Corporate reputation and customer behavioral intentions: The roles of trust, identification and commitment

Industrial Marketing Management 38 (2009) 732–742

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Industrial Marketing Management

Corporate reputation and customer behavioral intentions: The roles of trust, identification and commitment ☆ Hean Tat Keh ⁎, Yi Xie 1 Department of Marketing, Guanghua School of Management, Peking University, Beijing 100871, PR China

a r t i c l e

i n f o

Article history: Received 28 March 2007 Received in revised form 12 December 2007 Accepted 12 February 2008 Available online 8 April 2008 Keywords: Corporate reputation Customer trust Customer identification Customer commitment Behavioral intentions

a b s t r a c t How does corporate reputation influence customer behavioral intentions? This article proposes a model with customer trust, customer identification and customer commitment as the key intervening factors between corporate reputation and customer purchase intention and willingness to pay a price premium. We test the model by using data from 351 customers of three Chinese B2B service firms. Results indicate that corporate reputation has positive influence on both customer trust and customer identification. Customer commitment mediates the relationships between the two relational constructs (customer trust and customer identification) and behavioral intentions. Customer identification and customer commitment relate closely, but they are distinct constructs in the B2B setting. © 2008 Elsevier Inc. All rights reserved.

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently. Warren Buffett

1. Introduction The issue of corporate reputation grabs headlines. For example, Fortune magazine conducts an annual ranking of the most admired companies. A survey conducted by PRWeek Magazine reveals that almost 75% of the CEOs interviewed expressed concern about threats to their organizations' corporate reputation (Capozzi, 2005). While good corporate reputation takes a long time to build, it is easily dismantled. The rise and fall of Enron is a prominent example of the creation, use of and destruction of a corporate reputation. According to the resource-based view of the firm, corporate reputation can be considered to be a valuable strategic resource that contributes to a firm's sustainable competitive advantage (Dierickx & Cool, 1989; Capozzi, 2005). The formation of a good reputation is a long-term process inside an organization, thus it is an intangible asset that is difficult for competitors to imitate. While some studies document a positive relationship between corporate reputation and

☆ The authors are listed in alphabetical order. We are grateful to Helen Lin, Jimmy Xue and Jill Zhang for their research assistance during the data collection for this study. We also thank the editor and three anonymous reviewers for their helpful feedback and encouragement. ⁎ Corresponding author. Tel.: +86 10 6275 6281; fax: +86 10 6275 1470. E-mail addresses: [email protected] (H.T. Keh), [email protected] (Y. Xie). 1 Tel.: +86 10 5276 7726. 0019-8501/$ – see front matter © 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.indmarman.2008.02.005

financial performance (e.g., Podolny, 1993; Fombrun, 1996; Roberts & Dowling, 1997, 2002) and try to explain the underlying mechanisms and consequences of corporate reputation (e.g., Cretu & Brodie, 2007; Dowling, 2006), existing research in the marketing literature says little about whether corporate reputation can contribute to interorganizational relationship marketing, which we address in this study. Specifically, we postulate that three important relational factors—customer trust, customer identification and customer commitment—are the bridges between corporate reputation and customer behavioral intentions. The present research proposes a model that adds to the literature in three ways. First, the model explores the underlying mechanism by which corporate reputation influences customer behavioral intentions. This increases our understanding of how corporate reputation contributes to competitive advantage by building relational benefits. Second, the model incorporates customer identification into the B2B context and examines corporate reputation and customer trust as antecedents of customer identification. Third, the constructs of identification and commitment have traditionally been confused in terms of conceptualization and measurement, giving rise to concerns regarding the discriminant validity between them (Edwards, 2005). This study distinguishes identification from commitment both conceptually and operationally, thus providing a solution to the debate on construct redundancy. The rest of the paper is organized as follows. Section 2 reviews the literature to understand the main constructs. Section 3 presents a research framework and testable hypotheses, followed by a description of the data, data analysis, and discussion of our findings. Finally, Section 4 summarizes the contributions and concludes with the limitations of this study and suggestions for future research.

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2. Theoretical background 2.1. Corporate reputation The concept of corporate reputation draws academic attention from the management, economics, sociology, and marketing areas (Brown, Dacin, Pratt, & Whetten, 2006). In general, researchers conceptualize corporate reputation from either an economics perspective that regards corporate reputation as insiders' or/and outsiders' expectations and estimations of specific organizational attributes (e.g., Weigelt & Camerer, 1988), or builds from institutional theory that characterizes it as a global impression reflecting the perception of a collective stakeholder group—for example, customers, employees, and investors (Deephouse, 2000; Fombrun & Shanley, 1990; Olins, 1990). Consistent with the institutional view, we define corporate reputation as an overall evaluation of the extent to which a firm is substantially “good” or “bad” (Weiss, Anderson, & MacInnis, 1999; Roberts & Dowling, 2002). In order to have a well-rounded understanding of reputation, we need to examine both its antecedents and consequences. In the context of MBA education, Rindova, Williamson, Petkova, and Sever (2005) find resource signals (quality of inputs and quality of productive assets), certifications from institutional intermediaries (media rankings and certifications of achievement) and affiliation with highstatus institutions to be key antecedents of organizational reputation. However, the narrow research context limits the generalizability of their model. In another study, Carmeli and Tishler (2005) investigate the roles of product quality and customer satisfaction in predicting reputation. Past research indicates that corporate reputation has a positive effect on financial performance (e.g., Podolny, 1993; Fombrun, 1996; Roberts & Dowling, 1997). In addition, a favorable corporate reputation can greatly benefit firms in other ways, including (1) delaying rival mobility in the industry, (2) charging price premium on customers, at least in highly uncertain markets, (3) attracting higher-quality and larger amounts of investments from the stock market, (4) maintaining a high spirit among employees, (5) enjoying a cost advantage due to less contracting and monitoring costs with suppliers and lower remuneration rate among employees, and (6) supporting and enhancing new product introduction and recovery strategies in the event of a crisis (Benjamin & Podolny, 1999; Carmeli & Tishler, 2005; Fombrun & Shanley, 1990; Fombrun, 1996; Rindova et al., 2005; Roberts & Dowling, 2002). Yet, a good reputation is not a cure-all. In a recent study, Page and Fearn (2005) suggest that while a bad reputation makes building brand equity difficult, a good reputation does not guarantee strong brands. Having strong corporate reputation has a downside, particularly when firms get into trouble. Rhee and Haunschild (2006) illustrate the liability of good reputation through a study of product recalls in the U.S. automobile industry. Specifically, their findings reveal that firms with good reputation suffer more than those with poor reputation when they make mistakes, which may be due to the contrast effect from disconfirmation of high expectation (Herr, 1989). 2.2. Customer commitment and trust Commitment and trust are central factors that contribute to successful relationship marketing because of their ability to lead indirectly to cooperative behavior and produce outcomes that promote efficiency, productivity and effectiveness (Morgan & Hunt, 1994). From its root in social exchange theory (Cook & Emerson, 1978), commitment is one of the key concepts in relationship marketing research (Dwyer, Schurr, & Oh, 1987; Hennig-Thurau, Gwinner, & Gremler, 2002). Commitment is an exchange party's long-term desire to maintain a valuable ongoing relationship with another (Moorman, Zaltman, & Deshpande, 1992; Morgan & Hunt, 1994).

