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  • Narrating Corporate Reputation: Becoming Legitimate through StorytellingAuthor(s): Morten Thanning VendelSource: International Studies of Management & Organization, Vol. 28, No. 3, Corporate Imageand Identity Management (Fall, 1998), pp. 120-137Published by: M.E. Sharpe, Inc.Stable URL: http://www.jstor.org/stable/40397417 .Accessed: 16/06/2014 09:48

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  • Int. Studies ofMgt & Org., vol. 28, no. 3, Fall 1998, pp. 120-137. 1998 M.E. Sharpe, Inc. 0020-8825 / $9.50 + 0.00.

    Morten Thanning Vndelo

    Narrating Corporate Reputation Becoming Legitimate Through Storytelling

    Companies must possess a good reputation if customers are to consider them

    capable and reliable suppliers of products (Kristensen, 1992; Larson, 1992), since a company's reputation is a highly visible signal of its capabilities and

    reliability (Powell, 1990; Shapiro, 1983). Reputation is particularly significant for companies operating in markets where prepurchase evaluation of product quality is vague and partial (Weigelt and Camerer, 1988). As examples, we may think of so-called knowledge-intensive firms such as software companies, invest- ment bankers, and management consultants.

    For software companies, the significance of reputation derives from the fact that it is difficult for customers to observe or evaluate the quality of their prod- ucts before purchase, since production of products takes place only after pur- chase. There is also asymmetry in information between customers and software

    companies concerning the actual expertise possessed by the software companies' employees. Customers, thus, have imperfect information about software

    companies' abilities to handle and fashion the information technology (Weick, 1990) so that it fulfills their information-processing needs. It follows that cus- tomers are ill informed about the relative quality of the considered alternatives and, thus, find it difficult to compare and select suppliers. Ergo, software compa- nies and their customers interact in an atmosphere of uncertainty with customers uncertain about the quality of the products in the market.

    To compensate for these problems, customers typically use the perceived quality of products produced by software companies in previous periods as an indicator of the quality of future products from, and levels of expertise in, soft- ware companies; thus, reputation substitutes for materialization of the knowledge

    The author is an Assistant Professor in the Department of Informatics, Copenhagen Busi- ness School, Howitzvej 60, DK-2000 Frederiksberg, Denmark. Research for this article was supported by the Danish Fulbright Commission. James G. March provided insightful inspiration, and thanks are due to Todd Chiles, Stein Kleppeste, Kristian Kreiner, Nicola Marziliano, and Ellen O'Connor for beneficial comments on earlier versions.

    120

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  • NARRATING CORPORATE REPUTATION 121

    and expertise they possess (Clark and Salaman, 1996). Therefore, to get in touch with customers, influence their expectations and willingness to listen to sales- men, and convince them about their capabilities, software companies must pos- sess a good reputation for being capable of developing the type of product in question. Support for this observation is provided by Podolny (1993, 1994) and by Podolny, Stuart, and Hannan (1996), who found that companies with an excellent reputation benefit most from their customers' uncertainty.

    It follows that reputation is a signal about the quality of companies' products and, as such, provides information about their future performance. Hence, repu- tation is a valuable input to the decision making of customers who are unwilling or unable to invest resources in obtaining detailed information about companies' products or data about the companies' performance in past periods. Then, as reputation thereby lowers transactions costs for customers, it makes sense to regard reputation as a facilitator of economic transactions in an uncertain world.

    With this in mind, it is reasonable to regard reputation as an intangible asset (Budworth, 1989) that can generate future rents and may be critical for the company's survival. This suggests that the absence of reputation represents a challenge to software companies when they attempt to enter new markets. Ac- cordingly, software companies must carefully build up and manage their rep- utation, and this may be a lengthy process. However, studies of new business creation in software companies (Thaning and Vendete, 1995; Vndelo, 1995) observed that, when initiating new business creation, these companies seldom

    spent much time building up reputation based on experience, considering such a strategy for new business creation too risky and too expensive. In- stead, they produced narratives about their future performance to convince customers of their value and to legitimize themselves as competent suppliers of products to customers in new markets; this technique did breed success in some cases.

    From this observation arise questions concerning how this could happen. This article seeks answers to the following questions:

    1 . What makes a narrative credible in the eyes of a customer? 2. Why would software companies choose to narrate reputation?

