I. Cover page UvA - Januari 2017

I. Cover page

THESIS INDIVIDUAL RESEARCH PROJECT

PROCURING PROFESSIONAL SERVICES:

THE EFFECT OF CORPORATE REPUTATION ON

BUSINESS-TO-BUSINESS BUYING BEHAVIOR TOWARDS

NASCENT PROFESSIONAL SERVICES FIRMS

Date of submission: 30-1-2017

UvA identification number: 11184000

Student name: Antoine Bernard Christian (A.B.C.) Lauwerijssen

Academic supervisor University of Amsterdam: Dr. Karin Venetis

UvA MSc BA 2016-2017 Twan Lauwerijssen - 11184000 !1

University of Amsterdam

MSc in Business Administration, Marketing Track

UvA - Januari 2017

II. Statement of originality This document is written by Student Twan Lauwerijssen who declares to take full responsibility for the

contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than

those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work,

not for the contents.

III. Confidentiality of the thesis The present thesis is permanently embargoed. It contains confidential data of various organizations. It is not

permitted to publish or reproduce this thesis – in whole or in part – without the express consent of the author.

This thesis may only be made available to correctors and members of the examining committee.

UvA agrees and undertakes to permanently maintain secrecy with respect to the thesis and all other

information obtained and to use such only for advising on and evaluating Mr. Twan Lauwerijssen his thesis.

Access to the thesis and other information obtained may be granted only to college staff that requires this

information for advising on and evaluating the thesis and who are themselves obliged to maintain

confidentiality.

IV. AcknowledgementI should like to acknowledge my thesis coach Dr. Karin Venetis for her tutorship throughout the development

of my thesis, she dedicated her time, expertise, and was particularly supportive by providing me with insight

and information regarding the professional services sector. Also Dr. Sjaña Holloway who was particularly

helpful by suggesting how to shape my thesis and get it structured on paper. Further, special thanks go out

to many marketing- and industry professionals that inspired me throughout the thesis process. Finally, thank

you to all friends and family who were encouraging during challenging times and were always available to

reflect with me on critical points to come up with suggestive thesis improvements.

Amsterdam, 30th of January 2017


V. Abstract Traditionally, unlike consumer markets, organizational purchase decisions are made by a highly qualified

buying center within a formalized procurement process based on rational factors. However, less rational

factors like corporate reputations play a crucial role particularly in dynamic risk environments such as the

professional services firm (PSF) sector. However, research is scarce on this specific field of business-to-

business research. Moreover, existing PSF studies have primarily been focused on well established firms,

whilst nowadays reputation research is more interesting to study from a nascent firms’ perspective. Because,

these nascent, flexible and fast-moving entrants increasingly threaten — and sometimes even outperforms

— established industry players. Therefore, this thesis explores how nascent PSFs manage to attract clients

whilst lacking reputational resources.

The proposed theory extends research on corporate reputation by identifying different antecedents and

related types of reputational constructs, and highlights the complex and non-deterministic nature of

business-to-business procurement processes in this particular context. Related working propositions are

examined mainly in an explorative manner in the marketing communications industry by examining how and

why corporate reputation influences advertisers when considering partnerships with (nascent) advertising

agencies. Ten Dutch marketing directors amongst the top 50 largest spending advertisers are sampled who

recently initiated a formalized procurement process. This hard-to-access population was sampled through

purposive self-selection sampling, interviewed using semi-structured qualitative interviewing techniques, and

transcriptions were thematically analyzed using open-, axial-, and selective coding procedures.

Empirical findings suggest that: nascent PSFs can convince skeptical stakeholders that they fit with the

industry norms and rules by utilizing uncertainty-reduction activities to compete with well-established firms;

and/or that clients have the intrinsic motivation to proactively select nascent PSFs on the basis of its superior

social ties; and/or that clients first evaluate the legitimacy and status of potential PSFs and these constructs

differ from reputational evaluation which increases nascent PSF selection. Overall, findings suggest that

reputation resides with the founding PSF partners, as these experts have substantial experience and/or

understand client opportunities better than well-established PSFs. These and other conclusions corroborates

and builds on prior research, and can be generalized mainly to similar buying situations in the PSF sector.

Keywords: Corporate Reputation; Corporate Status; Corporate Legitimacy; Buying Center; Business-to-

Business Marketing; Decision-Making; Nascent Professional Services Firms; Signaling Theory


VI. Executive summary In a business-to-business context, the true qualities of organizations are often absent which makes the

evaluation rely on indirect indicators of these qualities to reduce business risk and uncertainty, that is:

corporate reputation (Fombrun & Shanley, 1990; Chandler et al., 2013). A favorable corporate reputation

could create a competitive advantage and increases an organizations’ performance, survival chances, and

business development (Fombrun & Shanley, 1996; Fombrun & Van Riel, 2004). From an academic

perspective however, unlike consumer research, reputation research on business-to-business settings still

remains in its infancy (Walsch et al., 2015). Moreover, scholars (Greenwood et al., 2005; Walsch et al., 2015;

Barnett & Pollock, 2012) recognize that reputation research is lacking in industries that rely on it most: the

professional services sector. It is essential to this sector as professional services are perceived as a totally

different purchasing situation compared to other business-to-business purchases, as it involves: higher levels

of risk (West, 1997); something intangible which makes it hard to evaluate on purely rational criteria

(Nachum, 1996); and the services are often used to solve complex business issues which makes potential

return on investment hard to evaluate (Sonmez & Moorhouse, 2010).

In the professional services sector, the accountancy-, consulting-, legal-, and architectural industries alone

generated revenues of 1.6 trillion U.S. dollars and employed 15 million people globally in the year 2013

(Empson et al., 2015). Furthermore, professional services industries of all sorts are experiencing a vast

growth in startup firms (Empson et al., 2015). However, existing reputation studies on professional services

firms (PSFs) have primarily been focused on large established firms, whilst this thesis contends that

reputation research is more interesting to study from the perspective of newly emerging PSFs. Over the past

decade, these new, flexible and fast-moving PSFs increasingly threaten established industry players

(Rugman, Verbeke & Nguyen, 2011), gain significant competitive advantage (Nordenflyght, 2010), and

sometimes even outperform existing competition (Gompers & Lerner, 2001). Moreover, the corporate

reputation of nascent PSFs depends on delivering high-quality services, but these firms need reputation to

attract clients to deliver services in the first place (Lee, Pollock & Jin, 2011; Williamson, 2000; Pollock, Porac,

& Wade, 2004). Therefore, investigating how nascent PSFs break this vicious circle by generating reputation

early in an organizations’ life is considered by this thesis as fundamental to reputation- and management

research. Thus, the following central focus question can be formulated: How do nascent professional

services firms manage to attract clients whilst lacking reputational resources?