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Berry and Parasuraman (1991) suggest that, in the services marketing area, relationships are built on the basis of mutual commitment. Following the literature, we define customer commitment as an exchange partner's willingness to maintain an important enduring relationship (Garbarino & Johnson, 1999; Hennig-Thurau et al., 2002). The literature recognizes trust as a prerequisite to building customer relationships and as a preceding state for the development of commitment (Garbarino & Johnson, 1999; Morgan & Hunt, 1994). Morgan and Hunt (1994) note that trust will occur when one party has confidence in an exchange partner's reliability and integrity. Because of its salience in the context of uncertainty, trust plays a critical role for service providers and B2B marketers (Hennig-Thurau et al., 2002; Moorman et al., 1992). In particular, Berry and Parasuraman (1991, p. 144) note that “effective services marketing depends on the management of trust because the customer typically must buy a service before experiencing it.” In this study, we define customer trust as the customer's overall perception towards the ability (i.e., skills and competencies of the trustee), benevolence (i.e., the extent to which a trustee is perceived as being willing to take the other party's interests into account when making decision), and integrity (i.e., the truster's belief that the trustee is honest and fulfills its promises) of the provider (Mayer, Davis, & Schoorman, 1995). 2.3. Customer identification Customer identification is an important but underutilized construct (Bhattacharya, Rao, & Glynn, 1995; Bhattacharya & Sen, 2003). Customer identification helps explain the relationship between employees and their organization (Berger, Cunningham, & Drumwright, 2006; Kramer, 1999), as well as the relationship between customers and their consumed brands (Underwood, Bond, & Baer, 2001). In particular, brand researchers suggest that customer identification with a brand community (i.e., specialized, non-geographically bound community, based on a structured set of social relations among admirers of a brand) will exert influence on brand-related purchase behaviors and community duration (Algesheimer, Dholakia, & Herrmann, 2005). Based on social identity theory and organizational identification theory, Bhattacharya and Sen (2003) suggest that some of the strongest customer–company relationships occur when customers identify with the companies that satisfy one or more of their key selfdefinitional needs (e.g., self-continuity, self-distinctiveness and selfenhancement). The underlying premise is that people typically go beyond their personal identity to develop a social identity with the hope of articulating their sense of self (Brewer, 1991) and that people may also identify with organizations even when they are not formal members of those organizations (Pratt, 1998; Scott & Lane, 2000). Organizations are entities with their own image, personality and identity (Melewar & Karaosmanoglu, 2006; Mokhiber & Weissman, 2003; Simoes, Dibb, & Fisk, 2005). Therefore, organizational customers also have the need for self-definition and may express themselves through developing social identifying relationships. Products, services, brands, and companies are key components of an individual's social identity, and constitute valid targets for identification among relevant customers because of their roles in self-referral and selfdefinition (Kleine, Klein, & Keman, 1993; Underwood et al., 2001). Analogously, in the B2B market environment, transaction partners comprise a significant part of organizational customers' social identity and form suitable identification targets. Customer–company identification is a distinct concept from customers' identification with a company's brand, its target markets and its prototypical consumer. To illustrate, when companies implement a multi-brand strategy for all products or services (e.g., P&G) or operate in a wide range of business areas (e.g., GE), customers' identification towards a company will differ greatly from their identification towards its specific brand. A company with high customer

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identification can benefit through customers' loyalty to existing products, willingness to try new products, spreading positive word-ofmouth, and resilience to negative information associated with the company (Bhattacharya & Sen, 2003). In spite of the desirable benefits of customer identification and its critical role in building and maintaining “deep, committed, and meaningful relationships” (Bhattacharya & Sen, 2003, p. 76), empirical research is scarce on the existence, nature, antecedents and consequences of customer identification towards companies (Cardador & Pratt, 2006; Einwiller, Fedorikhin, Johnson, & Kamins, 2006). One exception is Ahearne, Bhattacharya, and Gruen's (2005) study, in which they identify both antecedents (i.e., construed external image of the company, perceived salesperson characteristics and perceived company characteristics) and consequences (i.e., customer extra-role behaviors and customer product utilization) of customer–company identification. In particular, addressing customer identification in the B2B context is meaningful.

buying decisions (Katrichis, 1998). A customer exhibiting higher purchase intentions and willingness to pay a price premium is more likely to stay longer with the supplier firm and have lower sensitivity to price changes. In particular, researchers are recognizing the critical role of price premium as a favorable characteristic of customer commitment as well as an important contributor to firm revenue (e.g., Bendixen, Bukasa, & Abratt, 2004; Kumar, Bohling, & Ladda, 2003). 3. Research framework and hypotheses Building on the preceding literature review, the following model links a firm's corporate reputation, through three relational constructs (customer trust, customer identification and customer commitment), to customer purchase intention and willingness to pay a price premium (see Fig. 1). 3.1. Corporate reputation and customer trust