    In answering these two questions, I first consider conventional wisdom about

    reputation and known modes of reputation in the software industry. Second, using material from one of the previously mentioned studies, I present the case of a successful IT-system sale for which little can be explained by use of conven- tional wisdom about reputation. Third, I propose a narrative approach to reputa- tion and use this approach to analyze the case, thereby demonstrating what a

    company needs to produce a narrative that convinces customers about its ability to produce and deliver a particular product. Finally, I draw some implications for

    management.

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  • 122 MORTEN THANNING VNDELO

    Conventional wisdom about reputation and reputation building

    We typically think of reputation as attributed to an organization by its multiple constituents based on their experience with the organization, its performance, partners, and products in past periods; that is, reputation is a kind of social memory. Altogether, the multiple constituents produce a picture of the overall attractiveness of the organization, thereby attributing to it good, bad, excellent, or dubious reputation (Fombrun and Shanley, 1990; Shram and Wuthnow, 1988).

    Talking about reputation building, Fombrun (1996), Fombrun and Shanley (1990), and Weigelt and Camerer (1988) emphasize that building up a good reputation is a lengthy process that needs to be managed carefully because com- panies, through long-term commitment, must demonstrate their ability to pro- duce high-quality products. More precisely, organizations earn a good reputation by doing a good job.

    Good reputation is very useful for an organization; it may enable it to charge premium prices for its products, enter into favorable agreements with banks, attract graduates from top universities, get in touch with customers easily, and so on, such that good reputation constitutes a valuable asset for the organization (Fombrun and Shanley, 1990; Shapiro, 1983). In contrast, an organization with bad or no reputation is likely to encounter situations where the opportunities open to it are few and the constraints imposed on it are many (Podolny, 1993).

    Known modes of reputation in the software industry

    Within the software industry, it makes sense to talk about four modes of reputa- tion. Two of these note that reputation results from organizational performance; according to the other two, reputation derives from affiliations.

    The first mode is reputation based on experience. Such a reputation comes into use when software companies face customers with whom they have dealt before and thus have earned a reputation in previous projects. In the case of positive experience, reputation can materialize into a long-term relationship and confidence between a software company and the customer. In turn, such long- term relationships may lead to organizational trust, as well as to less costly and more loosely drawn contracts.

    The second mode is reputation based on references to performance (past or present). Software companies often employ the reference mode when they face customers with whom they have not dealt before, so customers lack experience with the companies' performance. Ergo, in terms of reputation, they must rely on references to previous projects (past performance) or ongoing projects (visions for future performance) where they developed/develop products like the ones demanded by the customers, thereby demonstrating experience with, for exam- ple, the technology to be employed in the projects.

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  • NARRATING CORPORATE REPUTATION 123

    The third mode is reputation based on affiliations with prominent customers, third parties, or other producers, which may enable software companies to pre- sent themselves as suitable suppliers of the demanded products. Affiliations with companies with a better reputation will enhance the reputation of a software company, whereas affiliations with less reputable companies will hurt its reputa- tion. Hence, this mode says that your reputation is influenced by whom you hang out with (Oik and Ring, 1997; Podolny, 1993). As an example of the first situation, a sales engineer in one of the companies explained that, when custom- ers were aware of or informed about the company's close relations with the large and well-reputed IT-company United Business Computers,1 the sales work was often much easier.

    In addition to the performance-affiliation distinction presented earlier, it also makes sense to distinguish between first- and second-hand reputation. For repu- tation derived from performance, experience-based reputation is firsthand, while reference-based reputation is secondhand; for reputation derived from affilia- tions, situations where the customer has direct experience with the affiliate repre- sent firsthand ones and other situations are secondhand ones. With these two distinctions, it is possible to form a 2x2 matrix (see figure 1).

    The case: A narrative of future performance

    The case describes events in a new division of the rapidly growing Danish software company Unique Ltd., which offers design, development, and im-

    plementation of advanced software applications for industrial, scientific, and administrative purposes, as matched to the specific needs of each customer. Hence, Unique delivers turnkey systems.

    This case study is based on empirical evidence gathered in semistructured qualitative interviews and informal talks with Unique employees. Interviews were taped and transcribed; informal talks were documented as shorthand notes. Documentary material was also collected. The collection of empirical evidence spanned a period of three years starting in January 1991 .

    Creation of the financial services division

    In Winter 1989, Unique's top management decided to build a new division

    (Financial Services Division [FSD]) aimed at the delivery of systems and ser- vices to the financial sector in Denmark. An important reason for this decision was that top management perceived of the market for systems to the financial sector as attractive. "The market for software systems and services to the finan- cial sector is a promising one," said the CEO, "because the customers are willing to make investments in order to obtain the best possible foundation for their decision making."