Corporate reputation is defined as “a relatively stable, issue specific, aggregate perceptual representation of

a company’s past actions and future prospects compared against some standard.” (Walker, 2010) Although

this definition highlights the paradoxical nature of this thesis as nascent PSFs do not have a pre-existing


track-record, the literature review provided other perspectives on corporate reputation to possibly explain

how nascent organizations break the vicious reputation cycle. On a more superficial level, scholars

recognize that the corporate reputation of PSFs can be qualified in two respects, that is: the collective

reputations of the firm itself and the reputation of the service provider interacting with clients (Ebbers &

Wijnberg, 2010). Therefore, given that nascent PSFs are characterized by the people delivering the service

(Sonmez & Moorhouse, 2010; Nordenflycht, 2010), reliance on executive reputation could explain how

nascent firms manage to attract clients. Thus, executive reputation is one of the constructs taken into

account by this thesis.

However, researchers argue that exploring corporate- and executive reputation alone might be a too

simplistic view, as recently founded organizations signal other quality concepts such as corporate status

(Stern et al., 2011). Corporate status is “an organizations’ position in a hierarchical order that reflects some

diffuse sense of better or worse that is indirectly tied to past behaviors, but is more directly tied to the pattern

of relations and affiliations in which the actor does and does not choose to engage.” (Poldony, 2005) The

difference between the two constructs is that reputation is derived from the economic notion of perceived

quality of current services based on the quality of past services, whereas status is used with a reference to

the notion of rank or prominence which is not based on past performance (Rindova et al., 2005; Washington

& Zajac, 2005). Therefore, given that the past performance of nascent PSFs is thin, corporate status could

be an alternative for corporate reputation in explaining how nascent firms manage to attract clients by simply

signaling (other) closely related (reputational) signals.

Moreover, how the constructs of corporate reputation and corporate status come together whilst evaluating

organizations is investigated by some scholars. For example, Jensen and Roy (2008) found a sequential

decision-making perspective that status is used to arrive at a “long-list” of alternative exchange partners

which is then followed by corporate reputation to fine-tune the choice. Moreover, Bitektine (2011)

complemented the research of Jensen and Roy (2008) and found that corporate legitimacy precedes

corporate status in the sequential process of exchange partner selection. Corporate legitimacy is defined as

“A generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate

within some socially constructed system of norms, values, beliefs, and definitions.” (Suchman,1995)

Considering the corporate legitimacy construct and its potential role in explaining how nascent PSFs manage

to attract clients whilst lacking reputational resources, these insights suggest that when stakeholders assess

and compare organizations, then legitimacy may develop from comparisons between organizations that

engender appreciation, admiration, trust and respect of one company over another and so build reputation

(Suchman,1995; Rindova & Fombrun 1999). As this thesis seeks to contribute to organizational- and


management research by exploring the reputational beliefs rendered by decision-makers with respect to the

social properties of nascent PSFs, it is worthwhile to include these related constructs that might influence

this decision-making process.

Another possible alternative in explaining how nascent PSFs manage to attract clients is examining the

phenomenon from the reputation-holders’- as opposed to the beholders’ point of view. Insights from this

perspective lends support to the notion that the stakeholders’ uncertainty and risk perception can be reduced

by the reputation-holder through the utilization uncertainty-reduction activities, these are: reputation-

borrowing (Pollock & Jin, 2011), reputation-building (Petkova, Rindova & Gupta, 2008); and reputation by

endowment (Pollock, Fund & Baker, 2009). In other words, insights as such suggest that nascent PSFs

could convince potential skeptical clients by utilizing various uncertainty-reduction strategies. However,

although these studies demonstrate that a new organization can utilize strategies to persuade various

stakeholder groups, little is known about how stakeholders process such signals and come to shared beliefs

that an organization possesses a desirable set of (reputational) qualities. Moreover, none of these studies

focused on clients evaluating nascent PSFs in particular. Therefore, the possibility that nascent PSFs are

able to alter their reputation through uncertainty-reduction activities are considered whilst exploring the

central focus question.

Throughout the literature study, four propositions have been formulated for primary research. As this thesis

investigated an under-explored phenomenon at a particular point in time, by asking ‘why' and ‘how’

organizations make decisions, it made this thesis a cross sectional exploratory study. From the deductive-

inductive theory perspective, Grounded Theory is applied as this thesis started with an initial conceptual

framework, and theory is further build throughout the research process resulting in a new conceptual model.

Because corporate reputation and related constructs are not objectively given and measurable, and literature

is scarce on nascent PSF evaluation, a qualitative methodology is used instead of a quantitative approach.

Furthermore, these constructs are heavily influenced by the context of information exchange, including the

attitudes of the decision-makers, previous interactions, and characteristics of the business environment.

Therefore, a qualitative approach was deemed as an effective way to allow rich insights to emerge whilst

exploring the central focus question and related working propositions.

The context within which the central focus question and propositions were investigated is the Marketing

Communications Industry (MCI). The purpose of the MCI is to enable advertisers to communicate effectively

and efficiently with their target audiences to acquire sustainable competitive advantage (Fill, 2011, p. 165).

The focus of this thesis is on the business relationship between the advertising agency and the advertiser, as


essentially the advertiser is the client of an advertising agency as it appoints an agency to provide

professional services. In the context of this study, this meant that (nascent) agencies are the reputation-

holder, and the advertiser is the reputation-beholder or evaluator. In-depth face-to-face and telephone

interviews are conducted with ten Marketing Directors for at least 40 minutes, these participants initiated a

tender-process recently to employ a (nascent) advertising agency. Due to the competitive realities of the

MCI, the marketing director is constantly forced to develop new relationships with its advertising agencies

and in the meantime, extend existing relationships. Therefore, the individual most likely to provide detailed

and rich insights into the selection process of (nascent) advertising agencies is considered to be the

marketing director. Through purposive self-selecting sampling, this hard-to-access population was sampled

until data saturation point was reached. Based on other qualitative studies on PSFs (Turnbull, 2014; West,

1997; Farell & Schroder, 1996), this point of meaningful data was reached around eight in-depth semi-

structured qualitative interviews. The interview transcripts were thematically analyzed using open-, axial- and

selective coding, whereas the translated verbatim quotes were send to the participants to check for factual

accuracy and meaning.

Empirical findings on the investigated working propositions suggest that nascent PSFs can convince

skeptical stakeholders that they fit with the industry norms and rules by utilizing uncertainty-reduction

activities to compete with well-established firms, and/or that clients have the intrinsic motivation to proactively

select a nascent PSF on the basis of its superior social ties. The importance of these findings are that it

corroborates prior research that not only nascent organizations but also nascent PSFs in particular utilize

reputational strategies to convince various stakeholder groups. Thus, also in a business-to-business

professional services context, decision-makers form perceptions on positive signals which ultimately

constitute the evaluative dimensions of reputation. This thesis contends that PSFs benefit most of all

business-to-business and business-to-consumer situations through the utilization of uncertainty-reduction

activities because of: the intangibility of the services; the degree of uncertainty; and amount of risk involved.