2.4. Behavioral intentions Customer behavioral intentions are signals of actual purchasing choice, and thus are desirable to monitor (Zeithaml, Berry, & Parasuraman, 1996). There are different ways of operationalizing behavioral intentions in the literature. For example, Bansal, Irving, and Taylor (2004) investigate the role of consumer commitment on switching intentions. Mittal, Kumar, and Tsiros (1999) measure customers' intention to recommend, and find an asymmetric as well as dynamic crossover effect of product and service satisfaction in determining customer intentions towards product manufacturers and service providers. Zeithaml et al. (1996) suggest a multidimensional behavioral intention structure based on the Servqual scale. Each method has its own advantages and weaknesses, the choice among which may well depend on specific research purposes. This study focuses on two specific behavioral intentions—purchase intention and willingness to pay a price premium of existing customers, which have direct and critical influences on brand and organizational performance (Ailawadi, Neslin, & Lehmann, 2003; Zeithaml et al., 1996). The behavioral intentions of existing customers in the B2B market are particularly salient as it is more difficult to attract new customers due to the higher risk and complexity of organizational

Highly reputable companies are likely to gain customer trust in three ways. First, both economic and institutional perspectives of reputation recognize its valuable role in reducing the uncertainty stakeholders encounter when they evaluate firms (Benjamin & Podolny, 1999; Rindova et al., 2005), because positive corporate reputation is based on superior performance over a certain period of time. As confidence is an important factor in the creation of relational trust (Morgan & Hunt, 1994), high reputation can strengthen customers' confidence and reduce risk perceptions when they make judgment on organizational performance and quality of products or services. Thus customers are more likely to perceive companies with highly favorable reputations as trustworthy. Second, customers are more likely to perceive companies with good reputations by several interrelated features—credibility, reliability, responsibility, and trustworthiness (Fombrun, 1996), as well as perceived quality and prominence (Rindova et al., 2005), which can enhance customers' expectation of corporate capability in providing excellent products or services, and integrity in fulfilling formal contracts or announced promise. In particular, during the initial stages of the relationship when there has been no previous transaction between both parties, a good reputation signals the seller's competence and/or goodwill (Campbell,1999). As a result, buyers may base their trust on the

Fig. 1. Conceptual model and results (Model 1).

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seller's reputation to evaluate the cost and benefit of transacting with this seller (Barone, Manning, & Miniard, 2004). Finally, corporate reputation is often viewed as a “fragile resource,” which requires considerable time and investment to develop but is easily destroyed (Hall, 1993). Thus, reputable companies are expected to behave well and are less likely to engage in negative behaviors, which strengthen customers' confidence in their integrity and reliability. For example, Doney and Cannon (1997) find that confidence in the supplier's reputation is one of the important cognitive processes through which industrial buyers develop trust in a supplier firm. Accordingly, we propose that: H1. Corporate reputation relates positively to customer trust. 3.2. Corporate reputation and customer identification Customers identify with an organization based on their perceptions of its defining characteristic or perceived identity (Dutton, Dukerich, & Harquail, 1994). Corporate reputation is such a key characteristic. A critical antecedent of customer identification is the attractiveness of the corporate identity, which in turn depends on identity similarity, identity distinctiveness and identity prestige (Bhattacharya & Sen, 2003). Corporate reputation has a positive influence on the development of customer identification because of its ability to underscore identity attractiveness of the focal company. Several explanations may account for the perception of highly reputable companies as being attractive. First, companies with high reputation tend to have superior financial profitability, products or services, and frequent media coverage, which subsequently enhance their relative advantage and distinctive identity in the marketplace, which in turn contribute to their identity attractiveness. Second, as favorable reputation directly denotes high prestige, corporate reputation is directly related to identity attractiveness of the company (Bergami & Bagozzi, 2000). According to social identity theory, buyers are willing to identify or build connection with highly-regarded sellers, just as individual customers are willing to identify with reputable companies, which can facilitate their self-definition process and satisfy the need for self-distinctiveness and self-enhancement (Pratt, 1998; Bhattacharya & Sen, 2003). In a recent study, Ahearne et al. (2005) find that the external image of a company, which is similar and closely related to reputation, plays an important role in leading to customer–company identification. Accordingly: H2. Corporate reputation relates positively to customer identification. 3.3. Customer trust, customer commitment and behavioral intentions Morgan and Hunt (1994) suggest that commitment involves vulnerability, thus parties are motivated to seek trustworthy partners. The findings by Moorman et al. (1992) indicate that trust in their service providers significantly influences customer commitment to the relationship. Achrol (1991) also claims that trust is among the major determinants of relationship commitment. The positive relationships between relational constructs (i.e., trust and commitment) and favorable behaviors are well-documented in the marketing literature (e.g., Morgan & Hunt, 1994; Hennig-Thurau et al., 2002). In particular, Doney and Cannon (1997) indicate that the buying firm's trust in a supplier firm is positively related to the buying firm's anticipation of future interaction with the supplier. Commitment has been shown to be positively related to favorable intentions such as repeat purchases, making recommendations, acts of price insensitivity and cross-buying (Musa, Pallister, & Robson, 2005). In addition, there is also evidence indicating that the linkage between trust and behavioral intentions is often fully or partially mediated by commitment (e.g., Morgan & Hunt, 1994; Garbarino & Johnson, 1999; HennigThurau et al., 2002; Bansal et al., 2004). This leads to the following hypotheses:

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H3. Customer trust relates positively to (a) purchase intention and (b) willingness to pay a price premium. H4. Customer commitment mediates the relationship between customer trust and (a) purchase intention and (b) willingness to pay a price premium. 3.4. Customer trust, customer identification and customer commitment Mutual trust is a key characteristic of successful social exchanges, both between persons and between organizations. Thus, companies consider building a trustworthy identity among the various stakeholders—customers, investors and other bodies—as a crucial task. To communicate their self-definition and enhance their self-esteem, customers are likely to identify with trustworthy organizations. In identifying with the trusted party characterized as being competent, benevolent and honest, customers tend to portray a similar profile to them. That a buyer will perceive a linkage between its self-identity and its seller when the buyer distrusts the seller is difficult to imagine. Bhattacharya and Sen (2003) propose that the extent to which consumers perceive the company identity as trustworthy will determine their response to it. Further, as a key factor in building long-term and close relationships (i.e., committed relationships), trust should also be an antecedent of identified relationships. Thus, we propose that: H5. Customer trust relates positively to customer identification. Favorable consequences of customer identification include customers being more loyal, more likely to try new products or services, spread positive word-of-mouth about the company and being resilient to negative information associated with it (Bhattacharya & Sen, 2003; Einwiller et al., 2006). Ahearne et al. (2005) find that identification impacts both in-role behavior (i.e., product utilization) as well as extrarole behavior (i.e., citizenship) even when the effect of brand perception is controlled. Besides purchase intention, we explore the effect of customer identification on willingness to pay a price premium. The reasoning is that customers who identify with a company are more likely to be proud of the association, and they make extra effort to advocate the company (i.e., citizenship) as well as being less sensitive to higher prices for the products or services of their identified company. H6. Customer identification relates positively to (a) purchase intention and (b) willingness to pay a price premium. Organizational identification and commitment are closely related and easily confused constructs, as they both describe the strong linkage between the individual and the organization. Cheney and Tompkins (1987) differentiate these two concepts by noting that “identification is the appropriation of identity and commitment is the binding to action” (p. 8) and they explicitly suggest commitment as an outcome of an individual's identification with a collective over time. In a similar vein, Edwards (2005) argues that identification is limited to a specific subjective state of the individual, while commitment is a more inclusive construct, encompassing certain psychological states that would occur subsequently if a person identifies with an organization. Studies on the interaction between employees and their organizations provide evidence for the role of organizational identification as a determinant of employee commitment (Wiener, 1982; Pratt, 1998). The marketing literature also indicates that identification is a key factor for building customer commitment (Fullerton, 2005). For example, in the context of channel management, Morgan and Hunt (1994) indicate that higher shared values between retailers and their suppliers increase retailers' commitment toward the ongoing relationship. As a result, we expect that customer identification can enhance customer commitment. Furthermore, while both commitment and identification can affect behavioral intentions, as commitment is a more immediate antecedent to action, we posit that customer

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commitment plays a mediating role between customer identification and behavioral intentions. H7. Customer commitment mediates the relationship between customer identification and behavioral intentions. 4. Methods 4.1. Sample and data collection An empirical study examines the model in the B2B context as previous research indicates that firms tend to build customer relationships at an organizational level. A focal firm's organizational customers are more likely to depend on the name of the firm than on a specific brand name in making purchase decisions (Rao, Agarwal, & Dahlhoff, 2004). Data were collected in the following manner. First, the study obtained support and assistance from three Chinese companies in different B2B service industries. The first company (Firm A) is a well-known, publicly-listed, computer network firm. The second company (Firm B) is a state-owned firm providing professional translation services. The third company (Firm C) is a medium-sized Sino-foreign joint venture whose trading businesses are located in Shenzhen and Hong Kong. The distinct backgrounds of the three focal companies provide adequate variation in the measurement of corporate reputation. The three focal firms then provided their customer lists as well as telephone numbers of key contact persons in customer organizations who played critical roles in determining the ongoing relationships between the service providers and their customers. Three trained research assistants telephoned the key informant of each customer– company to explain the purpose of this research and elicit their cooperation. Respondents were assured that their identities would remain anonymous and that only aggregated results would be reported. The expected incentive for participation in this survey was that the findings would help advance managerial knowledge related to corporate reputation and customer relationships. Out of a total of 996 contacts, 353 customer companies agreed to participate in this study. The questionnaires were sent to these cooperative informants by mail or email. After a week, a total of 208 responses were received, and with follow-up calls the remaining 145 responses were received. However, two of them were unusable due to missing data. The final sample for analysis consisted of 351 observations (203 organizational customers of Firm A, 68 of Firm B and 80 of Firm C). The overall response rate is 35.2% (Firm A 40.4%, Firm B 29.1%, and Firm C 30.7%). The first part of the questionnaire describes the objectives of our study and instructed respondents on how to answer the questions. To reduce potential common method bias, this research assures respondents that their answers as well as the names of the involved

companies will be used anonymously and for academic purposes only, and requests that respondents answer the questions as accurately as possible (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). The next section consists of items relating to the main constructs of this research, such as the corporate reputation of the focal company, and the respondent company's identification towards the focal company, whose order is counter-balanced in the questionnaire. Finally, the respondents indicate the background profiles of their companies. The customer companies in the sample cover a wide range of industries, which avoids industry bias. Industries represented included both manufacturing (e.g., automobile parts, garment, pharmaceutical, electronic equipment, toys and heavy machinery) and non-manufacturing (e.g., telecommunications, banking and insurance, logistics, advertising, supermarket retailing, hotel, real estate development, restaurant, tourism, IT and education) sectors. The respondents were mainly males (58%), and over half of them were middle-level managers or above in their companies (52%). A multi-t test on responses of the key constructs between managers and non-manager respondents indicates that none of the key constructs was significantly different between the two groups. In addition, the respondents have been with their companies for more than 5 years, on average. Thus, the respondents were able to give authoritative comments on issues of interest. 4.2. Measures All measures were adopted or adapted from previous research. To ensure conceptual equivalence and word-clarity, we conducted translation and back-translation. The translated questionnaire was evaluated by two bilingual faculty members to examine its face and content validities. Before the main study, 26 MBA students having similar backgrounds with people in the sample were recruited to pretest the questionnaire in order to avoid vague concepts and keep the questions as simple, specific, and concise as possible (Podsakoff et al., 2003). Feedback from this process was used to improve the measuring instrument. All the items were measured using a sevenpoint scale (1 = “strongly disagree,” 7 = “strongly agree”). Corporate reputation was measured using the scale adopted from Weiss et al. (1999). For the variable of customer identification, we adapted the well-established measurement of organizational identification (Mael & Ashforth, 1992) and selected the relevant items to measure organizational customer identification towards the focal company. In the literature, researchers have used both the unidimensional (e.g., Garbarino & Johnson, 1999; Hennig-Thurau et al., 2002) and multidimensional views of commitment (e.g., Gundlach, Achrol, & Mentzer, 1995; Bansal et al., 2004), as well as the unidimensional (e.g., Mayer et al., 1995; Selnes & Sallis, 2003) and multidimensional