    The new division appeared on the organizational chart in February 1989; in

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  • 124 MORTEN THANNING VNDELO

    Reputation based Reputation based ormance Qn experjence on references

    Affiliations Direct experience Knows about with affiliate affiliate

    First hand Second hand

    Figure 1 Four Modes of Reputation in the Software Industry

    April 1989 top management appointed Ian Lawson as division manager and Hans Anderson as marketing manager. For three months they analyzed this new market and wrote a strategic plan describing the development of product groups: (1) systems integration, (2) consultancy services, and (3) off-the-shelf IT- systems for stock brokerage companies.

    Start-up of financial products activities

    To accomplish the third strategic goal, Ian Lawson decided to acquire small companies engaged in the development of such products; he assumed it would be easier to acquire products and a customer base than to start up product develop- ment in Unique and then identify and persuade customers to buy the products.

    In September 1989, Lawson acquired a group of six employees and a portfo- lio-management system from Back-Office Software, a small software house spe- cializing in developing back-office systems for stockbrokers. Lawson acquired these activities, as FSD needed them to demonstrate to CJ-Broker that Unique could deliver a portfolio-management system. From this perspective, the acquisi- tion was a success: In October 1989 Unique signed a contract with CJ-Broker for such a system.

    Acquisition of Dealing Technology

    Thereafter, Lawson continued his search for possible acquisitions and in Decem- ber 1989 acquired Dealing Technology. He chose to buy this firm for two rea- sons: (1) Dealing Technology was for sale at a reasonable price, and (2) Dealing System (a front-office system for trading stocks and bonds) was based on an

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  • NARRATING CORPORATE REPUTATION 125

    OS/2 platform, which he believed to be the technology platform of the future. Dealing Technology was a small company with two employees; its owner,

    George Law, and a programmer, Gordon Hall. It developed Dealing System as a turnkey system to a large Danish stock-brokerage company (GR-Broker) and later sold it to two similar companies (ABN-Broker and CJ-Broker). Law also tried, unsuccessfully, to sell the Dealing System, to more stockbrokers, but most of them already had front-office systems, which they were unlikely to replace with a new system. Hence, when Lawson contacted Law and suggested a collab- oration between Dealing Technology and Unique, he ended up purchasing Deal- ing Technology.

    After the acquisitions of Dealing Technology and Back-Office Software, and after obtaining a contract for delivery of a portfolio-management system, FSD entered 1990 with a handful of activities aimed at the development and sale of front-office systems to stockbrokers. Yet, in 1990, FSD faced difficulties in selling its financial products; it was unable to complete any sales in the first half of 1990.

    Sale of an FX system to West Bank

    In late Spring 1990, Lawson discovered that West Bank, a medium-sized Danish bank, planned to place an order for a foreign-exchange (FX) system. However, FSD did not have an FX system and West Bank wanted a "ready-to-wear" FX system with several reference customers, which his firm did not have. To over- come this problem, Lawson and Law decided to look upon West Bank as an opportunity to persuade a customer to sponsor development of an FX system which FSD subsequently could refine and sell as an off-the-shelf FX system. Law explained:

    We believed that if we told some competent software engineers to develop a prototype within a week, then they could come up with something which looked almost like an FX system. In fact we believed that the software engi- neers solely had to produce a user interface, as it really did not matter whether it was an integrated part of a larger system. Because customers would only need to see a user interface, and then they would believe that we had an FX system.

    Accordingly, they initiated an effort aimed at persuading West Bank to buy an FX system from Unique. Foremost, these activities focused on explaining to West Bank representatives that Unique had almost finished development of an FX system. Hence, Lawson initiated development of a prototype of an FX sys- tem. George Law later described how he and other employees developed this

    prototype:

    First, we spent three days developing a prototype generator. This generator could pick up text files and display them on a screen with fancy colors. Then,

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  • 126 MORTEN THANNING VNDELO

    we ordered sales materials from various suppliers of FX systems and repro- duced their user interface. In total, we designed 20 screens with different colors and of different sizes, also a lot of numbers appeared in the various fields on the screens, but, of course, it was impossible to make changes in the numbers. Thereafter, we implemented the prototype as an extension to Dealing System, because we had to have some screens with moving numbers in order to show a system in operation.