Additional significant findings are the strong internal motives of clients to hire nascent PSFs. Not only are

nascent PSFs perceived as being more dedicated, strategic, and creative in providing client solutions, but

also capable in bundling capabilities with other PSFs for individual client needs. In other words, nascent

PSFs are chosen because of its dedicated teams and greater degree of open-sourcing of talent and

capability. However, decision-makers do not only have to know about the nascent PSF existence, and being

convinced of its capability to deliver services of certain value and quality, but also have the need to perceive

a fully developed functional structure so it assures decision-makers that the nascent firm is indeed a “real

organization” that fits with industry practices.


Thus, where historically business was straightforward as clients hired PSFs to create solutions for problems

in a rather stable environment, nowadays clients seek radically different ways from PSF support groups to

maintain competitive advantage in high-velocity environments. On the one hand, well-established firms are

needed for capacity and scope, whilst nascent firms are defending their competitive positions by staying

relative agile and doing innovative advancements by specializing in particular fields of interest. Thus, some

clients will build a combination of nascent and well-established PSFs around them in a flexible network, and

orchestrates the activities themselves, whereas others reject risk by assigning a leading PSF with a bunch of

nascent PSFs attached to it. The central focus question is answered satisfactory as this thesis provided

insight into issues like, why a nascent PSFs happens to be selected and what these firms can do to become

selected. The findings of this qualitative study can be tested by further research through a quantitative

methodology across PSF industries and beyond geographical boundaries by numerical data. The same

methodology can be used to measure the factors that explain the varying effectiveness of: different

reputation-building strategies; and/or the special skills and capabilities needed for the implementation of a

reputation-building strategies by nascent entrepreneurial firms; and/or the different functional backgrounds

and industries of the founders that affect their reputation-building strategies. In terms of further qualitative

research, researchers can complement this study by investigating: how these (nascent) PSF support groups

are/can be structured and utilized by clients in efficient ways and how nascent firms can increase their stake

in this network; and/or why some entrepreneurs engage in reputation-building efforts earlier than others in

the industry; and/or investigate what the role of reputation is in relationship- maintenance and -termination

decision-making processes towards nascent and/or established firms.


VII. Table of contentsI. Cover page 1 ...............................................................................................................................II. Statement of originality 2 ...........................................................................................................III. Confidentiality of the thesis 2 .....................................................................................................IV. Acknowledgement 2 ..................................................................................................................V. Abstract 3 ....................................................................................................................................VI. Executive summary 4 ................................................................................................................VII. Table of contents 9 ...................................................................................................................

Chapter 1: Theoretical introduction 10 ............................................................................................Chapter 2: Literature review 14 ........................................................................................................

2.1. Interorganizational collaboration with professional services firms 14 ......................................2.2. Corporate reputation 16 ...........................................................................................................2.3. Corporate reputational strategies 19 .......................................................................................2.4. Corporate reputation, status, and legitimacy 22 ......................................................................2.5. Literature conclusion and conceptual model 25 ......................................................................

Chapter 3: Methodology 31 ...............................................................................................................3.1. Research design 31 .................................................................................................................3.2. Research strategy and operationalization of concepts 33 .......................................................

Chapter 4: Results 41 ........................................................................................................................4.1. Performed research activities 41 .............................................................................................4.2. Results theme 1: Task importance 45 ......................................................................................4.3. Results theme 2: Decision-making process and related constructs 48 ...................................4.4. Results theme 3: Reputational dimensions and underlying attributes 53 ................................4.5. Results theme 4: Reputational strategies 60 ...........................................................................

Chapter 5: Discussion 64 ..................................................................................................................5.1. Critically answering the central focus question 64 ...................................................................5.2. Critically answering working proposition one 66 .....................................................................5.3. Critically answering working proposition two 68 ......................................................................5.4. Critically answering working proposition three 70 ....................................................................5.5. Critically answering working proposition four 72 ......................................................................5.6. Adjusted conceptual model 74 .................................................................................................

Chapter 6: Conclusions 76 ...............................................................................................................6.1. Concluding the central focus question 76 ................................................................................6.2. Concluding the task situation theme 78 ...................................................................................6.3. Concluding the decision-making process theme 80 ................................................................6.4. Concluding the reputational dimensions theme 82 ..................................................................6.5. Concluding the reputational strategies theme 84 ....................................................................

References 86 ....................................................................................................................................Appendices 96...................................................................................................................................


Chapter 1: Theoretical introduction When an organization succeeds to implement a strategy of value creation that is not possessed by others in

the market place or industry it achieves a competitive advantage (Porter, 1996). The theory of strategic

management suggests that a favorable corporate reputation can create a competitive advantage and

increases an organizations’ competitive performance, survival chances, and business development

(Fombrun & Shanley, 1996; Fombrun & Van Riel, 2004). Scholars identify corporate reputation as a strategic

intangible asset particularly valuable from a reputation-holders’ point of view (Barney, 1996; Grant, 1991;

Rindova et al., 2006). The reputation-holder might utilize various uncertainty-reduction activities in order to

attract stakeholders, particularly organizations that are in its infancy to influence the formation of reputational

beliefs by the beholder (Lee, Pollock & Jin, 2011; Petkova, Rindova & Gupta, 2008; Pollock, Fund & Baker,

2009). This thesis aims to look at corporate reputation when the reputation-holder is judged by an external

decision-maker to enter a business relationship.

The knowledge-based economy is characterized by high-velocity environments in which intellectual strategic

decision are made at a fast pace by skilled professionals to reach organizational goals (Stern, Dukerich, &

Zajac, 2014; Andersen & Sørensen, 1999). In order sustain strategic goals in environments as such, it

increasingly calls for constant network collaboration, configuration, and partner evaluation (Andersen &

Sørensen, 1999; Stern, Dukerich, & Zajac, 2014). One instance of coupled business networks concerns the

employment of professional services firms (PSFs). Pre-existing external points of reference for evaluating

collaborative PSFs about the true qualities are often absent, which makes organizations rely on other indirect

indicators of these qualities (Fombrun & Shanley, 1990). Corporate reputation is defined as one of the main

indirect indicators to reduce business risk and uncertainty (Fombrun & Shanley, 1990; Chandler et al., 2013;

Fombrun & Van Riel, 2006). Therefore, researchers note that investigating reputation within the professional

services sector is vital because reputation serves as a social signal in a client market that is known for its

uncertainty, risk, and information asymmetry (Greenwood, Parkash, & Deephouse, 2005; Walsch et al.,

2015; Barnett & Pollock, 2012). However, to date, not much reputation research is done in a business-to-

business context (Walsch et al., 2015), let alone what the reputational effects are whilst clients evaluate

PSFs as a potential exchange partner.