Table 1 Measurement items for trust and commitment in this study. Variables

Items

Source

Customer trust

1 We trust that the focal company is competent at what they are doing. 2 My company feels generally that the focal company is trustworthy. 3 My company feels generally that the focal company is of very high integrity. 4 My company feels generally that the focal company is very responsive to customers. 5 My company feels generally that the focal company will respond with understanding in the event of problems. 1 My company does not feel a strong sense of “belonging” to the focal company.a 2 It would be very hard for my company to leave the focal company right now, even if we wanted to. 3 The company deserves my company's loyalty. 4 It would not be too costly for my company to leave the focal company in the near future.a 5 My company would not leave the focal company right now because we have a sense of obligation to them. 6 My company have too few options to consider leaving the focal company. 7 My company does not feel like “part of the family” with the company.a

Selnes and Sallis (2003) Selnes and Sallis (2003) Sirdeshmukh, Singh, and Sabol (2002) Sirdeshmukh, Singh, and Sabol (2002) Selnes and Sallis (2003) Bansal et al. (2004) Bansal et al. (2004) Bansal et al. (2004)

Customer commitment

Italicized items are deleted in the final analysis due to low factor loadings. a Reverse coded item.

Bansal et al. (2004) Bansal et al. (2004) Bansal et al. (2004)

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737

Table 2 Final measurement items. Variables

Items

AVE Factor loadings Alpha in CFA

Corporate reputation

1 The focal company is a highly-regarded company. 2 The focal company is a successful company. 3 The focal company is a well-established company. Customer commitment 1 My company does not feel a strong sense of “belonging” to the focal company.a 2 It would be very hard for my company to leave the focal company right now, even if we wanted to. 3 The company deserves my company's loyalty. 4 It would not be too costly for my company to leave the focal company in the near future.a 5 My company would not leave the focal company right now because we have a sense of obligation to them. Customer 1 This organization's successes are my company's successes. identification 2 My company is very interested in what others think about the focal company. 3 If a story in the media criticized this organization, my company would feel embarrassed. 4 When someone praises the focal company it feels like a compliment of my company. Customer trust 1 We trust that the focal company is competent at what they are doing. 2 My company feels generally that the focal company is trustworthy. 3 My company feels generally that the focal company is of very high integrity. 4 My company feels generally that the focal company is very responsive to customers. Purchase intention 1 My company will buy most of relevant products/services from the focal company in the future. 2 My company will consider the focal company the first choice from which to buy products/services. 3 My company will do more business with the focal company in the next few years. Price premium 1 My company will continue to do business with the focal company even if its prices increase somewhat. 2 My company will pay a higher price than competitors charge for the benefits currently received from the focal company. a

.76

.86 .86 .90 .77 .76 .88 .77 .83 .64 .89 .92 .88 .83 .93 .95 .87 .85 .88 .84 .89 .93

.65

.71

.81

.74

.83

.91

.90

.90

.94

.89

.90

Reverse coded item.

views of trust (e.g., Kingshott, 2006). Multidimensional operationalizations can reflect different sources of the construct, while unidimensional operationalizations regard the construct as an overall judgment. In this research, we took an overall perspective and operationalized customer trust and customer commitment unidimensionally. Four items adapted from Sirdeshmukh, Singh, and Sabol (2002) and Selnes and Sallis (2003) were used to measure customer trust, which captured the three components of ability, benevolence, and integrity. Commitment was measured using five items from Bansal et al. (2004) and Allen and Meyer (1990), which included affective, continuance and normative components (see Table 1 for detailed measurement items for trust and commitment). Finally, purchase intention was measured using items from Zeithaml et al. (1996) and Doney and Cannon (1997), and willingness to pay a price premium was measured using items from Zeithaml et al. (1996). After deletion of items that have low item-to-total loadings or highcross loadings in the confirmatory factory analysis, all remaining meaures had Cronbach alphas greater than the cut-off point of .7 suggested by Nunnally (1978) (see Table 2), indicating that the measures for the main constructs exhibited good internal consistency. 5. Analysis and results 5.1. Model estimation Before testing the hypotheses, the study examined a correlation matrix of the composite scales for the key constructs, as shown in Table 3. The signs of the bivariate correlations indicated patterns consistent with the expected relationships. To test the hypotheses, the analysis employs structural equation modeling with the maximum likelihood estimation method, using the framework Fig. 1 shows as the base model (model 1). To explore the mediating role of customer commitment between the two relational constructs and behavioral intentions, the analysis follows Baron and Kenny's (1986) procedures and compares model 1 (with customer commitment as the intermediate variable) against model 2 (without the linkages between customer trust/ identification and customer commitment). Specifically, model 1 suggests that customer trust and customer identification can influence behavioral intentions indirectly through customer commitment, which is indicated by the linkages between customer trust/customer identification and customer commitment; while model 2 suggests that

customer trust and customer identification have only direct effects on behavioral intentions, as indicated by the lack of connections between customer trust/customer identification and customer commitment. If the comparison results suggest that relationships between the two relational constructs and behavioral intentions are more significant and/ or stronger in model 2 than in model 1, then the mediating role of commitment is supported (Baron & Kenny, 1986). 5.2. Construct validity The analysis follows Anderson and Gerbing's (1988) two-step approach for structure equation modeling, whereby the estimation of a confirmatory measurement model precedes the simultaneous estimation of the measurement and structural models. Therefore, the analysis evaluated the convergent and discriminant validities of the focal constructs by estimating a six-factor confirmatory measurement model, in which all the six constructs were latent variables and each item loaded only onto its latent construct. The latent constructs are allowed to correlate with each other, and the measurement items and their error items are allowed to be uncorrelated. The model indicates an acceptable fit of the data (χ2 = 551.75, df = 174, p b .001; CFI = .99; TLI = .98; IFI = .99; NFI = .98; and RMSEA = .08), confirming the unidimensionality of the measures (Anderson & Gerbing, 1988). In addition, all indicators loaded significantly onto the respective latent constructs (p b .001) with the values varying from .64 to .95, and the average variance extracted (AVE) indices all exceeded the recommended standard of .5 (see Table 2), thus confirming good convergent validity (Bagozzi & Yi, 1988).