    When presenting first the Dealing System and then the prototype, the sales- people, managers, and software engineers from FSD told West Bank that the FX system was almost finished. Again, Law explained:

    And then we said: "Here we go," and showed them some screens from the Dealing System with numbers flickering up and down. Thereafter, we showed them screens from our "FX system," and we said: "This is a complete system for trade with stocks, bonds and foreign exchange" and they believed us al- though we could not show them an FX system in operation and had to explain that the user interface was incomplete. Also, we did not know what we were talking about, and therefore, in advance, we met a few times with currency dealers from our existing customers and asked them to explain what foreign exchange was about. Finally, the currency dealers participated in the first meetings with West Bank, where they helped us answer questions from the bank about the system.

    By using this approach, FSD succeeded in establishing negotiations with, and selling an FX system to, West Bank, and in June 1990 Unique and West Bank signed a contract stating that an FX system was to be delivered to West Bank in December 1990. The contract included some general provisions as well as three pages specifying the functions to be included in the FX system. Mainly, these three pages had their origin in the sales materials ordered from different suppli- ers of FX systems and mixed to compose a presentation of Unique's FX system.

    Development and delivery of the FX system

    After completion of the sale, Ian Lawson and George Law assembled a project team of six software engineers, assigned Law as project manager, and initiated development of the FX system. The developmental approach pursued by the team resembled the approach pursued by salespeople, managers, and software engineers in the sale process, as the team assumed that trade with foreign curren- cies was almost similar to trade with stocks and bonds. Therefore, it copied the source code from Dealing System, changed the headlines, and started editing the code to facilitate FX operations. Although the team knew little about FX opera- tions, it did not attempt to specify the requirements to the system. Also, since the team had to observe tight deadlines for delivery of the system to West Bank, there was little time for such activity.

    By the end of July 1990, Unique delivered the first part of the FX system to West Bank. The delivery was unsuccessful; the system did not fulfill the contract

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  • NARRATING CORPORATE REPUTATION 127

    specifications, though the latter were rather vague since they mentioned only the various subsystems in the FX system. Nevertheless, Unique did not deliver what West Bank expected.

    What followed was a reorganization of the project and the appointment of a new project manager who developed a new project plan and initiated develop- ment of the system from scratch. Also, he established formal interaction between West Bank's currency dealers and the project team, as it needed the currency dealers to tell about their demands regarding the system. About six months later, the team made deliveries which West Bank accepted in fulfillment of the con- tract, so some sort of a recovery of the project took place at this time. In spite of this success, the project continued to face problems and project plans never held true. Also, the system lacked stability; it often broke down because of bugs in either the computer network or the software. Because of the persistent problems with the FX system, West Bank became increasingly dissatisfied with Unique as an FX system supplier, and the bank seriously considered terminating the con- tract, as problems peaked in September 1991 .

    The persistent problems caused managers in FSD to invest a lot of effort to get the project back on track. Over subsequent years, the project went through a number of reorganizations, project managers were dismissed and new ones as- signed, the quality assurance manager became involved, task forces were formed and several administrative procedures (such as product plans, QA practices, and work flow) were introduced.

    Nevertheless, the project came to an end in fall 1992 when Unique and West Bank agreed that a fbnctionable FX system had been delivered. At that time the project was almost two years behind schedule and the severe problems in the project were well known throughout the financial sector in Denmark; FSD never succeeded in selling FX systems to other customers.

    Comments on the case

    In reviewing the case, there is little evidence that the conventional wisdom about reputation and reputation building provides a suitable outlet for analysis; it makes little sense to analyze reputation as based on experience. I propose instead that it makes sense to use a narrative approach to reputation.

    A narrative approach to reputation

    In recent years, the narrative approach has come to play a more central role in organizational studies (Barry and Elmes, 1997; Boje, 1991; Boland and Tenkasi, 1995; Christensen, 1995; Czaraiawska, 1997; Czarniawska-Joerges, 1994, 1995a, 1995b; Hatch, 1996; O'Connor, 1995; Phillips, 1995; Skldberg, 1994; Van Maanen, 1988). Czarniawska-Joerges (1995a, p. 16) suggested that narra- tives are used in organizational studies in three forms: (a) in organizational

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  • 128 MORTEN THANNING VNDELO

    research written in a storylike form ("tales from the field"), (b) in organizational research collecting organizational stories ("tales of the field"), and (c) in organi- zational research conceptualizing organizational life as story making and organi- zational theory as story reading (interpretive approaches). Within the interpretive approach, Czarniawska-Joerges (1994) has used narratives to analyze organiza- tional identity, arguing that organizational identities originate from narratives. Using this as my point of departure, I suggest that reputation building takes place through the production of narratives. I also suggest that, in the process of build- ing a reputation, an organization engages in a kind of identity making as it attempts to influence relevant elements of its environment to perceive itself and its products in a particular way.

