The relationship between legitimacy, reputation, sustainability and branding for companies and their supply chains PT5

Supply chain case: The European horse meat scandal

During the past decades the food industry in Europe has become extensively complex and internationalized. Despite the existence of an abundant body of laws and principles governing it, the increasing scale and the intricacies of the food supply chain resulted in a variety of dysfunctions. The horse meat scandal casts a cloud on both consumerism related topics and on commercial damage inflicted on manufacturer and retail brand equity (National Geographic, 2013). Just recently, Lawrence, 2013a and Lawrence, 2013b reported of legal action and financial compensation settlements launched by the Irish meat processing company ABP, delivering beef burgers to TESCO, against a Polish supplier and a Cheshire based trading company, Norwest Food, respectively as beef containing horse meat were supplied. According to ABP some of the horse meat came via the Cheshire based company from a Dutch factory. Norwest Food apologized to ABP for “… unknowingly and unwittingly supplied contaminated beef products …”. There are detrimental consequences on company and supply chain reputation, if dyadic and contextual consonance (Fig. 3) is not considered. This might result, for example, in apology advertisement campaigns as launched by TESCO (Sweney, 2013) containing a promise to simplify and streamline the supply chain. Compounding the matter, the ad was banned, triggered by a complaint of a butcher, by the Advertising Standards Authority (ASA), as it was perceived misleading in terms of mistakenly implying that all retailers and suppliers had sold horse meat contaminated beef.

In the first four weeks when the scandal came to light, sales of frozen burgers and frozen ready meal in the UK fell 43% and 13% respectively, according to a market research firm Kantor Worldpanel UK (2013). Consumer trust in the food supply was severely damaged as highlighted by recent polls in the UK. A consumer intelligence research company reported that 65% of 2200 questioned adults trusted labels less (Hutchison & Baghdjian, 2013). The extent of the scandal even altered the shopping habits of many meat consumers. Some stopped buying meat altogether, as reported in a poll by ComRes. which stated that 7% of respondents quit eating meat altogether (The Economist, 2013). However, the fullness of the problem of the European horse meat scandal has still not been reached, and governments and supply chain members are passing responsibility to each other. National food standard agencies, food manufacturers, brokers, auction houses, wholesalers, dealers and traders, primary and secondary processing plants, agents and distributors are all trying to find the scapegoats and allocate the blame.

This case aims to lead to a multidisciplinary conceptualization embracing a holistic view on how to identify and remedy the current gaps combining internal supply chain factors with external ones. This link between legitimacy related values and a reputation related topic such as quality, underlines the bi-directional relationship between legitimacy and reputation.

The increasing consumer demands for low end food products triggered by a recession are in diametrical contrast to high production costs for beef related products. To accommodate this situation, complex broker networks and longer food supply chains crossing European borders have been formed (Lawrence, 2013a and Lawrence, 2013b). Sustainable quality cannot be achieved without dedicating sufficient resources by all stakeholders and there is a limit to budget cutting on a macro level. Essentially, this means that there is a trade-off between reducing budgets and production costs (reputation related) and reducing the concerns for food safety (legitimacy related). As an operational consequence, the application of the dispersion model as suggested by Rong and Grunow (2010), would lead to limiting the batch sizes in the production stage and increases in production setups, cleaning efforts, etc., which trigger increased production costs and decreased efficiency and competitiveness.

Relating to transport costs, Hallier (2013) developed a transport chain for the food industry from the birth place of the animal to consumption via abattoirs, processing plant wholesalers and retailers. Thanks to EU subsidies conferring advantages on certain producers, firms were enabled to buy cattle from far away suppliers. The same procedure exists for slaughtering and for processing plants. Besides the dwindling quality, transparency in origin and authenticity of the meat is greatly reduced.

On the macro level, quality is also regarded to be affected by the reduction of national funds and resources committed, for example, when (not) involving vets and hygiene inspectors in the slaughtering process (Lawrence, 2013a and Lawrence, 2013b). Compounding the matter, a discrepancy between regulating and actually implementing the regulations exists. While the EU regulates the market, prohibiting the mislabeling of food products, it is up to the individual national authorities to enforce such regulations (Alemanno, 2013). The ongoing increased consumer demand for lower prices of high quality food, and the evident gaps between governmental and efficient self- auditing of the industry (Lawrence, 2013aLawrence, 2013b and National Geographic, 2013) point to a cognitive dissonance between stakeholders’ quality awareness on the one side and the preparedness by all players of the food supply chain to dedicate sufficient resources for quality protection on the other.

As an old English proverb goes, ‘all stakeholders need to put their money where their mouth is’. The reflection activity suggested by Czinkota twinned with a ‘resolution spirit’ is suggested to concentrate on the following holistic supply chain orientated topics (complementing and adding to the previously mentioned suggestions by literature):

1.

