of external stakeholders, both individuals and organizations.

Leaders of illegal firms can be quite successful in building positive reputations and this success exacerbates the negative consequences that occur when the firms collapse.

Provides a qualitative study of reputation building and the extensive impact on stakeholders of the dissolution of illegal ventures.

Intangible assets and reputation play a considerable and complex role in acquisitions. Targets with better reputations are more attractive, yet may fetch a premium. Though the intangibles drive many transactions, the ability of an acquirer to leverage intangibles and reputation specifically after the transaction is more problematic. Two characteristics of reputation – mobility and transferability – are introduced to reflect the degree to which a target’s positive reputation may accrue to the buyer following an acquisition. Acquirer experience, hubris and cultural differences between acquirer and target may moderate the relationships between these characteristics of reputation and acquisition outcomes. Implications for practitioners are offered, including when acquiring firms should look for reputation capture vs. spillover, and when employee retention and internal communication should be the focus vs. integration and external communication.

We model the interaction between a profit-maximizing firm and an activist using an infinite-horizon dynamic stochastic game. The firm enhances its reputation through “self-regulation”: voluntary provision of an abatement activity that reduces a negative externality. We show that in equilibrium the externality-reducing activity is subject to decreasing marginal returns, which can cause the firm to “coast on its reputation,” that is, decrease the level of externality-reducing activity as its reputation grows. The activist, which benefits from increases in the externality-reducing activity, can take two types of action that can harm the firm’s reputation: criticism, which can impair the firm’s reputation on the margin, and confrontation, which can trigger a crisis that may severely damage the firm’s reputation. The activist changes the reputational dynamics of the game by tending to keep the firm in reputational states in which it is highly motivated to invest in externality-reducing activity. Criticism and confrontational activity are shown to be imperfect substitutes. The more patient the activist or the more passionate it is about externality reduction, the more likely it is to rely on confrontation. The more patient the firm and the more important corporate citizenship is to firm’s brand equity, the more likely that it will be targeted by an activist that relies on confrontation.

Purpose – We delineate how the concept of reputation has been used in different literatures. We develop some formal definitions of observers and reputation that bring together the different literatures. We then ask how noncooperative or “bad” reputations might be repaired. Based on the developed definitions and past research, we suggest some possibilities for reconciliation. We also work on developing an experimental paradigm to investigate reputation.

Methodological/Approach – We review research from different disciplines, develop definitions, and design an experiment.

Findings – We suggest that, under certain conditions, group reconciliation can occur. However, these conditions are quite specific.

Practical Implications – When the goal is to solve a social dilemma, reconciliation is an important part of the process. Without reconciliation, group integration is problematic.

Social Implications – Reconciliation can be a powerful process that encourages cooperation. We suggest some ways that reconciliation might be possible.

Originality/Value of the Chapter – This chapter suggests a new formalization to connect different conceptualizations of reputations.

This chapter examines how leaders can utilize a clear values framework to signal what they want their organization’s reputation to be as well as design their organization to help ensure that what happens in the organization lives up to those espoused values. Reputations are, of course, built up among both internal and external audiences, and work must be done to ensure that neither audience develops negative impressions about the organization’s reputation.

Key to this reputation development and management is consistency between espoused values and enacted values. While many organizations have espoused values, it can be difficult to embed them into the foundational practices of an organization; if they are not enacted, this can lead to direct reputational harm. Building them in fully means clearly enacting the espoused values with structures (the systems and rules), people (who is hired, supported, and excluded), and culture (the environment in which the organization operates). Values frameworks are therefore posited as the foundation upon which to build organizations which can lead to warding off potential reputational calamities in the first place, minimizing the impacts of reputational harms that do take place, and bouncing back more strongly in the wake of hits to an organization’s reputation.