    In the context of the software industry, I suggest that, when it approaches a new market, a software company produces and tells narratives of its future performance in order to sell its products to customers. Supporting this interpreta- tion, a salesman in one of the companies studied gave this description of his job: "In this company, we possess a lot of technologies and we develop concepts of how to exploit them. Hence, the job of the salesman is to initiate fantasies for the customer who might say: 'Hey, this is exactly what we need,' or 'It seems that your company can help us solve this problem.'

    "

    By using reputation narratives, the software company seeks to convince cus- tomers that it possesses the knowledge and expertise that enable it to develop and deliver the products demanded by them. The production of such narratives repre- sents attempts by the software company to initiate negotiations with customers about the development and delivery of products. Whether or not negotiations with a customer result in a contract, a central outcome of these negotiations is the customer's belief about the software company's knowledge and expertise. In turn, this belief constitutes information about the software company's ability to produce products of a certain quality. Consequently, narratives facilitate the enactment of a reputation that may assist a transaction between the software company and the customer, and an analysis based on a narrative approach to reputation can produce an in-depth understanding of Unique's sale of an FX system to West Bank. I will now focus on the dramatic character of reputation narratives.

    A theoretical basis for the analysis of narratives

    Having introduced and argued in favor of a narrative approach to reputation and reputation building, I must clarify what a narrative is and provide a theoretical basis for determining what makes a reputation narrative credible in the eyes of a customer in order to provide a theoretical basis for the analysis of reputation narratives.

    Czarniawska-Joerges (1995a, p. 15) defines a narrative as "a sequential ac- count of events, usually chronologically, whereby sequentiality indicates some

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  • NARRATING CORPORATE REPUTATION 129

    kind of causality, and action - accounted for in terms of intentions, deeds and consequences - is commonly given a central place." To this, Bruner (1990) adds that it is the sequence of the story elements rather than the truth or falsity of these elements that determines the plot, and thus, the power of the narrative as a story.

    Further, according to Czarniawska (1997), when originating from a narrative, identity comes into being in conversations between actors, so that the organiza- tion is never the sole author of its own narrative, since in every conversation a positioning takes place, that is accepted, rejected, or improved upon by the partners in the conversation. She explains this statement in a prior text on organi- zational and individual identities: "Treating identity as a narrative - or, more properly identity-construction as a continuous process of narration where both the narrator and the audience formulate, edit, applaud, and refuse various ele- ments of the ever-produced narrative- leads us to the literary genre of autobiog- raphy" (Czarniawska- Joerges, 1994, p. 198).

    Levitt and Nass (1994) accept the idea that identity narratives are autobiogra- phies. However, they claim that organizations have much greater control over their identity than Czarniawska- Joerges implies. From their point of view, orga- nizations can to a much larger extent than she suggests be the authors of their own identities, and thus they can change the narrative depending on the audi- ence. As an example, Levitt and Nass (1994, p. 246) cite how the Coca-Cola company, in a brilliant reconstruction, recreated the disastrous introduction of the "New Coke" to create the valuable identity of "Coke Classic." Griffin (1993) shared this view, saying that narratives are from beginning to end defined and orchestrated by the narrator to include a particular series of actions in a particular temporal order for a particular purpose.

    From this autobiographical nature of narratives, it follows that it is relevant to

    regard identity narratives as instances of organizational impression management, or self-presentation - that is, actions deliberately designed and implemented to influence an audience's perception of an organization (Elsbach, Sutton, and

    Principe, 1998; Goffinan, 1959; Larsen, 1975; Tedeschi and Melburg, 1984); I believe that the same holds true for reputation narratives. With this view as a

    point of departure, it can be said that, in their narratives of future performance, software companies seek to convey the impression that they possessed authority and expertise in areas which customers value (Clark and Salaman, 1996), thereby making themselves attractive as suppliers of software and generating trust in customer relationships.

    Narrative as autobiographies

    If narratives of future performance are to substitute for reputation, then they must establish companies as suitable and capable suppliers of products demanded by customers. Consequently, in a narrative it is essential that the software company

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  • 130 MORTEN THANNING VNDELO

    (a) demonstrate awareness about which product the customer needs, and (b) give the impression that it is in control of the information technology and of the application domain of the needed product, and thus, that it is able to carry its ideas for deployment of the technology into real products. In essence, to be successful, a narrative of future performance must reveal what the software company will do and why it is capable of doing it.