Enhanced coordinated and systematic planning and control

Whereas initially Chase, Aquilano, and Jacobs (2000) and Duclos, Vokurka, and Lummus (2003)focused their supply chain conceptual frameworks on flexibility (supply, organizational, information system, operations systems, market and logistic related flexibility), Aramyan, Ondersteijn, Van Cooten, and Oude Lansik (2006) developed an agrifood specific model referring to efficiency, additional responsiveness and food quality related factors.

Due to the “the high level of interdependence between the elements of Supply Networks, their inherent feedback loops, non-linearities, and delays”, the Remplanet Project (2010, p.6) suggests simulation modeling approaches and computational decision support systems in addition to purely analytical approaches (i.e. Soni and Kodali, 2013 and Van der Vorst et al., 2009). In this context, Taylor (2005)suggests agri-food value chain analysis. This is confirmed by previous research of Low, Johnston and Wang (2007, p. 99) in terms of linking the company’s technology to its various network constituents: “a company’s legitimacy emanates first and foremost from the development and commercializations of innovative and creative technological solutions”.

2.

Communication, positive collaboration experience and ‘functional’ trust

Supporting Czinkota’s view and relating to relationship related risks, Fischer (2013) defines two levels of trust in the agrifood supply chain. He labels the most important trust determinants in this context as ‘effective communication and positive collaboration experience’. At retailers’ and processors’ level, relationships tend to be more formalized, with larger use of contracts. The reason appears to lie in the fact that retailers deal with many and large corporations. On the other hand, processors and farmer relationships appear to rely more on trust, due to the representatives of each group tending to know each other from dealing in the local and regional markets. While Fischer (2013) holds that trust is needed when there are possible risks involved, it could, vice versa, be argued that for a food supply chain to be secure and safe, it must rely little on a dysfunctional connotation of trust. By the same token, a food supply chain that relies heavily on trust among its actors implies existing issues of safety and security. A possible solution is to create exclusively formalized rather than informal trust based systems. This more formalized trust could be based on food safety standards (Manning & Soon, 2013) or on modeling ethical behavior in the food supply chain (Manning, Baines, & Chadd, 2006).

3.

Concerted strategies and actions

The awareness of the value of quality needs to be heightened on all levels of the supply chain, recognizing that maintaining the highest levels of quality may be contradictory with the pressure for price reductions. Educational and social marketing measures are suggested to be taken by EU, governments, the supply chain and educational institutions. Regarding the latter, supply chain training as practiced, for example, in the car supply chain, should be integrated to a much greater extent by universities. There is a need to create a supply chain culture, replete with quality and corporate responsibility considerations.

More research funding should be provided from national sources and supranational sources, in order to investigate the cause and effect relationships of sustainable quality in a supply chain. Our current economic system based on globalization and free market forces, albeit flexible in expanding supply chains to achieve lower prices, does not guarantee sufficiently the dimensions of sustainable quality control and high ethical standards. On a macro level, the detrimental consequences of excessive concentration should be discussed, together with the potentially positive contributions of higher levels of competition in industry.

In addition, a higher degree of systematic and co-ordinated responsibility allocation, both within government and supply chain members is suggested. More strategic planning, quality benchmarking, authenticity testing, regulation and control must occur based on more formalized rather than trust based supply chain relationships.

This article is a part of a series. Read Part 4 here.

The relationship between legitimacy, reputation, sustainability and branding for companies and their supply chains PT4

Contextual consonance and sustainable survival of the value chain

Summarizing the key aspect developed so far, the social conformity condition represents the base capability on which to maintain and/or renew, in the long run, the relationship between firm-brand and individual/consumer–company/supply chain stakeholder. The final result will be sustainable relationships (see Fig. 3).

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Fig. 3.

Contextual consonance.

About that, in 1987 the World Commission on Environment and Development defined sustainability as the development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Chabowski, Mena, & Gonzales-Padron, 2011, p.55). On the basis of this definition, the management has to ensure that the supply chain management, decision making and politics and tactics planning, aimed to create and/or maintain the dyadic consonance, must respect the contextual needs (Cox, 1999 and Darnall et al., 2008). In this context, Lindgreen et al. (2012) refer to the new concept of CSR branding as an integral part of CSR strategy, and Abratt and Kleyn (2012) explain the relationship between CSR strategy, corporate branding and identity. Corporate communication related to CSR (Zulhamri & Yuhanis, 2013) might relate to advertising (Farache & Perks, 2010), social media (Colleoni, 2013), and corporate heritage (Blombäck & Scandelius, 2013) to achieve a favorable brand image (Blombäck & Scandelius, 2013).

In line with Phipps (2012) holding that “the value chain which classically dates to Michael Porter’s work several decades ago, is itself ripe for assessment”, the authors call for an increased integration of supply chain and brand chain. In more detail, this integration refers to the interplay between branding, the stakeholder, and the value chain based on dyadic as well as contextual consonance (see Fig. 3).