Table 3 Correlations and descriptive statistics of key constructs.

1. Corporate reputation 2. Customer commitment 3. Customer identification 4. Customer trust 5. Purchase intention 6. Price premium

1

2

1 .45(⁎⁎) .42(⁎⁎) .61(⁎⁎) .56(⁎⁎) .41(⁎⁎)

1 .73(⁎⁎) .55(⁎⁎) .79(⁎⁎) .74(⁎⁎)

3

4

5

6 Mean (S.D.)

1 .45(⁎⁎) 1 .68(⁎⁎) .65(⁎⁎) 1 .67(⁎⁎) .47(⁎⁎) .76(⁎⁎) 1

⁎⁎ Correlation is significant at the .01 level (2-tailed).

5.30 (1.07) 4.63 (1.24) 4.48 (1.35) 5.44 (1.07) 4.93 (1.19) 4.55 (1.44)

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To assess the discriminant validity of the measures, chi-square tests for all the constructs in pairs (15 tests) are conducted to determine whether the restricted model (correlation fixed as 1) was significantly worse than the unrestricted model (correlation estimated freely). All chi-square differences, except that between customer identification and purchase intention which was marginally significant (p = .065), were significant (p b .05), providing acceptable evidence of discriminant validity for the measures (Anderson & Gerbing, 1988). We are interested in the discriminant validity between customer identification and customer commitment. Results of the specific chi-square difference test for customer identification and customer commitment (Δχ2 [1] = 11.8, p b .001) indicated that these two closely-related constructs differed significantly. In addition, the AVE is greater than the squared correlation of any pair of two constructs, further supporting the discriminant validity of the constructs (Fornell & Larcker, 1981). For example, the squared correlation between customer identification and purchase intention (.46) is less than the AVE of customer identification (.71) and the AVE of behavioral intention (.74), which provides some evidence for discriminant validity between these two constructs. In testing for the existence of common method bias, Harman's onefactor method was used. An exploratory analysis of the data indicated the absence of a single factor accounting for the majority of variance among the measures, thus common method bias was not a problem in this study (Podsakoff & Organ, 1986). In summary, all measures have good construct validities and desirable psychometric properties. 5.3. Hypotheses testing Before pooling the data, the analyses included MANOVAs on all the measures and there were significant differences in some measurement items among the three focal companies. Therefore, two dummy firm variables were used to represent the origin of the respondents and the three focal companies were coded as firm A (1,0), firm B (0,0) and firm C (0,1). Compared with firm B, firm A has higher score on corporate reputation (r = .189, p b .001) and customer identification (r = .334, p b .001), and lower score on customer trust (r = − .212, p b .001) and purchase intention (r = −.081, p b .01), while firm C has higher score on customer identification (r = .260, p b .001) and lower score on purchase intention (r = −.068, p b .05).

The method includes regressing the dummy variables, along with key antecedents indicated in the conceptual framework, onto all constructs when estimating the structural model (Atuahene-Gima & Murray, 2004). Through this procedure, the origin of the respondents was controlled for, which enabled us to pool the data collected from customers of the three focal companies together. The analysis proceeds to examine the overall model fit. While the chi-square statistic (χ2 = 863.19, df = 209, p b .001) is significant, all the baseline comparison indices (CFI = .98, NFI = .97, IFI = .98, RFI = .96, TLI = .97, and RMSEA = .10) indicate an acceptable fit of the data, as shown in Fig. 1. The results show that corporate reputation has positive direct effects on both customer trust (r = .68, p b .001) and customer identification (r = .16, p b .01), in support of H1 and H2. Comparing the values of the two coefficients, it appears that corporate reputation has greater influence on customers' perception of corporate trustworthiness than on customers' judgment about whether to identify with a company. In addition, corporate trust is positively related to customer identification (r = .36, p b .001), which supports H5. H3 and H6 examine the impact of customer trust and customer identification on the two behavioral intentions. The estimation results of model 2 (see Fig. 2) reveal that corporate trust has positive effect on purchase intention (r = .37, p b .001) and moderate effect on price premium (r = .09, p b .05), whereas customer identification has significant effect on purchase intention (r = .31, p b .001) and price premium (r = .38, p b .001), respectively. Thus, both H3 and H6 are supported. To test H4 and H7, that is, the mediating role of commitment in the linkages between customer trust and behavioral intentions, as well as between customer identification and behavioral intentions, we compare the standardized path coefficients of the two models with and without the mediating relationships. According to Baron and Kenny (1986), with the addition of a mediator (customer commitment) into the model, the contribution of a previously significant independent variable (in model 2) should drop significantly (in model 1) for partial mediation and become insignificant for full mediation. Therefore, we compare the results in Figs. 1 and 2 to assess H4 and H7. First, Fig. 2 shows that the overall model fit of model 2 (χ2 = 1165.75, df = 211; CFI = .96, NFI = .96, IFI = .96, RFI = .94, TLI = .95 and RMSEA = .11) is dissatisfactory and worse than that of model 1 (Δ χ2 [2] = 302.56, p b .001), which suggests that the mediating role of customer

Fig. 2. Results of Model 2 (without the linkages between trust/identification and commitment).