    Typically, software companies employ impression-management techniques when they want to claim suitability and capability as suppliers of certain prod- ucts, and thus these techniques provide the accounts in the narratives. A vital impression-management technique used by software companies is production and presentation of interpretations of the information technology. Interpretations of the information technology can take verbal form and as such can be conveyed in conversations between software companies and customers. However, like strategies, they become more real and credible when they take on material form (Barry and Elmes, 1997). Hence, software companies typically use written pro- posals and prototypes to present their interpretations of the information technol- ogy. Interpretations of the information technology are significant since the technology is equivocal, admits several plausible interpretations, and can take on many visages (Weick, 1990). Therefore, the information technology requires sense making to be sold; it has little value to a customer until an interpretation explains it as a solution to his or her problem. As an illustration of the import- ance of interpretations of the information technology, Yakura (1994, p. 1) offers the following example: "A writer might think of a computer as a big calculator, helpful only for numerical computations, and completely useless to his or her existence. If a consultant could alter the meaning of the computer for the writer, introducing it as a more efficient kind of typewriter, the consultant might then be able to sell it to the writer as a word-processing system."

    From this it follows that to persuade a customer to buy a product, the software company must provide him or her with an interpretation of the information technology, which makes sense to him as a solution to his needs and thereby forces him to take it seriously. Second, by producing and presenting such an interpretation, the software company demonstrates that it is in control of both the technology and the application domain of the product, thereby revealing its capabilities. Finally, by capturing the needs of the customer sufficiently, the software company demonstrates capacity and commitment to achieve control over the situation (Clark and Salaman, 1996).

    In addition to interpretations of the information technology, software compa- nies often seek to advance their reputation by use of (a) generalizations of the past, (b) acknowledgments, and (c) coloring in their narratives. Generalizations of the past are described by Boje (1991), who shows that storytelling is a way of drawing parallels between two patterns, thereby revealing how prior experience is relevant in the present case or why prior failures in what look like similar projects are not relevant to the present case. As an example of the latter, an

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  • NARRATING CORPORATE REPUTATION 131

    organization may excuse a prior failure as caused by factors beyond its control, thereby indicating that it is unlikely to be repeated and not indicative of the organization's normal performance (Tedeschi and Melburg, 1984). Reputation narratives may include references to both past performance and affiliations, as software companies tell about their past endeavors (Clark and Salaman, 1996). Hence, in narratives, software companies may generalize from prior events in order to support their claims and block such generalizations when they weaken their claims. Acknowledgments in narratives may appear as self-critique, whereby software companies demonstrate awareness of weaknesses in their pro- posals for products, or apologies, in which software companies confess responsi- bility for negative actions and express that the actions were wrong (Tedeschi and Melburg, 1984). Hence, good stories anticipate and answer in advance the customer's objections, some of which they would not have dreamed of (Clark and Salaman, 1996). In fact, such accounts do enhance the reputation of organi- zations. Thus, Elsbach (1994) studied how spokespeople build and support forms of accounts through the specific arguments and evidence they contain, finding that acknowledgments contributed more to the legitimacy of organizations than denials. Coloring refers to the inclusion of strategic plans for business units, production plans, descriptions of methods to be used, merits of the software engineers to take part in the production of the product in question, and so on, in the narrative, for the support of software companies' claims of expertise. Such information constitutes symbols and signals of the capacity of the company and thus may enhance customers' susceptibility to the company's interpretations of the technology.

    Typically, the accounts in the narrative are interlinked, since each reveals aspects not fully covered by others. Hence, each comments on the prior one so that the production of a reputation narrative becomes quite similar to the con- struction of a scientific paper, as Latour and Bastide describe (1986, p. 59): "The text puts together its elements as if they were stones in a primitive arch. Each one is supported by the last but leans out into the void. Yes, it is a construction. Is it fragile? Sturdy? That depends upon masons, the thrust it must sustain, and the fit. But mostly it depends upon the negotiations which guide the way in which each stone is balanced upon the last." Consequently, a good narrative develops the accounts in the narrative, progressively building on earlier asser- tions, and seeking to ensure that the customer draws the necessary and inevitable conclusions. Thus, producers of reputation narratives face the same challenge as fiction writers - namely, how to develop an engaging, compelling account, one that readers can willingly accept.