According to the authors, sustainability, in its three dimensions, economic, social and environmental ‘(Triple Bottom Line) — People — for social-, Planet — for ecological- and Profit — for financial— as defined byElkington (1997), is a condition where the dyadic and contextual consonances are concentrated.

Regarding the TBL pattern, in the last decades a development of theoretical and empirical studies and research was evident, based on corporate social and environmental performance, environmental performance and, as aforementioned, corporate reputation. If the last stream is regarded a consolidated matter finalized to create economic prosperity, the first and second variables represent the basis of a new marketing stream named “Sustainable and Curative Marketing” (Czinkota, 2012 and Martin and Schouten, 2012). The sustainability orientation combined with a restitution spirit is the characteristics of a new marketing and management philosophy based on which a company and its supply chain should be context centered (Corbett and Kleindorfer, 2003Hutchins and Sutherland, 2008Kleindorfer et al., 2005 and Linton et al., 2007).

Relating to Martin and Shouten (2012) and Czinkota (2012), this newly suggested marketing stream could be defined as follows: companies and their respective supply chains create, communicate and deliver value focusing on dyadic stakeholder/stakeholder groups and contextual consonance in such a way that both, natural, human and social capital is globally restored, preserved or enhanced.

Reflecting the aforementioned shortcomings of International Marketing and its theoretical underpinnings, the current supply chain case regarding the European horse meat scandal involving the mislabeling of beef meat products is a striking example of the burning issues that consumers, supply chain members and authorities face in the functioning of the supply chain and making it consonant with the requirements of legitimacy and reputation. Importantly, the case reflects that, as far as legitimacy is concerned, where related values such as public health & safety and/or animal welfare are concerned, it is important to embrace macro (government), meso (quangos and associations) and micro (all industrial food supply chain members) stakeholders (see Fig. 1).

 This article is a part of a series. Read Part 3 here.

The relationship between legitimacy, reputation, sustainability and branding for companies and their supply chains PT3

3. The focus: Reputation, legitimacy, corporate identity and branding in industrial marketing

If homogeneity or harmony is the predominant social condition in support of legitimacy, a different assumption can be made with relation to reputation (Baccarani & Golinelli, 1992).

According to a popular definition, reputation is the expression of corporate conduct aimed to differentiate the company from competitors in the perception of competitive rivalry (Elsbach, 2006Rao, 1994 and Rao et al., 2003). A key marketing strategy to achieve this competitive differentiation is product or corporate branding. In this context, Mudambi (2002) holds that B2B decision making is increasingly drawing on branding, a fact which has been generally underestimated so far in industrial marketing. Based on a literature review and differentiating consumer and industrial market characteristics, Mudambi suggests a model for B2B branding with the company brand as the central form of the branding strategy identifying three buyer clusters. The model, however, lacks a wider triadic stakeholder marketing perspective as referred to by Abdolvand and Charsetad (2013).

Reputation is therefore that set of aggregate perceptions and evaluations, developed by stakeholders and induced by the process of corporate branding, that favor the company against its competitors ( Fombrun, 1996 and Roberts and Dowling, 2002). Referring to a supply chain perspective, this view is reflected in the following quote: “Greening your supply chain can achieve reputational and efficiency gains, savings to the bottom line and ultimately increased revenue” (http://www.carbontrust.com/client-services/advice/business-advice/green-supply-chain). In this context, Abdolvand and Charsetad (2013) innovatively proved that social corporate performance positively influences positioning differentiation and, importantly, brand equity.

A bi-directional relationship between legitimacy and reputation is implied when juxtaposing Fombrun’s and Rindova’s et al.’s proposed perspectives. While the first holds that compliance with rules and social practices may be what actually favors the establishment of competitive differences between the compliant company and its competitors, Rindova et al. (2005) argue that a perceived high quality of products means a greater business prominence in the minds of the stakeholders involved. This view is exemplified by the Italian company Parmalat which, due to de-legitimated financial behavior did not reflect contextual consonance (Bank of America declared ‘false’ a bank active account of Euro 3.95 billion specified in the balance sheet). The firm managed to keep its reputation due to a re-vamped corporate identity and personality (see Fig. 2). The result was that the savers continued to buy Parmalat’s bonds. In this case, from a consumer perspective, reputation gave legitimacy to the firm.

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Fig. 2.

Reputation and legitimation process.

Figure options It is clear that the reputational state, also due to contextual conformism (legitimacy), tends to add value to the corporate brand, allowing the company to offer products with higher (reputational) quality at higher prices.

Corporate branding planning aims therefore to reduce information asymmetry with relation to target evaluation, the degree of purchase risk faced by the individual/consumer, and unawareness by the target of corporate features that are beyond the products/services on offer (firm specific).

For the purpose of this work, it is important to consider the adoption of a symbolic approach which considers reputation as a conformity aimed at competitiveness, representing on the one hand its resources and dynamics, and, on the other hand, the current results and future ambitions (Love and Kraatz, 2009 and Van den Bosch et al., 2005).

