A Systems Approach to Understanding how Reputation Contributes to Competitive Advantage

Abstract

Reputation has many interpretations, but most agree that it is an intangible asset that can build competitive advantage for a firm. This paper takes a dynamic resource-based view of reputation and argues that the best way to understand how it contributes to competitive advantage is through a systems approach. The systems thinking approach is concerned with developing and testing operational explanations of organizational behavior. It differs from the traditional approach as it requires an understanding of the ‘whole’ through the relationships between ‘organizational’ pieces. The traditional approach is based on an understanding of the whole by understanding the individual pieces. This paper offers an explanation of the systems approach starting with a basic understanding of causal loop diagrams and stock and flow diagrams, progressing into the more complicated modeling of behavior and interactions. How reputation plays a role in a hypothetical example of the hiring process, often referred to as employer branding, is used to illustrate how the approach can be applied in reputation management. Systems thinking is recognized as a quality approach to organizations but one that is complicated and that has been slow to be adopted by organizations. Some insights into how to employ the approach are offered at the end of the paper.