The Social Construction of Reputation: Certification Contests, Legitimation, and the Survival of Organizations in the American Automobile Industry: 1895–1912

Hayagreeva Rao

Strategic Management Journal, 1994, vol. 15, issue S1, 29-44

Abstract: Despite widespread agreement among organizational researchers that intangible resources underlie performance differences among organizations, little empirical evidence exists in the literature. Building on the idea that reputation is socially constructed, this paper depicts reputation as the outcome of the process of legitimation. It observes that organizational researchers have overlooked how certification contests legitimate organizations, generate status orderings, and create favorable reputations. This paper suggests that victories in certification contests are credentials that enable firms to acquire a reputation for competence. It predicts that cumulative victories improve the survival of organizations and better the life chances of startup organizations more than those of lateral entries. These predictions are analyzed in the American auto industry during 1895–1912 when special‐purpose product rating agencies were absent and reliability and speed contests served as credentialing devices. The results show that cumulative victories in contests extend the life chances of winning organizations but there is no evidence that new startup organizations benefit more than lateral entries. These findings underscore the significance of intangible assets and point to the need for an institutionally informed theory of competences.

Date: 1994
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