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commitment cannot be neglected. In addition, the results of model 2 indicate that customer trust, customer identification and customer commitment all have significant positive impact on both purchase intention and price premium, respectively (all p's b .05). When customer trust and customer identification are linked to customer commitment (as in model 1), the standardized path coefficients between trust/identification and behavioral intentions are all affected to varying extents. Specifically, the positive effect of customer trust on purchase intention remains significant, but the strength decreases from .37 to .25, whereas the positive effect of customer trust on price premium is fully mediated by customer commitment and becomes insignificant in model 1. The linkages between customer identification and behavioral intentions become insignificant and drop to nearly zero. Sobel tests are conducted to further support the mediating role of customer commitment in the linkages between customer trust/ customer identification and the two behavioral intentions (Baron & Kenny, 1986). Results show that the mediating effect of customer commitment on the relationship between customer trust and price premium and relationships between customer identification and the two behavioral intentions are significant (Z's equal to 8.07, 7.70, and 6.73 respectively, p b .05), while the mediating effect of customer commitment on the connection between customer trust and purchase intention is marginally significant (Z equals to 1.89, p = .06). This implies that customer commitment (1) fully mediates the relationship between customer identification and both behavioral intentions, and (2) fully mediates the relationship between customer trust and price premium, and partially mediates the relationship between customer trust and purchase intention. Therefore, H4 receives partial support and H7 receives full support. In addition, customer commitment relates positively to corporate trust (r = .24, p b .001) and customer identification (r = .75, p b .001). Although previous research indicates that trust is a key antecedent of commitment, our results reveal that customer identification has relatively stronger influence on customer commitment, which further confirms the notion that identification and commitment are closelyrelated constructs. To assess whether corporate reputation influences the two behavioral intentions through the paths of customer trust, customer identification and customer commitment, we compare the direct effect of corporate reputation on purchase intention and price premium when the three relational constructs are included and when they are not. The results indicate that the incorporation of the three relational constructs reduces the direct effect of corporate reputation on purchase intention from .67 (p b .001) to .24 (p b .001) and the direct effect of corporate reputation on price premium from .50 (p b .001) to insignificance (r = .06, p N .1). The analyses include estimating a competing model by adding a linkage between corporate reputation and customer commitment in model 1. The results do not show improvement in the model fit (χ2 = 861.05, df = 208, p b .001; CFI = .98, NFI = .97, IFI = .98, RFI = .96, TLI = .97, and RMSEA = .10) compared to our original model (Δχ2 [1] = 2.14, p N .05), and the relationship between corporate reputation and customer commitment is small and insignificant (r = .08, p N .05). Therefore, the additional linkage is unwarranted and the analysis validates the parsimonious model. 6. Discussion and implications The study investigates the underlying mechanism through which corporate reputation influences customer behavioral intentions. Much of previous research on corporate reputation emphasizes the direct effects of corporate reputation on behavioral intentions or on corporate financial performance, and our study provides an explanation for the process. The results indicate that companies with favorable reputations benefit from building trust and identification among customers, which, in turn, positively influence customer commitment.

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Moreover, customer commitment plays a mediating role between the other two relational constructs and behavioral intentions. A reputable corporate name conveys various signals to the market (Fombrun & Shanley, 1990). Customers are more likely to believe that highly-regarded companies are competent, act honestly in their daily operations, and consider interests of both parties in the relationship when making decisions, which contribute to the trustworthiness of these firms. Customers are also more willing to associate themselves with companies of high repute, as part of self-articulation and selfenhancement. As such, the development of a favorable corporate reputation is important for relationship-oriented firms. Due to the significance of relationship marketing in industrial firms, internal-tothe-relationship reputation is especially critical for them. It would be myopic for industrial firms to gain favorable reputation from only investors and the general public but neglect their perceived reputation among customers. This implies that highly-regarded companies can benefit from their reputable names, and should carefully manage important relational resources resulting from having a good reputation. By conducting surveys, managers can know if corporate reputation leads to attitudinal and psychological influences on their customers, and regular measurements of customer commitment can reveal the effectiveness of corporate reputation on attracting favorable behaviors. These processes are more complex for industrial firms, because the purchase decisions of customers are usually determined by groups of individuals in buying centers rather than by a single person. Members in the buying center may hold various perceptions towards a focal supplier and emphasize different criteria in making evaluation and selection. Therefore, it is important to know whether corporate reputation is important for all buying center members or for whom it is important, the gate keeper or the final decision-maker. As for the effects of the three relational constructs on behavioral intentions, we find that the two behavioral intentions have varying sensitivities to relational strength, and willingness to pay a price premium is founded on closer customer–company relationships. Specifically, the results in Fig. 2 (model 2 without linkages between trust/ identification and commitment) imply that customer trust has much stronger effect on purchase intention than on price premium, while customer identification, which represents a close bonding between customers and companies, has larger influence than customer trust on price premium. In addition, the results in Fig. 1 (model 1 with commitment as a mediator) reveal that trust still has significant influence on purchase intention even after controlling for the effect of commitment, while customer commitment is the only significant influence on price premium. Customers who have deep trust in their providers tend to continue the relationship, while only customers who are strongly committed towards their suppliers are willing to pay higher prices. This finding is consistent with the notion that there are different stages in a relationship, from “strangers” to “acquaintances” to “friends” to “partners” (Johnson & Selnes, 2004). When the relationship between the customer and the supplier evolves from strangers to partners, customers may experience reputation-based certainty, then trust-based repurchase intention, and finally identification/commitment-based willingness to pay price premium. Therefore, the ability to attract price premium from customers can be regarded as an indicator of an industrial firm's relationship quality with its customers in general. A buying firm's inclination to continue its present relationship with a supplier does not necessarily mean that it is also willing to pay higher prices for the supplier's offerings. Managers of reputable companies should have a good understanding of their companies' relationships with key customers. In managing relationships, it is worthwhile for firms to cultivate trust, identification and commitment gradually among their customers, and subsequently maintain high-quality relationships. In addition, there are also different levels of favorable relationships. For example, customers