In the 90s, the PSFs sector has emerged as one of the most significant, rapidly growing, and profitable

sectors in the global economy (Nordenflyght, 2010). The accountancy-, consulting-, legal-, and architectural

industries alone generated revenues of 1.6 trillion U.S. dollars and employed 15 million people globally in the

year 2013 (Empson et al., 2015). Despite of the significance of this sector, reputation research on PSFs have

until recently remained very much in the shadows (Barnett & Pollock, 2012). Moreover, existing reputation


studies on PSFs have primarily been focused on well-established firms, whilst reputation research might be

more interesting to study from a recently founded PSFs’ perspective. Because, these new, flexible and fast-

moving entrants increasingly threaten established industry players and sometimes even outperform existing

competition (Rugman, Verbeke & Nguyen 2010; Nordenflyght, 2010; Gompers & Lerner, 2001). Investigating

how reputation is managed by nascent PSFs is important because its reputation depends on delivering high-

quality services, but these organizations need reputation to attract stakeholders to deliver services in the first

place (Lee, Pollock & Jin, 2011; Williamson, 2000; Pollock, Porac, & Wade, 2004). Therefore, investigating

how nascent PSFs break this vicious circle by generating reputation early in an organizations’ life is

considered by this thesis as fundamental to reputation- and management research, yet few studies have

addressed this question directly.

Corporate reputation is defined as “a relatively stable, issue specific, aggregate perceptual representation of

a company’s past actions and future prospects compared against some standard.” (Walker, 2010) Although

this definition highlights the paradoxical nature of this thesis as nascent PSFs do not have a pre-existing

track-record, the literature review provided other perspectives on corporate reputation to possibly explain

how nascent organizations break their vicious reputation cycle. On a more superficial level, scholars

recognize that the corporate reputation of PSFs can be qualified in two respects, that is: the collective

reputations of the firm itself and the reputation of the service provider interacting with clients (Ebbers &

Wijnberg, 2010). Therefore, given that nascent PSFs are characterized by the people delivering the service

(Sonmez & Moorhouse, 2010; Nordenflycht, 2010), reliance on executive reputation could explain how

nascent firms manage to attract clients. Additionally, corporate reputation is considered as a dynamic

multidimensional construct formed by an organizations’ past actions, whilst having a few closely related

constructs such as e.g. ‘corporate identity’ and ‘corporate status’ (Fombrun & Shanley, 1990; Dollinger et al.,

1997). Insights as such suggest that exploring corporate reputation can be a complex exercise. Furthermore,

corporate reputation contains a variety of different underlying dimensions and attributes, and can be

categorized in three groups: functional reputation (e.g., competence and success factors), expressive

reputation (e.g., attractiveness and uniqueness factors), and social reputation (e.g., integrity and

responsibility factors) (Fombrun & Van Riel, 1997; Abrahamson & Fombrun; Eisenegger 2008). Within these

categories, each dimension has a variety of attributes that are helpful for operationalization, yet there is no

validated research to date on the underlying attributes and dimensions that come into play when nascent

PSFs are evaluated by potential clients. This lack of measurement scales might explain the slow uptake of

literature on reputational studies from a business-to-business professional services perspective, and/or the

amount of qualitative studies on recently founded organizations.


A few qualitative studies attempted to explain how startup firms manage to attract clients whilst lacking

reputational resources. For example, researchers argue that exploring corporate reputation in the context of

recently founded organizations might be a too simplistic view, as these organizations signal other quality

concepts such as status (Stern et al., 2011). Similarly, other scholars found that nascent firms could rely on

corporate status and legitimacy as indirect indicators of quality as these constructs are more easier “earned”|

than reputation (Poldony, 2006; Washington & Zajac, 2005; Bitektine, 2011). Moreover, researchers found a

sequential decision-making perspective that a new organization must first be seen as a legitimate market

participant before stakeholders begin to evaluate the firm in terms on status beliefs (Jensen & Roy, 2008). As

this thesis seeks to contribute to organizational- and management research by exploring the reputational

beliefs rendered by decision-makers with respect to the social properties of nascent PSFs, it is worthwhile to

include related constructs that might influence this decision-making process.

Another possible alternative in explaining how nascent PSFs manage to attract clients is examining the

phenomenon from the reputation-holders’- as opposed to the beholders’ point of view. Insights from this

perspective lends support to the notion that the stakeholders uncertainty and risk perceptions can be

reduced by the reputation-holder through the utilization uncertainty-reduction activities, these are: reputation-

borrowing (i.e. through affiliations with established industry players) (Gulati & Higgins, 2003; Lee, Pollock &

Jin, 2011; Pollock et al. 2010, Reuber & Fisher, 2005; Pollock & Gulati, 2007; Stuart, 2000; Stuart, Hoang &

Hybels, 1999), reputation-building (i.e. changing the attitude of stakeholders by coherent and consistent

positive signals) (Fisher & Reuber, 2007; Petkova, Rindova & Gupta, 2008; Rao, 1994; Rindova, Petkova &

Kotha, 2007); and reputation-by-endowment (i.e. reputation given by the employees, founders, and/or

celebrity CEO) (Beckman, Burton & O’Reilly, 2007; Beckman & Burton, 2008; Pollock, Fund & Baker, 2009).

However, although these studies demonstrate that a new organization can utilize strategies to persuade

various stakeholder groups, little is known about how stakeholders process such signals and come to shared

beliefs that an organization possesses a desirable set of (reputational) qualities. Moreover, none of these

studies focused on clients evaluating nascent PSFs in particular. Therefore, the possibility that nascent PSFs

are able to proactively alter their reputation through uncertainty-reduction activities will be considered whilst

exploring the central focus question.


Concluding, along with the increasing complexity of conducting business in the knowledge-abased economy,

the issue of corporate reputation in relation to inter-organizational collaboration grows in importance. The

importance of a favorable corporate reputation arises from the fact that it signals value and trust regarding a

PSFs’ competence at times when there is information asymmetry, risk, and uncertainty. However, corporate

reputation and related constructs are not objectively given and measurable, as these concepts are heavily

influenced by the context of information exchange, including: the attitudes of the decision-makers; previous

interactions; and characteristics of the business environment. Therefore, given the limited insights on how

nascent PSFs accumulate reputation early in its life, the following central focus question (CFQ) is formulated:

’How do nascent professional services firms manage to attract clients whilst lacking reputational resources?’.

In order to make this CFQ manageable for literature study, the following set of research subquestions are

formulated:

1) How are organizational decisions made, and what type of collaboration networks are possible between

clients and nascent professional services firms?

2) What is corporate reputation, and to what extent do clients rely on different reputational dimensions whilst

evaluation nascent professional services firms?

3) To what extent can nascent professional services firms alter their reputation in order to be perceived as

reputable by potential clients?

4) How does corporate legitimacy and -status increases the chances of nascent professional services firms

in being selected by clients?


Chapter 2: Literature review This thesis seeks to contribute to organizational-, reputation- and management research by exploring

corporate reputation that organizational decision-makers can render with respect to the social properties of

recently founded professional services firms (PSFs). In other words, this thesis aims to answer the

formulated central focus question: ‘How do nascent professional services firms manage to attract clients

whilst lacking reputational resources?’. The first part of this chapter sets the context of this study as it

describes PSFs, its importance to other clients, the types of organizational relationships that exists between

the two, and how buying or collaboration decisions are made. The literature review continuous by exploring

the limited corporate reputation domain in an organizational collaboration context. The third part explores

reputation strategies that nascent PSFs might utilize to attract various stakeholders, whereas the last section

explores the corporate- legitimacy and -status constructs. A related working proposition is presented in each

section, which eventually leads to a literature conclusion at the end of the chapter for primary research.