As part of this symbolic approach, the notion of conformity does not only express the semantic adaptability that the company displays towards the relational partner (individual/consumer/target), but also a cognitive, emotional and cultural adjustment in terms of structures and practices (Love & Kraatz, 2009).

Symbolic representation, aimed at conformity, can be therefore seen as the process of creation/maintenance of corporate reputation, which covers both spontaneous and planned communication activities. While spontaneous communication results from corporate behavior seen as expression of values, culture and corporate personality, planned communication (corporate identity) is on the other hand the symbolic representation (visual identity) of what the company is (corporate brand) and of what it offers in terms of values and culture (product brand) (Fombrun & van Riel, 2003).

Van Riel and Balmer (1997) define corporate identity as ‘the way in which an organization’s identity is revealed through behavior and communications, as well as through symbolism to internal and external audiences’ (Van Riel & Balmer, 1997). The process of corporate identity is that set of marketing and communication activities undertaken by the company in order to build favorable associations and positive reputation towards all stakeholders (Hatch & Schultz, 2008). The creation of a corporate identity, either of brand or of product, aims so as to achieve a high level of recognition by relevant stakeholders and at developing the ability to transfer value to them.

Corporate identity has therefore the purpose of helping the individual/evaluator to develop his perceptions by reducing the risk linked to the purchase of company products.

We can say that corporate brand is a ‘script’ that simplifies the decision-making process while associations, developed on the basis of expectations, are about cognition, affection, evaluations.

Such evaluations (corporate image) represent the result of perception that stakeholders, as recipients of corporate behavior, develop either towards the distinctive/competitive capabilities of the company (with relation to finance, organization, production, sales, etc.) or towards the corporate essence compared to that of other companies (Barnett and Salomon, 2006Rindova et al., 2005 and Van Riel and Fombrun, 2007).

According to such principles, the firm, both through planned and spontaneous marketing and communication activities, tends to create, maintain and develop its reputation on the basis of two main goals: being known and being known for something (Lange, Peggy, & Dai, 2011). The ‘being known’ goal is about stimulating and developing stakeholders’ awareness in order to make the company/organization/brand prominent compared to its competitors, with relation to corporate essence, the latter considered from a holistic perspective (Rindova & Petkova, 2007).

‘Being known for something’, on the other hand, is about the intention of the company to be perceived by stakeholders as different from its competitors, as a result of specific features of the product/service offered (see Fig. 2). A study by Staw and Epstein (2000) provides a compelling example of this proposed ‘symbolic conformity mechanism’. They found that firms enhanced their reputations by adopting various popular management practices (e.g. total quality management, employee empowerment, and teams). They argued that this effect occurred because these practices embodied the normative values and cultural beliefs of the audiences who ascribed the reputations. In this respect, behavioral branding as discussed by Kaufmann, Basile, and Vrontis (2012), and Kaufmann, Vrontis and Czinkota (2012) can be regarded as a further efficient leadership and branding related concept, particularly in light of the research finding by Fiedler and Kirchgeorg (2007) that “marketing strategies can specifically target single stakeholder groups in order to position a corporate brand.”

In conclusion, conventional thinking holds that legitimacy is a requirement of all organizations whereas reputation is a desirable, but not an essential property.

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The relationship between legitimacy, reputation, sustainability and branding for companies and their supply chains PT2

2. Legitimacy and corporate performance perceptions

The term legitimacy was defined by Parsons, 1956 and Parsons, 1960 and then Weber (1978) as a state of congruence towards laws, rules and social values. Scholars of social theory, organization, and the Resource-based View Theory introduced the notion of legitimacy in their theories (Johnson et al., 2006Ruef and Scott, 1998Salancik and Pfeffer, 1978 and Suchman, 1995). In the late ’70s, pioneers of the Neo-Institutional approach, such as Meyer and Rowan (1977) and Zucker (1977), while analyzing the ability of an organization to achieve survival, stressed the importance of expressing behavioral patterns conforming to standards, rules and beliefs of the reference context, in addition to more established factors such as organizational efficiency. From the seminal work of Meyer and Rowan onwards, all scholars belonging to the neo-institutional school argue that organizations that shape their behavior to moral rules and regulations of their reference context can be defined as legitimate. According to Fan (2005) (in Kaufmann, Vrontis and Czinkota, 2012 and Camilleri, 2008), effectively communicating legitimacy related values might give the company a differential and competitive advantage. In this context, Hawn, Chatterji, and Mitchell (2011)differentiated between market (related to market actors) and social legitimacy (related to non-market actors) in generating economic value and, innovatively, investigated their interactions. They elicited that increasing their social legitimacy is less beneficial for companies being already on a high level of market legitimacy; on the other hand, the high level of market legitimacy may substitute for a decreasing social legitimacy.

