Only When All is Good: The Fragility of Reputation After Wrongdoing

Strategic management research often treats reputation as a macro-level attribute, leaving undertheorized the cognitive linkages through which it shapes stakeholder judgments. We examine an alternative account in which reputation operates as an intermediate interpretive frame that shapes individuals’ competence beliefs and, through them, behavioral intentions. Using a repeated-measures experiment and a field study, we find that reputation operates both directly, as a heuristic influencing willingness to pay and loyalty, and indirectly, by shaping competence inferences. Following alleged wrongdoing, however, both functions collapse. Although some repair strategies partially reactivate reputation’s indirect framing role, its direct heuristic function does not return, and recovery remains incomplete. We recast reputation as a fragile and conditional cognitive frame whose value depends on the credibility of the competence inferences it supports.