2.1. Interorganizational collaboration with professional services firms This section starts by exploring the subquestion ‘How are organizational decisions made, and what type of

collaboration networks are possible between clients and nascent PSFs?’. In contrast to generic services

such as cleaning and secretarial services, PSFs includes far higher purchasing risks and costs and are

typically characterized by having substantial indirect effects on the functioning of other organizations (West,

1997; Nachum, 1996; Sonmez & Moorhouse, 2010). Nordenflycht (2010) identified three characteristics that

differentiates PSFs from generic services, these are: knowledge intensity, low capital intensity, and

professionalized workforce. Similarly, Sonmez and Moorhouse (2010) highlight that PSFs solve complex

business issues and realize value opportunities through a mastered expertise. However, because various

PSFs are defined by these characteristics (e.g., accounting, legal, consultancy, and advertising), it makes

PSFs a large and heterogenous group and limits the ability to generalize (Nachum, 1996). Thus, not only will

the decision-making towards PSFs be different than generic services, also within the professional services

sector the decision-making could vary considerably.

2.1.1. Types of networks and relationships with (nascent) professional services firms

The form of relationship between organizations follows from the type of network by which these

organizations are defined (Hooley, 2012, p. 424). The work of Cravens et al. (1996) is broadly accepted by

other scholars, and identifies four types of networks based on the intensity of the environmental vitality and

whether relationships are collaborative or transactional. Within these networks, various types of relationships

are possible with PSFs. ’Outsourcing’ is described as an arm’s length relationship where an organization

simply purchases services from a partner as the alternative to buying them internally (Hooley et al.,2012, p.


425), whereas ‘partnerships’ involve a close relationship with combined capabilities to increases ones value

creation (Lambert, Emmelhainzm, & Gardner, 1996; Taylor, 2005). There are opposing stances in the

literature on which forms of networks and relationships are applicable to PSFs (e.g., Hooley et al.,2012, p.

425; Lambert et. al.1996; Taylor, 2005) due to the heterogenous nature of the PSF sector.

2.1.2. Organizational decision-making towards (nascent) professional services firms selection

Many characteristics associated with consumer decision-making can be observed in organizations as well

(Fill, 2011, p. 67-79). However, organizational decision-makers make more complex decisions that contribute

to corporate objectives (Jobber & Lancaster, 2012, p. 104-110). Various researchers aimed to make

organizational decision-making understandable by illustrating how the groups of variables relate and

influence each other. Adapting Fisher's (1976) decision-making theory, which have been validated widely

(e.g., Jobber & Lancaster, 2012, p. 104-110; Fill, 2011, p. 77-79; Solomon et al., 2012, p. 194-195), the sets

of interrelated variables can be classified in three broad elements: process, structure, and content.

Firstly, the process element describes the ‘how’ factor which refers to the procedure or process used to make

the actual decision (Fill, 2011, p. 77-79). There are a broad number of ways in which the decision-making

process itself may be conceptualized, but essentially the decision-makers move from a position of being

unaware of the problem to being convinced that a PSFs’ services are the most appropriate to the clients’

needs (Jobber & lancaster, 2012, p. 75). Secondly, the structure element refers to the ‘who’ factor and

involves a selected group of individuals that are dedicated to make a decision through a systematic process

(Solomon et al., 2012, p. 194-195). However, leading organizational behavior scholars recognize that group

behavior is actual individual behavior as only an individual as a member of a group can analyze a situation

and make a decision (Webster & Wind, 1972). Additionally, scholars are of the opinion that an individual

cannot make decisions value free, because he/she is bounded by the ability to process all the information

(March, 1978; Shavit & Adam, 2011). Moreover, intuitive decision-making is described as a third type of

decision-making that builds on the notion that a manager makes decisions on the basis of experience,

feelings, thinking, subconscious processing and social judgements (Smith & Shefy, 2007; Evans, 2010).

Lastly, the ‘content’ element describes factors that influence the individual in the decision-making process

(Jobber & Lancaster, 2012, p. 104-110). Although there are numerous factors that might influence the

decision-making process, the scope of this thesis is on reputational- and related factors when clients select

nascent PSFs for collaboration.

Concluding, nascent PSFs, and PSFs in general, have substantial indirect effects on the functioning of

clients. Through their delivery of intermediate services, PSFs provide customized solutions through an


experienced workforce to solve complex business issues. This large and heterogeneous group of PSFs

operating in different industries and environmental vitality, results in various types of relationship networks.

Regardless of the type of PSF, collaborative network, or preferred relationship, three broad decision-making

elements are needed to make the procurement decision. Important findings are that a sequential decision-

making process exists in which organizational decision-makers rely on corporate reputation. It is expected

that the type of network and relationship aimed for by clients influences also the degree to which there will be

relied on reputational factors. In other words, the task situation of the client is likely to affect the degree of

risk and thus the amount of reliance on reputational signals. However, uncertainties derive from how these

findings apply to nascent PSFs in particular. Therefore, the first working proposition is formulated as follows:

'1) Clients with a relatively high task importance are less likely to select nascent professional services firms

to collaborate with.’. Exploring this working proposition might confirm or otherwise reject the assumption

whether nascent firms truly outperforms well established competition at the same collaborative level.

2.2. Corporate reputation This section investigates the ‘content element’ of the decision-making process — that is — corporate

reputation by answering the subquestion: ‘What is corporate reputation, and to what extent do clients rely on

different reputational dimensions whilst evaluation nascent PSFs?’. It was found that the word reputation

originates from the Old French noun ‘reputer’, or directly from Latin ‘reputationem’, which means ‘thinking

over’ or ‘reflect upon’ (Fombrun & Van Riel, 1997; Barnett, Jermier, & Lafferty, 2006). Bevis (1967) defines

reputation as “The net result of the interaction of all the experiences, impressions, beliefs, feelings and

knowledge that people have.” (as cited by Fombrun & Van Riel, 1997). In this sense, people as well all

businesses have reputations. Within the marketing domain, Fombrun and Rindova (1996) define brand

reputation as “a collective representation of a brand’s past actions and results that describes the brand’s

ability to deliver valued outcomes to multiple stakeholders.’’ Others define brand reputation as “consumer’s

subjective evaluation of the perceived quality of the brand.” (Rhee & Haunschild, 2006). Whilst some

marketing practitioners confusional use corporate reputation, brand image and brand identity as synonyms

(Chun, 2005), other scholars illustrate that reputation clearly differs from these other constructs even though

some underlying dimensions overlap (Walker, 2010; Duncan & Mariarty, 1997; Duncan & Mariarty, 1997).