This constant search for contextual conformity and, hence, survival may shield the company from any behavioral change that could induce sanctioning reactions (i.e. strikes) from context members (Brown, 1998). The meaning of legitimacy employed in this study is succinctly expressed by Scott (1995, p. 45), who argues that “legitimacy is not a commodity to be possessed or exchanged but a condition reflecting cultural alignment, normative support, or consonance with relevant rules or laws”. The social dimension of branding in this context is expanded by Meads and Sharma (2008, p.9) who state that: “The business becomes a social purposeful system with the brand aspiring towards ‘social value’” (Meads & Sharma, 2008, p.9).

2.1. Central hypothesis

These definitions mark the central hypothesis of our research: legitimacy should be regarded the conditio sine qua non both to the social acceptance of the company and to a coherent implementation of reputation strategies.

 These considerations, however, highlight the existence of a gap in the line of studies regarding corporate/brand reputation. According to research by Van Riel and Fombrun the corporate image that stakeholders develop as a result of corporate communication activities, refers to four domains (product, social, financial and employment) and is aimed to distinctly recognize the company from among its many competitors (Brown et al., 2006Davies et al., 2001Fombrun, 1996Fombrun and van Riel, 2003Gioia et al., 2000Illia and Lurati, 2006Pruzan, 2001Scott and Lane, 2000Van Riel and Fombrun, 2007 and Whetten and Mackey, 2002). However, this assumption considers conformity of the company to rules, norms and cultural values of the reference context, as a behavior merely aimed at standing out in the competitive scenario characterized by a condition of rivalry. This view overlooks that behavior consistent with context requirements also allows the company to reach a perceptive, solely institutionally and even context targeted, positioning in constituencies’ minds (cognitive legitimacy) and does not necessarily result in distinctive evaluations compared with competitors, or an effect on financial results (Suchman, 1995). Hence, corporate legitimate behavior should not be regarded as having competitive and/or financial motives in the first place.

For example, many place marketing studies conclude that the extent of compliance of an organization with social expectations can reinforce or reduce a territory’s attractiveness (for example, companies that do not meet environmental standards may make the area in which they operate to be perceived as highly polluted and, therefore, economically, socially and/or touristically unattractive) (Chiu, 2011 and Zimmermann, 2001).

Following this line of thought, corporate behavior and, in its wake, the entire supply chain behavior, may trigger a dual (economic and institutional) approach towards its reference context.

This work shows that in the first case, when corporate behavior is merely geared towards the bottom line, reputation is exclusively seen as the capacity to cause results related to competitiveness.

The institutional approach, on the other hand, caters to the social, cultural, ethical role that the company plays within its reference context, and, therefore, is also about how the company itself is socially perceived by the community with which it interacts either directly or indirectly (Rindova, Williamson, Petkova, & Sever, 2005).

2.2. Differences between legitimacy and reputation

Some researchers describe the firm as either a social ( Kogut & Zander, 1996) or a discursive ( Tsoukas, 1996) community, or as a community of practice ( Constant, 1987 and Kreiner and Lee, 1999). Shifting the perspective, scholars like Kjellberg and Helgesson (2006)Andersson, Aspenberg, and Kjellberg (2008), orAraujo, Kjellberg, and Spencer (2008), and Storbacka and Nenonen (2008) refer to the notion of co-created markets as actors increasingly engaged in market and/or social practices. Recurring social practices, undertaken by individuals and social organizations within a social system, enable the establishment of relations between social players. Such relations in turn will evolve to mutual adaptation of social actors’ respective activities ( Giddens, 1984). This phenomenon marks a process of reflexive self-regulation, typical of social integration phenomena and of cybernetic systems as well as the expression of relational reciprocity among actors who are co-present ( Staber and Sydow, 2002Wiener, 1948Bateson, 1977Beer, 1959,Beer, 1966Beer, 1985 and Yolles, 1999). Berger and Luckmann (1966), furthermore, argued that organizations eventually mirror their environment as they reflect socially assembled realities.

A constant search by the company for such a state of consonance in the creation and/or maintenance of its relationships and mutual adjustment/change of practices and behavior employed by the social players, therefore express the existence of a continuous adaptation process (Golinelli, 2010 and Maturana and Varela, 1980).

In such a dynamic business scenario, the corporate system constantly looks for players with which to create and maintain lasting relations, through the development of, first, a state of consonance, and, then, of resonance. Consonance, as previously mentioned, is a condition that is achieved when the relevant players (corporate and supply chain system and context members) identify a common language and shared emotions/passions, while resonance marks a relational evolution in which the players create opportunities to reach common goals (Barile, 2006 and Golinelli, 2010).

Regarding the status, the individual stakeholder could fulfill an alternative or complementary double role. For example, an individual could be a citizen and/or a consumer. In the first case the corporate aim should be to satisfy the environmental and social norms (legitimate behavior), and in the second case to evoke some idiosyncratic features arousing a distinct positioning compared to other competitors (reputation related behavior).

