搜索
271ABSTRACTThepaperinvestigatestheroleofthegovernmentandself-regulatoryreputationmechanismstointernaliseexternalitiesofmarketoperation.Ifitpaysoffforcom-paniestoinvestinagoodreputationbyanactivepolicyofcorporatesocialrespon-sibility(CSR),externaleffectsofthemarketwillbe(partly)internalisedbythemar-ketitself.Thestrengthofthereputationmechanismdependsonthefunctioningofnongovernmentalorganisations(NGOs),thetransparencyofthecompany,thetimehorizonofthecompany,andonthebehaviourofemployees,consumersandinvestors.Onthebasisofanextensivestudyoftheempiricalliteratureonthesetop-ics,weconcludethatingeneraltheworkingofthereputationmechanismisratherweak.Especiallythetransparencyofcompaniesisabottleneck.Ifthegovernmentwouldforcecompaniestobemoretransparent,itcouldinitiateaself-enforcingspiralthatwouldimprovetheworkingofthereputationmechanism.Wealsoarguethattheworkingofthereputationmechanismwillbeweakerforsmallercompa-niesandforbothhighlycompetitiveandmonopolisticmarkets.Wethereforecon-cludethatgovernmentregulationisstillnecessary,especiallyforsmallcompanies.TijdschriftvoorEconomieenManagementVol.XLIX,2,2004Reputation,CorporateSocialResponsibilityandMarketRegulationbyJ.J.GRAAFLANDandH.SMID*JohanJ.GraaflandUniversiteitvanTilburg,FaculteitderWijsbegeerte,Ethiek,onder-nemingeneconomie,NederlandH.SmidUniversiteitvanTilburg,FaculteitderWijsbegeerte,studentEconomieenFilosofie,lidvanCentrumvoorMaatschappelijkOndernemen.*TheauthorsthankLucvanLiedekerkeforhiscommentsonanearlierversionofthispaperI.INTRODUCTIONInthelastdecades,ICThaschangedtheeconomicandpoliticalenvi-ronmentintheWesternworld.Thistechnologicalprogressimposesgreatchallengesforcompanies,becausetheirvariousstakeholderscanmonitorthemmuchbetter.Thisprovidesopportunitiesforderegula-tionbythegovernment.Inparticular,becauseofthewatchdogfunc-tionofthemediaandNGOs,companiesareforcedtoupholdagoodreputation.Thismightreducemarketimperfectionscausedbylackofinformation.Whereastraditionallythegovernmenthasthetasktoreg-ulatethemarketinordertopreventthiskindofexternalities,theglob-alisationoftheinternationalmarkethasmadesuchdirectregulationincreasinglyproblematic.Thecentralquestioninthispaperiswhetherthereputationmech-anismprovidesenoughincentivestocompaniestointernaliseexter-nalitiesresultingfromlackofinformation.Forthispurpose,wefocusontheliteratureoncorporatesocialresponsibility(CSR).AccordingtotheSocialEconomicCouncil(2001a)corporatesocialresponsibil-itymeansthatanenterprisehassufficientfocusonitscontributiontopublicprosperityinthelongerrun.Thecontributiontopublicpros-perityconsistsofvaluecreationinthreedimensionswhichiscalledtheTriplePbottomline:Profit(theproductionofgoodsandservices),People(theconsequencesforpeopleinsideandoutsidethecompany)andPlanet(theeffectsonthenaturalenvironment)1.Thisbroaddefi-nitionofCSRwillbeusedintherestofthispaper.TherearetwowaysthroughwhichreputationandCSRareconnected.First,oneoftheconditionsforthefunctioningofthereputationmechanismisthatinformationaboutthepastperformanceofcompaniesisavailable.ProvidinginformationandofferingtransparencytothestakeholdersisoneofthemajoraspectsofCSR,becausethiscontributestopublicprosperity.Indeed,aresponsiblecompanywillrespectitsstakehold-ersandthereforenotuseinformationadvantagestomanipulatetrans-actionsinitsowninterest.Therefore,theliteratureofCSRprovidesmuchinformationaboutinstrumentsthatraisethetransparencytostakeholders.AsecondreasonforfocussingontheliteratureonCSRisthatastrategyofCSRisitselfawayofbuildingupagoodreputa-tion.ThereisindeedmuchevidencethatthereputationofacompanyispositivelyrelatedtoitsCSReffort(TurbanandGreening(1996);FombrunandShanley(1990)).Ifahigherreputation,inturn,leadstohigherprofitsforthecompany,thereisanincentiveforthecompany272toengageinCSR.MilesandCovin(2000)findempiricalsupportthatbeingagoodenvironmentalstewardindeedcreatesareputationaladvantagethatenhancesmarketingandfinancialperformance.Like-wise,WilliamsandBarrett(2000)showthatcorporatephilanthropymayreducethecostsinvolvedwithcorporatecriminalactivity.SeveralotherstudiesthatinvestigatedtherelationshipbetweenCSRandprof-itabilitywithoutexplicitlyconsideringtheroleofreputation,alsofoundthatCSRreallypaysoffforcompanies(SimpsonandKohers(2002);MooreandRobson(2002);Moore(2001);Orlitzky(2001);Rufetal.(2001);BurkeandLogsdon(1996);Hartetal.(1996);PavaandKrausz(1996);ZahraandCovin(1995)).This,inturn,wouldimplythatthemarkethasitsownincentivesto(partly)internaliseexternaleffects.Thecontentsofthepaperareasfollows.InsectionII,wefirstgiveatheoreticalbackgroundofthereputationmechanismandtherela-tionwithCSRandgovernmentregulation.FollowingGraafland(2002a),wewillhypothesisethatthereputationeffectisstrongerwhennongovernmentalorganisations(NGOs)aremoreactiveandthemediaisbetterdevelopedandwhenthecompanyismoretrans-parent.Thewillingnesstoinvestinagoodreputationdependsonthetimehorizonofthecompanyandontheincentivesfromthelabourmarket,goodsmarketandfinancialmarket.Inparticular,wewillarguethatagoodreputationismorevaluableforacompanywhenitincreasestheproductivityofits