    When a narrative of future performance impresses the customer and makes him or her believe that the software company is competent, it creates intresse- ment,2 that is, it influences the customer to show interest in the proposed product and attracts the customer to the software company. In conclusion, the credible narrative of future performance presents convincing interpretations of the information

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  • 132 MORTEN THANNING VNDELO

    technology, which leaves no questions unanswered, or at least explains to their audiences where and how they can get answers to their questions.

    The FX system narrative

    The previous section presented a theoretical basis for analyzing reputation narra- tives as autobiographies, emphasizing the role of interpretations of the informa- tion technology as an impression management technique. Using this as a point of departure, we now look at how the various accounts in FSD's narrative of future performance contributed and interacted in order to establish (1) FSD's claim of relevance as the supplier of an FX system, and (2) FSD's claim of competence in the relevant application domain and expertise in handling the technology. Fi- nally, we consider how the narrative acquired credibility.

    In its narrative, FSD founded its claim of relevance on the mock-up prototype it added to Dealing System and presented as an almost operative FX system. It is particularly important to note the process by which the prototype came into being, that is, by ordering sales materials from other suppliers of FX systems and using their user interfaces as input to the construction of the prototype the soft- ware engineers and salesmen in FSD made sure that the prototype looked like an FX system and was thus understandable by West Bank. On the surface, the prototype appeared to be what it claimed - namely, an almost complete FX system - but it had some visible defects (e.g., it was impossible to make changes in the numbers that appeared in the various fields on the screens). Thus, standing alone, the prototype ran the risk that West Bank would reject it as unsatisfactory. To avoid such rejection, the FSD software engineers acknowledged that this defect was due to the incompleteness of the user interface. This acknowledgment revealed an aspect of the product not covered by the prototype and aimed at preventing West Bank from pricking a hole in the narrative and concluding that the FX system was not as complete as FSD claimed. Altogether, FSD used its prototype to signal that the division had the product West Bank was looking for; at this, it apparently succeeded.

    In FSD's narration of its claim of domain competence and technological expertise, one more prototype pops up. In the narrative, the prototype served as the point of departure for these claims: By using it to show that FSD's software engineers had developed a complete FX system, the software engineers and salespeople routed a signal to West Bank, saying that FSD was both technically competent and familiar with the domain of foreign-exchange operations, and was thus a competent supplier of FX systems. Again, it is important to note how the construction of the prototype took place: By copying the user interface from FX systems offered by other suppliers, FSD software engineers and salespeople made sure that they looked as if they knew what an FX system looked like - in other words, that they were competent. Also, the close link between the proto- type and Dealing System had a central position because, by forming this link,

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  • NARRATING CORPORATE REPUTATION 133

    FSD presented the FX system as an equivalent to the Dealing System, claiming that the competences and expertise acquired while developing Dealing System were germane to the development of the FX system. Somehow, they were say- ing, "We have done it before and we are just about to do it again," thereby generalizing past experience.

    Finally, by arranging for currency dealers from existing customers to partici- pate in meetings with West Bank, FSD indicated to West Bank that it cooperated with competent partners during the development of the FX system and thus had direct contact with relevant experts in the application domain. Also, FSD made sure that West Bank could get answers to its questions from people who spoke their own language. However, by bringing in currency dealers to answer poten- tially difficult questions from West Bank about the FX system, FSD ran the risk of disclosing its lack of domain competence and thereby risked weakening its own claim of domain competence. Yet the presence of the currency dealers did not cause West Bank to formulate this alternative interpretation of their presence and to question FSD's domain competence. Consequently, FSD could sustain this claim.

    The three major accounts described above constituted the core in the narra- tive. Yet other accounts of competence and expertise existed and contributed to the impression of FSD as a capable supplier of the FX system. For example, FSD was a division of Unique for the provision of products and service to the finan- cial sector, focusing on off-the-shelf systems to stock brokerage firms. Unique also made major investments in acquisitions of small companies or parts of them.

    To conclude this analysis of the FX system narrative as an autobiography, I suggest that the prototype (a materialization of FSD's interpretation of the tech- nology) was the first account in a linked sequence of accounts, each building on prior ones while adding new aspects to the picture of FSD as a capable supplier of the FX system, thereby lining up a plot line in which none could be missed in the narrative if it were to preserve its trustworthiness. In essence, the narrative said: "Here is the FX system we developed; it is almost like the Dealing System which has been sold to several customers. Thus, we have been in the business for some time and know what we are talking about."