Concluding, reputation is defined as a collective representation of a brand’s past actions based on subjective

evaluation of the perceived qualities of a brand. However, scholars have contending stances whilst

investigating e.g. reputation, brand image and brand identity which challenges the factual accuracy of

reputational findings. This discussion on ‘reputation’ will inevitably migrates to ‘corporate reputation’ in the

business-to-business context, because business evaluations are proven to be more thorough and complex

than consumer evaluation.


2.2.1. Corporate reputation

Corporate reputation is seen as one of the most vital intangible organizational assets, as it enables

organizations to: find financial investors and charge premium prices (Fombrun & Shanley, 1990); attract

talented employees from the labor market (Hannon & Milkovich, 1996); and accelerate access to particular

markets (Rindova, Greenbaum & Martin, 2015). The most widely accepted definition on corporate reputation

is “a collective representation of a firm’s past actions and results that describe the firm’s ability to deliver

valued outcomes to multiple stakeholders.”(Fombrun, 1996) A more recent definition by Walker (2010) is also

well recognized: “corporate reputation is a relatively stable, issue specific aggregate perceptual

representation of a company’s past actions and future prospects compared against some standard.”

Although there is an overall lack of reputation research in a business-to-business context, it can be

concluded that corporate reputation is: based on the aggregate perception of stakeholders; comparative;

favorable or unfavorable; relatively stable and enduring; and issue/stakeholder specific (Walker, 2010;

Fombrun, 1996). Particularly the findings of Rindova et al. (2015) suggest that corporate reputation is a

valuable asset for an organization to quickly go to market, which confirms the suspicion that reputation is the

main factor behind the success of nascent PSFs.

Barnett and Pollock (2012) confirms the observation that there is no consensus building amongst scholars

when it comes to corporate reputation and related constructs. This because several theoretical frameworks

have driven the conceptual thinking on corporate reputation, these are: Institutional Theory (Suchman,

1995), Agenda-Setting Theory (Wartick, 2002), Stakeholder Theory (Freeman, 1984), Signaling Theory

(Weigelt & Camerer, 1988), Identity Theory (Albert & Whetten, 1985), Resource Based Theory (Barney,

1996), Game Theory (Milgrom & Roberts, 1982), and Social Construction Theory (Rindova & Fombrun,

1999). In the context of PSFs, researchers particularly note the importance of signaling theory (Glucker &

Armbruster, 2003; Barnett & Pollock, 2012). The notion of signaling theory is the efforts companies make to

influence their stakeholders to build rapport and trust for their initiatives and interests (Barnett & Pollock,

2012). In contrast to the lack of consensus on conceptual thinking on corporate reputation, scholars do agree

that corporate reputation evaluation is influenced by three key sources: 1) personal experiences by the

beholder; 3) communication by the reputation holder; and 3) influential coverage from objective third-parties

(Hatch 2005; Keller, 1998; Barnett et al., 2006; Fombrun, 1996; Klewes & Wreschniok, 2009).

2.2.2. Dimensions of corporate reputation

When it comes to the underlying dimensions of corporate reputation, a discrepancy exists between the

theoretical perspective and its operationalization because the aggregated perception of al stakeholders


cannot be measured in a single paper alone. Therefore, researchers (Walker, 2010; Barnett et al., 2006;

Lewellyn, 2002) suggest that corporate reputation must always be specified to a specific issue- and

stakeholder group before the underlying dimensions can be explored. Moreover, scholars argue that

specifying the stakeholder group and issue will also help to bring clarity to other closely related constructs

such as corporate identity and corporate brand image (Lewellyn, 2002). Nonetheless, in general, the

underlying dimensions of corporate reputation can be categorized in three groups (Eisenegger, 2008), these

are 1) ’functional reputation’ relates to the performance goals of the organization based on a set of cognitive

and rational objective factors such as ‘products and services’, ‘innovation’, and ‘financial performance’; 2)

’expressive reputation’ refers to the emotional attractiveness of organizations’ character and according to

how unique they appear based on ‘emotional appeal’ and ‘vision and leadership’; and 3) ‘social reputation’

describes to what extent organizations are responsible based on ethical social norms such as ‘corporate

governance’, and ’workplace and ‘citizenship’ (Fombrun & Van Riel, 1997; Abrahamson & Fombrun). Each

dimension has a variety of attributes that are helpful for operationalization, however reputation studies must

always be issue- and stakeholder specific. Therefore, these dimensions may not reflect the decision-makers

perception when deciding to collaborate with recently founded professional service firms. In the context of

this thesis, the first scale developed to measure clients’ reputational perceptions towards PSFs is developed

by Walsch, Beatty and Holloway (2015).

2.2.3. The importance of corporate reputation to (nascent) professional services firms

The PSF sector is a sector where corporate reputation is of significant importance (Walsch et al., 2015;

Barnett & Pollock, 2012). A favorable reputation is needed for the long-term success of PSFs because it

reduces information asymmetries, and allows these firms to build strong and enduring social networks with

clients to “secure” future projects (Starbuck, 1992; Greenwood et al., 2005). Additionally, the judgment about

customized-knowledge-production-quality will require more than technical- and product quality features

(Walsch et al., 2015; Greenwood et al., 2005). For that reason, business economics call the services of

knowledge-based organizations “credence goods”, meaning that these goods are also bought on faith or

belief — in other words — on reputation (Feser & Proeger, 2015). The construct of corporate reputation of a

PSFs can be qualified in two respects, the reputation of the service provider at the forefront of the service

firm interacting with clients, and the collective reputations of the service firm itself (Wijnberg, 2010; Gardner,

Anand & Morris, 2008). Thus, it is expected that personal experience and competence is one of the most

significant sources of corporate reputation to nascent PSFs, since much of the work is embedded in the

professional staff and delivered through interaction with clients.


2.2.4. Executive reputation

It is hard to isolate executive reputation from the collective reputation of PSFs because a spillover-effect

occurs (Keller, 1998). For a number of reasons, evaluating the qualities of an executive is difficult at any

given point in time. Firstly, executive reputation is loosely coupled with organizational performance unlike the

collective organizational reputation (March 1978). Secondly, organizational performance is a team-effort,

thus most performances are not owing to executive quality (Hambrick & Mason, 1984). Third, scholars

suggest that executives may have only a limited impact on the actual organization-level outcomes as the

successes may be attributable to past decisions made by former executives (Pfeffer & Salancik, 1978).

However a decision-maker may not consider these reasons and attribute these successes to the nascent

PSF executives.