The plan is to have the stakeholder express relational consensus following an assessment of corporate conduct. That conduct in turn is shaped by corporate skills and abilities, which are expressions of two dimensions. First, it reflects conformity to social norms, values, rules and meanings operating within the reference social systems (legitimate behavioral corporate skills). Second, it demonstrates firm-specific features, aimed at making the individual/target discern from other companies, due to the perception of either tangible or intangible specific assets (reputation related corporate skills) (Hawley, 1968Hirsch and Andrews, 1984Parsons, 1960Thornton, 2002 and Tolbert and Zucker, 1996).

The company that meets the expected standards, rules and values can either present itself as a value setting within its context (industry, place, etc.) together with the other players (constituence/audience), or as a system whose survival goals are the result of differentiation towards its competitors (Deephouse and Carter, 2005 and Golinelli, 2010).

Attention is drawn to the innovative organizational behaviors implemented by the firms in Silicon Valley. These behaviors have been, and are still, useful for both to qualify the place, contributing to regional and national economic growth and to increase the reputation and the competitiveness of the local firms.

On the other hand, the organizational behaviors applied by some Chinese firms and supply chains, characterized by disrespect of the environmental or legal (i.e. counterfeiting) norms, detrimentally influence the firms’ and country’s reputation.

Hence, a social actor evaluates, different from a consumer, the condition of a social organization and may rate this organization “adequate”, because of congruence with the contextual legal and cultural values and norms (Albert and Whetten, 1985Hannan et al., 2007Rao, 1994 and Zuckerman, 1999).

This acceptance condition reflects a rational-cognitive firm that is congruent with laws, norms and social practices, and mimics the reference context, becoming, in turn, an expression of contextual values. This mimetic approach represents a phenomenon defined by the institutionalist and neo-institutionalist theories as isomorphism ( Di Maggio and Powell, 1983 and Di Maggio and Powell, 1991).

2.3. Legitimacy and isomorphism

Neo-institutionalist scholars regard isomorphism as the key to understanding why companies that operate within the same institutional/social context take decisions and follow behavioral patterns that are usually very similar (Barley and Tolbert, 1997Di Maggio and Powell, 1991Jepperson, 1991Leblebici et al., 1991,Meyer and Rowan, 1977 and Zucker, 1977). According to Meyer and Rowan (1977), the notion of isomorphism implies that organizations should meet the rational criteria set by the institutional context in order to be considered efficient, to maximize legitimacy and resources, and their ability to survive. Isomorphism processes are determined not only by the tendency to conform to the external environment, but also by the action of the environment itself that leads to the creation of new organizations consistent with rational myths (institutionalized rules, norms, procedural ceremonials). With every new myth that consolidates, new organizations correspond to meet the needs that the myth itself has produced (an example is that of companies pursuing the me-too strategy). The best way to manage the conflict between internal rationality criteria and environmental pressure is to develop two parallel structures, one formal, consistent with myths and ceremonials, the other informal, aimed at gaining competitive advantage (Meyer & Rowan, 1977). Taking the generally accepted importance of authenticity, for example, for branding and transformational leadership in terms of leaders and brands being able to “walk the talk” into account (i.e.Kaufmann, Vrontis and Czinkota, 2012 and Lopez, 2011, July 29), Meyer’s and Rowan’s view seems to be very debatable. The relevance of this statement is further supported by the case of the European horse meat scandal. Another example could be the Nike case, where Nike was accused of utilizing children that lived in underdeveloped countries, to produce goods. To show that the behavior was legitimate, the company implemented a control process to evaluate the job agreement and the occupational safety conditions. Nike, by means of these activities, improved its social legitimacy and reputation. Furthermore, Nike adopted the politics named re-use, through which the consumers were encouraged to deliver the used rubber of the shoes to the Nike store, to build and donate some running tracks.

The following Fig. 1 suggests that that rational behavior that is aligned to normative and cultural expectations of social context members, especially individuals, gives the company social legitimacy, which could in turn support the creation and/or maintenance of a favorable reputation for the company itself and its members (employees, managers, consultants, owners, etc.) (see Fig. 1).

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Fig. 1.

Isomorphism and differentiation.

Figure options

More detailed, isomorphism tends to have different connotations depending on whether it evolves according to cognitive (social beliefs), normative (existence of scarce resources whose acquisition is essential to survival) and/or coercive conditions (existence of rules essential to social and economic activity) (Di Maggio and Powell, 1983 and Leydesdorff, 2000).

Cognitive or mimetic isomorphism is characterized by a spontaneous process of imitation and/or interpretation in which the interaction between actors and relevant messages is processed and turned into cultural meaning (Bridwell and Mezias, 2012 and Rao, 1994).

In sum, the prevailing existence of rules and resources leads to the identification of forms of isomorphism based on:

1.