    So far as the trustworthiness of the narrative is concerned, it is important to note that, when reading it, West Bank uncovered no evidence that FSD could not deliver the FX system. Regarding the credibility of the narrative, it seems fair to say that it created intressement, as it influenced West Bank to order the FX system from Unique. From this, I conclude that the interpretation of the informa- tion technology presented to West Bank by FSD salesmen and software engi- neers did make sense to the bank as a solution to its need for an FX system. However, although we may conclude that the narrative worked with West Bank as its audience, we cannot infer that it would not work with a different one; clearly, a narrative that affects one audience may very well leave another unaffected.

    Before we conclude this analysis, it is important to note that the reputation implied by the narrative of future performance produced and told by FSD salespeople

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  • 134 MORTEN THANNING VNDELO

    and software engineers started to erode as FSD faced severe problems fulfilling its promised delivery of the FX system to West Bank. Hence, the basis for FSD's claim of competence and expertise vanished - it is difficult to maintain expert status when one is not acting like an expert. From an analytical point of view, this suggests that the activities in a software company materialize in more or less frequent and more or less transparent signals about how well it is doing. If sufficiently frequent and transparent, then such signals provide customers with occasions to modify their perception of the software company, thereby reassess- ing its reputation accordingly, as in the FX system case.

    Conclusion

    This article has suggested and showed that reputation can be implied by narra- tives of future performance. We have seen a case for which little could be explained by use of conventional wisdom about reputation; the case was ana- lyzed using a narrative approach that emphasizes the autobiographical aspects of narratives. In narratives of future performance, software companies exploit inter- pretations of the information technology in order to establish their relevance as suppliers of particular products, their claims of competence in the relevant appli- cation domain, and their expertise in handling the technology. Finally, narratives of future performance are credible when they establish a plot line in which the audience cannot prick holes or question the software company's claims.

    By showing that reputation can be implied by narratives of future perfor- mance, this study supplements conventional wisdom about corporate reputation and reputation building. Most important, it suggests that companies can build and enhance their reputation by producing and presenting narratives of future performance, and that the production of such narratives can happen quickly and be rather inexpensive.

    Narratives of future performance spawn expectations about when products will be available and what functions they will include; thus, such narratives are like product preannouncements (Garud and Lempel, 1997). For both narratives of future performance and product preannouncements, failure to meet customers' expectations is likely to have a negative impact on a company's reputation, possibly in ways that preclude a company from entering new transactions with more customers in the market. Hence, we can regard reputation implied by narratives of future performance and product preannouncements as fragile. This suggests that reputation implied by narratives of future performance is mainly relevant in the early phases of business relationships; over time, customers will acquire experience with a software company and come to attribute to it experi- ence-based reputation.

    Yet, in spite of this, companies deliberately decide to build and enhance their reputation by producing and telling narratives of future performance. It is tempt- ing to ask why companies announce products that do not exist when they know

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  • NARRATING CORPORATE REPUTATION 135

    that doing so might lead to situations where they cannot meet expectations and thus erode their reputation. I suggest that they do so for strategic reasons, since otherwise it would be difficult for them to enter new markets. I also propose that organizational skills in producing and using narratives of future performance may very well explain organizational performance in young markets. This ex- pands the speculations by Podolny (1993) that imported reputation could be relevant to organizational performance in young markets where companies have had few opportunities to build a reputation.

    Notes

    1. United Business Computers now owns 50 percent of the shares in the company. 2. Intressement refers to the action of enrolling, and it involves attracting one entity

    by coming between that entity and a third one (Law, 1986, p. 71).

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    Article Contentsp. 120p. 121p. 122p. 123p. 124p. 125p. 126p. 127p. 128p. 129p. 130p. 131p. 132p. 133p. 134p. 135p. 136p. 137

    Issue Table of ContentsInternational Studies of Management & Organization, Vol. 28, No. 3, Corporate Image and Identity Management (Fall, 1998), pp. 1-137Front MatterPreface: Managing the Corporate Image and Identity: A Borderline between Fiction and Reality [pp. 3-11]Corporate Identity: There Is More to It than Meets the Eye [pp. 12-31]Constructing New Identities in Established Organization Fields: Young Universities in Old Europe [pp. 32-56]The Role of Language and Formal Structure in the Construction and Maintenance of Organizational Images [pp. 57-85]The Business Concept as a Symbol [pp. 86-108]Product-Harm Crises and the Signaling Ability of Brands [pp. 109-119]Narrating Corporate Reputation: Becoming Legitimate through Storytelling [pp. 120-137]Back Matter