Concluding, the slow uptake of reputation studies is due to the variety of theoretical frameworks that have

driven corporate reputation so far, and scholars may not distinguish corporate reputation from corporate

identity and corporate image clearly. Based on an extensive corporate reputation review of 48 articles and

books, Barnet et al. (2006) illustrates that the construct of ‘corporate reputation’ clearly follows from

‘corporate image’ and ‘corporate identity’ whilst having similar antecedents. Still, in terms of antecedents and

underlying dimensions, it remains unclear which reputational dimensions are decisive when nascent PSFs

are evaluated. It is expected that executive reputation is most decisive for nascent PSFs in being selected

because executives operate at the forefront of the organization and build reputation through social

interaction and expressive signals. Moreover, since nascent PSFs by definition lack a performance track-

record and tangible products and services, it is expected that nascent PSFs benefit from expressive- and

social- reputational dimensions primarily. Therefore the second working proposition is formulated as follows:

‘2) ‘Clients rely more heavily on expressive- and social- reputational dimensions than on functional

reputational dimensions whilst evaluating nascent professional services firms.’. Exploring this working

proposition will provide a further understanding of the sources, antecedents, and underlying dimensions of

corporate reputation and related forms of social judgements that organizational decision-makers could

render with respect to the social properties of nascent PSFs.

2.3. Corporate reputational strategies This section explores the reputational signals that nascent PSFs could utilize to influence the decision-

makers perception by answering the subquestion: ‘To what extent can nascent professional services firms

alter their reputation in order to be perceived as reputable by potential clients?’. In the context of recently

founded organizations, scholars found three reputational strategies that these organizations utilize to attract

stakeholders, these are: reputation-borrowing (Pollock et al. 2010, Reuber & Fisher 2005; Stuart, Hoang &


Hybels, 1999), reputation-building (Fisher & Reuber, 2007; Petkova, Rindova & Gupta, 2008; Rao, 1994);

and reputation endowment (Beckman, Burton, & O’Reilly, 2007; Beckman & Burton, 2008; Pollock, Fund &

Baker, 2009). These reputational strategies will be explored in-depth in the upcoming paragraphs.

2.3.1. Reputation-borrowing strategies

Nascent organizations that affiliate with established organizations refers to the reputation-borrowing strategy.

Reputation-borrowing might stem from alliance partners (Gulati & Higgins, 2003; Stuart et al., 1999),

customers or clients (Reuber & Fischer, 2005), capital investors (Lee et al., 2011; Pollock et al. 2010), and

investment banks (Pollock et al., 2010). When reputation is borrowed, a reputation spillover effect occurs

between the two actors (Lee et al., 2011). From the reputation beholder point of view, prestigious affiliations

are perceived as knowledgeable and capable for evaluating a nascent organizations’ qualities and potential

(Gulati & Higgins, 2003; Stuart, 2000). For example, Stuart et al. (1999) found that biotechnology start-ups

with high reputable partners receive higher market valuations from the market. Additionally, the findings of

Gulati and Higgins (2003) suggests that endorsements by different third parties signals different reputational

values. Other studies complemented this research and found that effects of industry specializations and

geographic proximity are independent of reputation, and affiliation with prestigious customers are important

under high purchase complexity (Reuber & Fisher 2005).

2.3.2. Reputation-building strategies

Reputation-building studies recognize that most organizational strategies used by established organizations

do not apply to recently founded organizations (Petkova et al., 2008; Rindova et al., 2007). Nascent

organizations proactively change the attitude of stakeholders by coherent and consistent positive signals,

such as: victories in industry contests (Rao, 1994); product awards (Reuber & Fisher, 2007); innovations

(Rindova et al., 2007); investments in human capital (Petkova et al., 2008); and symbolic activities (Petkova,

Ringdove, Gupta, 2008). Through these visible actions, a recently founded organization can signal quality

and potential to various stakeholders and by doing so establish credibility (Petkova et al., 2008; Rao, 1994).

The reputation-building perspective attributes a major role to objective third parties, such as the media and

industry analysts, who bring nascent organizations to the focal attention of large stakeholder audiences

(Kennedy, 2008).


2.3.3. The reputation-by-endowment strategies

Reputation-endowment is seen as a nascent firms’ access to resources through the experience and

reputation given by the employees, founders, or (celebrity) CEO (Beckman et al., 2007; Sanders & Boivie,

2004). Reputation-endowment reduces uncertainty by ensuring that the organization possesses the

necessary expertise, work experience, and entrepreneurial successes (Pollock et al., 2009). Furthermore, it

was found that high performing new firms are characterized by broadly experienced (Sanders & Boivie,

2004), functional diversified (Beckman et al., 2007), and charismatic leadership (Burton, Sorensen &

Beckham, 2002). However, despite much progress, reputation-by-endowment studies remains in the early

stages and makes it particularly hard to draw conclusions on nascent PSFs. Particularly because a nascent

organization is often started by multiple individuals with different accumulated reputations, it makes it difficult

and arbitrary to determine whose reputation the firm represents (Petkova, 2006). Nonetheless, reputation-by-

endowment appears to be an effective strategy to apply by nascent PSFs as these firms are characterized

by a professional workforce that hold strong personal networks (Gardner et al. 2008; Malhorta et al. 2010).

Moreover, as scholars point out, clients can be seen as both external and internal stakeholders as they can

both create and evaluate reputational signals whist interaction with PSFs during the decision-making process

(Gray & Balmer, 1998; Glucker & Armbruster, 2003). This makes reputation-by-endowment strategies

particularly hard to measure.

Concluding, the emerging studies on reputational strategies clearly illustrates how nascent organizations

break their vicious reputation cycle by changing stakeholder perceptions. Reputation-borrowing is properly

named after the strategy when nascent firms affiliate with prestigious industry player, whereas reputation-

building strategies is characterized by changing the attitude of stakeholders by coherent and consistent

positive signals. Thirdly, reputation-by-endowment is seen as a new firms’ access to resources through the

experience and reputation given by the employees, founders, or (celebrity) CEO. Additionally, it was found

that endorsements by different third parties provides different reputational values for the nascent firms, and

affiliation with prestigious customers regardless of industry specialization and geographic proximity are

important under high purchase complexity. However, it remains unclear which strategies are utilized by

nascent PSFs and how the results of these strategies truly influence client perceptions. Considering the

importance of individual employees to PSFs, and the high degree of uncertainty when collaborating with

nascent PSFs, it is expected that reputation endowment strategies are most influential of the three. Thus, the

third working proposition is formulated as: ‘3) Clients are primarily persuaded by endowment- rather than

reputation-borrowing- and building strategies whilst evaluating nascent PSFs.’. Exploring this working

proposition will provide more insight into issues like, why a nascent PSFs happens to be selected and, more

importantly, what exactly such a PSF can do to become selected have received little attention.


2.4. Corporate reputation, status, and legitimacy This section explores how related types of social judgement influences the decision-making process of

clients by answering the subquestion: ‘How does corporate legitimacy and -status increases the chances of

nascent PSFs in being selected by clients?’. The previous sections on reputational strategies provided some

insights into related forms of social judgement linked to corporate reputation, as for example Stern et al.

(2011) agree that solely exploring corporate reputation in the context of nascent organizations is a too

simplistic view on the performance of these firms. Additionally, Barnett et al. (2006) illustrate that the

corporate reputation construct clearly follows from other constructs whilst also having similar antecedents

and overlapping underlying dimensions with closely related constructs. This makes it worthwhile to dedicate

the remainder of this literature review to exploring what the independent and interdependent effects of these

constructs are on the decision-making process towards nascent PSFs.