Awareness of the importance of acquiring new know-how and practices in order to survive: Normative Isomorphism

2.

Pressure factors such as laws, regulations etc., that lead to compliance: Coercive Isomorphism (Golinelli, 2010).

 Normative Isomorphism is found in company–context interactions in which a greater ability, knowledge and/or possession of intangible assets is present (facility = ability / capacity), so as to define a condition of pre-eminence of one towards the other.

Coercive Isomorphism is found in interactions between actors, every time it becomes necessary to identify rules and/or standards useful to determine how a social actor should behave in order to gain legitimation (i.e. Basel III).

The relationship between players and context can therefore be seen as a continuous and mutual adaptation that depends on environmental determinism and the ability of the company to influence its reference context. While the former affects and constrains corporate activities, the latter is intended to influence context entities and to establish the autonomy of the corporate system towards the surrounding reality (Golinelli, 2010).

Legitimacy and isomorphism, as described, display something very useful to the development of this study: legitimacy is based on the notion of contextual homogenizing aimed at establishing conformity and congruence, and therefore non-rivalry, against the entire reference context and/or members of it (Deephouse & Carter, 2005). At this stage, it is useful to reiterate that legitimation and reputation play a mutual role aimed at company survival. Based on the conditions of the banking industry, Deephouse and Carter (2005)investigated various interrelationships between isomorphism, performance, and legitimacy reputation as well as the antecedents and dimensions of the latter. They concluded that isomorphism has a positive effect on legitimacy and reputation of companies with a lower level of reputation, however, a negative influence on the reputation of companies with a higher level of reputation. Furthermore, the authors found that a better financial performance increases reputation but not legitimacy. They suggest a study researching the corporate effectiveness implications when losing legitimacy and/or reputation for further research. In addition, they call for an informative case study deviating from the best practice standards to an extent of actually losing legitimacy and for knowledge on managing legitimacy and reputation.

2.4. The curative marketing

By discussing the European horse meat scandal and its managerial cross-functional implications, this paper intends to give a contribution in this context.

Cognitive, normative and coercive isomorphism implies a new role definition of marketing, reflecting a paradigm change. In this context, Czinkota (2012) invites participation in an interesting discourse. He recognizes a major shift in the discipline of Marketing related to an increasing societal discontent with marketing and marketing actors due to the detrimental effects of globalization and a resulting global crisis of trust.

Czinkota dubs this paradigm shift as curative marketing. He defines this term as a required contribution of marketing/international marketing to restoring and developing international economic health as a precondition for overall welfare. This new direction implies a new spiritual and behavioral orientation for marketers towards bettering the respective societies characterized by salient motives to deliver joy, pleasure, fulfillment, safety, and personal growth, and achieving advancement towards a better society across borders. According to Czinkota the time is ripe for an intensive reflection of marketers in terms of analyzing and accepting the responsibility for the various global shortcomings caused by companies and their supply chains. Mistakes inflicted by the discipline in the past should lead to future action improvements, driven by a ‘damage restitution spirit’. The multidisciplinary theory provided by this paper underpins the development of curative marketing strategies and the corresponding operational marketing behavior. Values, know how or competences reflecting a curative marketing approach should reflect factual truthfulness and honesty, simplicity, guided by transparency and system understanding. These are aspects important in the context of supply chains’ authenticity, consisting of expanded international expansion and inclusion, communication and empathy with critics, and the acceptance of personal responsibility.

2.5. Previous eclectic literature in the field

The following Table 1 confirms the relevance of eclectic concepts applied in this work but, so far, does not provide them in the coherent and holistic manner as suggested in this research. The papers reflect that CSR, in order to achieve corporate missions and objectives such as social and environmental responsibility (Fearne et al., 2012 and Mäkelä and Näsi, 2010), social welfare, market share (Manning, 2013) as well as competitive advantage (Fearne et al., 2012), is commonly perceived as the key corporate strategy driven by legitimacy as the most important corporate concern (Dodds et al., 2013 and Johansen and Nielsen, 2012). This corporate performance is based on a focus on public reputation (Abratt and Kleyn, 2012b and Zulhamri and Yuhanis, 2013), preferable consumer perception (Blombäck & Scandelius, 2013), sustainable organizational development, employee loyalty (Kryger Aggerholm et al., 2011), product/service differentiation, or effective resource management (Fearne et al., 2012). Increasingly, the authors presented in Table 1 take a wider stakeholder orientation. As means to these ends, isomorphic processes (Johansen & Nielsen, 2012), corporate self-storying (Johansen & Nielsen, 2012) or employer branding and, relating to aspects of behavioral branding, long-term employer–employee relationships (Kryger Aggerholm et al., 2011) are discussed. In addition, a number of papers strongly link the factors of global supply management, especially in the food industry, with the concepts of reputation, legitimacy and sustainability (CSR). These driving factors include:

– a system control based on belief and interactive systems (Nijhof et al., 2008)

– chain members’ bargaining power (Cruz & Boehe, 2008) and balance of power (Spence & Bourlakis, 2009)

– differentiation strategies (Cruz and Boehe, 2008 and Manning, 2013)

– consumer engagement and loyalty in relation to Consumer Social Responsibility (Manning, 2013)

– collaborative awareness building (Cruz & Boehe, 2008)

– reputation risk management at all stages of the global value chain (Lemke & Petersen, 2013)

– positioning sustainability activities (authenticity, due diligence, product safety, credible environment management) in communication messages as an intrinsic aspect of quality (Camilleri, 2008)

– holistic approaches (Spence & Bourlakis, 2009)

– (re)allocation of resources (Fearne et al., 2012)

– linking SME idiosyncrasies with stakeholder interaction and product and process innovation (Theyel & Hofmann, 2012)

– decision on the supply chain length (Lehtinen, 2012)

– requirements for exporting, protection of agricultural land (Dodds et al., 2013).

Table 1.

Previous eclectic literature.
Mäkelä and Näsi (2010) Legitimacy and stakeholders and social contract
Farache and Perks (2010) CSR and advertising and legitimacy
Johansen and Ellerup Nielsen (2012) CSR and legitimacy and isomorphism
Zulhamri and Yuhanis (2013) CSR and reputation and legitimacy
Kryger Aggerholm, Esmann Andersen, and Thomsen (2011) Employer branding and organization sustainability & long term employer-employee relationships
Fearne et al. (2012) Value chain analysis, sustainability and competitive advantage
Manning (2013) Corporate and consumer social responsibility and food supply chain
Nijhof, Forterre, and Jeurissen (2008) Legitimacy and supply chain; belief and interactive systems
Cruz and Boehe (2008) Sustainability and global value chain
Lemke and Petersen (2013) Reputation risk management and supply chain
Camilleri (2008) Sustainability and supply chain and corporate reputation
Spence and Bourlakis (2009) CSR and supply chain responsibility (food chain)
Dodds, Graci, Ko, and Walker (2013) Sustainability and CSR and wine
Theyel and Hofmann (2012) Sustainability and value chain and SME and CSR
Lehtinen (2012) Sustainability, supply chain (food chain)

This article is a part of a series. Read part 1 here.

The relationship between legitimacy, reputation, sustainability and branding for companies and their supply chains PT1

1. Introduction

A lack of co-ordinated corporate or supply chain response to new and often threatening trends and pressures exerted by macro environmental stimuli has a negative bearing on the reputation of the company and its supply chain. Threatening incidents can be corporate and supply chain scandals (i.e. European horse meat scandal) or non-compliance with national or international legal regulations (such as Basel III; transfer pricing). To avoid these lacunae, brand managers are recommended to better protect the consistency of their brands’ values during their supply chain journey (Lopez, 2011) and to better adapt to their social context. This implies that the rules in the global business arena need to change: brand managers, supply chain members, consumers and stakeholders, must become co-operating gladiators to arrive at the best possible practices and grow a sustainable brand (Barrow, 2013Lindgreen et al., 2012Lopez, 2011, July 29 and Meads and Sharma, 2008). According to Barrow (2013), “it is crucial that everyone involved is making decisions based on the impact for the whole value chain and that they are given the tools to understand how a design or process change will affect the cost and footprint, from the raw material level through a product’s end of life”. For this purpose, our paper innovatively synthesizes and explains a number of conceptual frameworks for improving the overall corporate and supply chain performance to the benefit of society and all stakeholders involved. We link the notions of sustainability, ethical/social responsibility, Corporate Social Responsibility (CSR) and supply chain management with the legitimacy, reputation and branding concepts. Acknowledging the differences and effective interplay between legitimacy and reputation, according to the sustainability concept, becomes important when carrying out governance activities and when planning supply chain management. The paper culminates in the call for a newly to be established marketing stream we call ‘Sustainable and Curative Marketing’.

The conceptual basis of this work rests on the assumption that, although different in their respective purposes, legitimacy and reputation can become mutually supportive ‘institutions’, i.e. conditions, useful to acquire social status and competitive advantage, both of which are key objectives for companies and their supply chains. An urgently required better understanding of the concepts and their interrelations is enhanced by an explanatory basis provided by interdisciplinary theories (institutionalist, neo-institutionalist theories, the viable system approach, isomorphism and identity) to improve corporate and supply chain behavior. Finally, the paper introduces a new paradigmatic suggestion, called curative marketing, which appeals for increased reflection on current marketing shortcomings triggered by a restitution spirit as a precondition to improve the current lacunae. Intending to better inform managerial practice the theoretical considerations are spiced with case studies among which especially the currently debated supply chain case of the European horse meat scandal is illuminated suggesting concrete managerial implications for various business functions in the food industry.