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Diminishing Returns From Reputation: Do Followers Have a Competitive Advantage?

Author

Listed:
  • Tomasz Obloj

    (INSEAD - Institut Européen d'administration des Affaires)

  • Krzysztof Obloj

    (Search Management - UW - University of Warsaw)

Abstract

The paper addresses the value of reputation as a strategic, intangible resource. We hypothesize that a high reputation of an exchange partner will result in the ability to command a premium price during a transaction because it lowers the transaction costs of the other party. We also hypothesize that the smaller the differences in the level of reputation of competing parties, the more valuable a unit of reputation becomes. We test these hypotheses by empirical analysis of pairs of transactions on the Polish electronic exchange Allegro. Our analysis shows that if the differences in the levels of reputation decrease, the value of a unit of difference increases. We also extrapolate the results of our research into a more general model that shows the conditions in which a strategy based on high reputation (price premium per unit of reputation) is the most effective one and indicates the process of reputation development by stimulating the dynamics of leader and follower behavior.

Suggested Citation

  • Tomasz Obloj & Krzysztof Obloj, 2006. "Diminishing Returns From Reputation: Do Followers Have a Competitive Advantage?," Post-Print hal-00623906, HAL.
    • Handle: RePEc:hal:journl:hal-00623906
    DOI: 10.1057/palgrave.crr.1550029
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    Citations

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    Cited by:

    1. Sujit Sur & Carol-Ann Sirsly, 2013. "What’s in a name? Decomposing corporate reputation to assess the relative impact of temporal, firm and industry level factors," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(4), pages 1047-1072, November.
    2. Delgado García, Juan Bautista & De Quevedo Puente, Esther, 2016. "The complex link of city reputation and city performance. Results for fsQCA analysis," Journal of Business Research, Elsevier, vol. 69(8), pages 2830-2839.

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