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regarding the supplier as a preferred vendor tend to have higher expectations and demands in terms of “inputs” and “outputs” from each side during successful transactions, compared with those regarding the supplier merely as an authorized vendor. Although it is generally difficult for firms to charge a higher price, especially when faced with rigorous competition, preferred vendors are more likely to succeed in asking for higher prices from their customers than authorized vendors, and also less likely to suffer from negative perceptions. This may be attributed to the different norms underlying the key relational constructs in the relationships. This study also contributes to the organizational identification literature by empirically showing that the identified psychological state toward suppliers is closely related to, but distinct from, commitment (see also Brown, Barry, Dacin, & Gunst, 2005). In order to successfully manage organizational identification, Cardador and Pratt (2006) suggest three basic mechanisms: relational, behavioral and symbolic. The present research, in the context of industrial business market, empirically confirms the relational mechanism by linking customer–company identification with two relational factors (i.e., trust and commitment), as well as the behavioral mechanism by identifying its direct effect (in model 2) and indirect effect (in model 1) on customer behavioral intentions. The results show that corporate reputation and trust are critical antecedents of customer identification toward companies. Much of previous research on relationship marketing in the industrial context highlights the role of trust in building customer commitment and inducing favorable behaviors (e.g., Morgan & Hunt, 1994; Kumar et al., 2003). However, this study indicates that the relationship between identification and commitment is stronger than the relationship between trust and commitment, which implies that identification is a more immediate antecedent of commitment. In other words, customers identifying with the supplier are more likely to be committed to it and maintain the relationship than customers who simply trust it, due to the shared identity and similar value system. Therefore, managers should realize that trust is fundamental to buying–selling relationships, while identification is more effective to retaining customers. Actions that facilitate identification building among customers deserve special attention and efforts. For example, when suppliers design marketing programs aimed at reinforcing customer loyalty, besides offering additional benefits and showing trustworthiness, it is also meaningful to communicate organizational identity and create the notion of identification among customers. As perceived prestige, similarity and uniqueness of organizational image all contribute to the development of customer identification, suppliers should monitor their internal-to-the-relationship reputation, which is probably more important than the market's perception. In addition, a thorough understanding of the nature of customers' identity building will enable suppliers to position themselves strategically. For example, comparable operational procedures may enhance customer belief that the supplier has functional identity similar to themselves, while compatible organizational cultures would facilitate smoother communication and intimate relationships between the buyer and the seller. The Chinese context of this study also provides other interesting implications. As China transitions into a more international market, native and western management philosophies coexist, interplay and jointly guide market behaviors. The Chinese business thinking is significantly influenced by two kinds of indigenous cultural forces, namely the Chinese stratagems and Confucianism (Fang, 1999). As an old Chinese saying—“the marketplace is just like the battlefield”— indicates, the Chinese stratagems are often applied in solving a variety of business issues, and help Chinese entrepreneurs to obtain material and psychological advantages over their opponents. It will be more difficult for organizations that regard Chinese stratagems as the dominant principle in treating business partners and implementing market activities to form identified relationships with their partners. It is possible that the higher reputation its partner has, the more

threats the company will perceive, which may partially account for the variance in customer identification towards similarly reputable companies. The Confucian tradition in Chinese culture, which emphasizes the importance of interpersonal relationships (i.e., Guanxi), avoidance of conflict and the concept of face (i.e., Mianzi), highlights the key roles of individual and social trustworthiness in the Chinese B2B context (Fang, 1999). Different from relationship marketing characterized by impersonal and universalistic relationships, Guanxi involves personal and particularistic relationships and serves as a major determinant of success in the Chinese B2B market (Wang, 2007). This implies that a firm's identity in a Chinese business network is largely based on the business' social network, while a firm's identity in a western business network is mainly dependent on its own operations. Therefore, social identities of the top management and other key personnel are critical to their corporate identity in the Chinese market and should be carefully managed. Our findings indicate a strong relationship between organizational reputation and customer trust, which may be attributable to: (1) respondents are inclined to give a more favorable evaluation of partner firms' reputation due to the notion of Mianzi, and (2) companies are more likely to have a superior perception of the extent to which the partner is generally “good” or “bad” because of the harmonious cooperative atmosphere formed through interpersonal efforts. Therefore, adding constructs reflecting connections and trust at the individual level may strengthen the explanatory power of the proposed price-premium model in the Chinese B2B market. When interpreting the findings of this research, we also need to take the cross-cultural variance into account. National culture can impact the linkage between relationship strength and behavioral intentions in the B2B settings. For example, comparing responses from firms in the United States and Latin America, Hewett, Money, and Sharma (2006) find that the uncertainty avoidance dimension of national culture moderates the effect of relationship strength on repurchase intention. Similarly, the high level of uncertainty avoidance in Chinese culture may strengthen the relationships between customer commitment and purchase intention and price premium in our study. 7. Limitations and future research Although most of our hypotheses are supported, this study has a few limitations that present opportunities for further research. First, the survey research may lead to self-generated validity, which refers to the effect of the questionnaire structure on indicated correlations among constructs due to respondents' observation of relationships among measures (Feldman & Lynch, 1988). Second, the study assesses responses of customer companies towards only three focal companies in B2B service industries. Although the three focal companies as well as their customers have different profiles in terms of firm size, business type and reputation, the external validity of these findings requires additional studies involving other industries and countries for further substantiation. Third, other antecedents and consequences of corporate reputation (e.g., perceived product/service quality, and customer satisfaction) can be included in future studies to form a more comprehensive framework, and provide additional insights into the development, management and benefits of corporate reputation. Fourth, the survey method employed in this study is unable to elicit respondents' thoughts in situations with suppliers holding different levels of reputation and trustworthiness. Therefore, further research can use qualitative approaches such as focus group, which can provide complementary findings to the results of this study. Fifth, as respondents in this study are merely required to indicate the extent to which they are likely to pay a price premium for their suppliers, conjoint experiments or choice experiments would be useful in examining variations in price preference among highly, medium and lowly reputable suppliers. Sixth, the effect of respondent companies'

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