Walking a Fine Line: Firm Reputation for Innovation, Optimal Strategic Distinctiveness, and Performance

Organizational reputation has been shown to influence important organizational outcomes. As a result, a large body of literature has devoted significant attention to organizational reputation. Findings have shown organizational reputation influences a wide range of outcomes such as IPO pricing, firm performance, stakeholder support, and organizational misconduct. One area extant organizational reputation work has not examined is the influence of organizational reputation on strategic decision making. In this dissertation, I propose organizational reputation is an important factor influencing strategic decision making. I draw on recent refinements of the known for something dimension of organizational reputation and focus on firms with a high firm innovation capability reputation. Firms with a high innovation capability reputation are known for generating innovation. Innovation is expected from firms with a high innovation capability reputation, but less attention is given to the behaviors or actions these firms engage in to generate innovation. Recognizing stakeholders largely focus on the firm’s innovation leads CEOs to perceive discretion exists in the behaviors the firm can use to generate innovation. I examine how having a high innovation capability reputation and the areas of discretion CEOs perceive attached to the reputation influence strategic distinctiveness. Why some firms increase distinctiveness while others reduce distinctiveness is a central question for organizational scholars. I develop competing hypotheses suggesting an upside and downside to strategic distinctiveness exists influencing the likelihood of engaging in strategic distinctiveness. On the upside, strategic distinctiveness offers firms a mechanism to help achieve aspirations. One the downside, strategic distinctiveness offers a mechanism that could result in the firm losing the benefits its reputation offers. To examine boundary conditions, I draw on the upper echelons literature and argue organizational, environmental, and leadership contexts can create contingencies exacerbating aspirations or loss aversion that will either amplify or attenuate my main relationships. Finally, literature suggests firms walk a fine line between too much distinctiveness and not enough distinctiveness. Thus, I examine whether an optimal level of strategic distinctiveness is best for firm performance. I test my arguments using a sample of S&P 1500 firms between 2007-2015