2.4.1. Corporate status

The concept of status originates back to the work of Max Weber, who defined status as “an effective claim to

social esteem in terms of positive and negative privileges.” (Weber, 1956) Weber (1956) made a clear

distinction between class and status as he explained that people could have a high social status despite

being in a low economic class or vice versa. A more recent and well recognized definition on status is that of

Washington and Zajac (2005): “status is socially constructed, intersubjectively agreed-upon and accepted

ordering or ranking of individuals in a social system.” According to Burris (2004), a characteristic of status

structuring is the ‘mechanism of social closure’, which means that an actor's performance on a given status

level is not a guarantee to enter a higher status group. Rather, the status position of an actor is established

through behavioral “negotiations” with other actors (Berger et al., 1998). Thus, status is socially constructed

and often negotiated by actors before acceptance is achieved towards a certain or rank or level.

Similar to social status, organizational scholars see corporate status as socially and culturally determined

rather than economically (Elsbach & Kramer, 1996; Podolny, 1994). Jensen and Roy (2008) define corporate

status as “prestige accorded firms because of the hierarchical position they occupy in a social structure.”

Likewise, Bothner, Coward, and Lee (2010) define status as “a zero-sum intangible asset possessed by

social actors insofar as they are highly regarded by highly-regarded others.” A more comprehensive

definition on status is that of Poldony (2005) as he hold status as “an organizations’ position in a hierarchical

order that reflects some diffuse sense of better or worse that is indirectly tied to past behaviors, but is more

directly tied to the pattern of relations and affiliations in which the actor does and does not choose to

engage.” Essentially, what these definitions suggest is that status could be considered as: 1) the outcome of

the relations and associations organizations have with other firms (Poldony, 2005); 2) a zero-sum game


meaning that one organization cannot increase its status without one or more other actors losing status

(Bothner, at al., 2010); and 3) that high status organizations are likely to collaborate with other high status

organizations (Jensen and Roy, 2008).

A common theme in the literature is that corporate status is determined by the network position and the

patterns of associations a firm has with other high-status organizations (Dimoc, Shepherd & Sutcliffe, 2006;

Washington & Zajac, 2005). For example, Washington and Zajac (2005) investigated the pattern of

associations in the form of the number of games a sports team played against high- and low status

opponents, and found that playing against high-status opponents is likely to increase a sports team status

and hence its probability to being invited to a higher league. Additionally, Stern et al. (2014) found that an

organizations’ status is not only dependent on the associations with similar organizations, but also on close

ties with a high-status organization from a totally different industry — such as customers or clients. In the

context of this thesis, these findings suggests that a high-status or reputable client would indeed increase a

recently founded PSFs’ reputation. Moreover, these findings are in line with the reputation-borrowing

phenomenon that is focused on reputation creation through alliances. This confirms the importance of

including the construct of status in the context of this study.

A few studies were found that focused on corporate status and its effects on business performance,

dedication, and relationship effort. Castekkucci and Ertug (2010) found that when the status difference

between two partners increases, the lower-status partner provides greater effort and increased performance.

Similarly, Hsu (2004) found that organizations that have secured affiliations to high status organizations are

likely to work hard to maintain their relationships. Moreover, Hsu (2004) discovered that recently founded

organizations are both more likely to accept offers by reputable others, and also accept these offers at a

discount on their valuation. These findings suggest that there might be motives for clients to collaborate with

recently founded PSFs as opposed to well-established firms. However, this topic has not previously been

addressed in the context of PSFs in particular. Therefore, in addition to the proactive efforts of nascent PSFs

to change the reputation perceptions of clients, clients might also have an internal motive to proactively

approach organizations as such. These findings give a more holistic view on the evaluating process of clients

when choosing to employ a nascent PSF.

In line with Fisher's (1976) decision-making theory, Jensen and Roy’s (2008) study found a sequential

decision-making perspective that status is used to arrive at a “long-list” of alternatives, which is then followed

by corporate reputation to fine-tune the choice. Moreover, Bitektine (2011) complemented their research and

found that corporate legitimacy precedes corporate status in the same sequential process. This is in line with


an earlier finding by Rao (1994), as this scholar argues that a new firm has to be seen as legitimate market

participant before stakeholders begin to evaluate it and develop reputational beliefs. These findings confirms

the suspension that corporate- reputation, status, and legitimacy are closely related.

Concluding, some researchers treat reputation and status as two separate constructs, others see status as a

form of corporate reputation. Like reputation, corporate status is indirectly tied to past behaviors and an

indirect indicator for quality, but status is more directly tied to the pattern of relations and affiliation in which

the organization does or does not choose to engage in. As reputation is based on the quality of past

products, status is often used with a reference to the sociological notion of social rank or prominence which

is not based on past performance. Another interesting finding is that a sequential process decision-making

process exists in which status and reputation follow each other, together with corporate legitimacy. It is

interesting to speculate that this specific sequential process also hold in the decision-making process

towards nascent PSFs, as a nascent PSFs could easier obtain status than reputation. Thus, a working

proposition will be formulated in the next paragraph when corporate legitimacy is explored.

2.4.2. Corporate Legitimacy

Legitimacy has traditionally been defined as an evaluative judgement of a person, organization, or institution

based on the actors conformity to social norms, values, as well as compliance with legal requirements

(Suchman, 1995; Deephouse, 1996). The main leading theorist on corporate legitimacy is Suchman (1995),

and also his encompassing definition is used by many: “Legitimacy is a generalized perception or

assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed

system of norms, values, beliefs, and definitions.” Researchers have explored various legitimacy types

(Certo, 2003; Rao, Greve & Davis, 2001), and have developed various typologies (Deephouse 1996;

Foreman & Whetten, 2002; Ruef & Scott, 1998; Suchman, 1995), which resulted in over twenty legitimacy

types that fall under various typologies. Based on these types and typologies, it can be concluded that a

central element of legitimacy is meeting and adhering to the expectations of a social system’s norms, values,

rules, and definitions. A study by Foreman and Whetten (2002) found that if the business community

perceives a problem within an organization it can lead to industry speculations, which may magnify existing

firm-specific uncertainties. Consequently, organizations establish new relationships, thus expanding their

network, and by doing so signal to external constituents that firm-specific issues are being recognized and so

maintain or regain legitimacy (Foreman & Whetten, 2002). In the context of this study, this could result in

decision-makers asking other industry connections for referrals to nascent PSFs to reduce uncertainty and

risk. On the other hand, nascent PSFs might build legitimacy by sharing successes in the industry to regain

legitimacy, this would refer to brand-building strategies.


Concluding, there are overlaps between the constructs of reputation, status, and legitimacy as researchers

suggest that these forms of social judgement arise from common social comparison processes (e.g., Dutton

& Dukerich. 1991; Rindova et al., 2006; King & Whetten, 2008). If status is viewed as the relative ranking of

an organization in hierarchical order, then a PSF with a high status is more likely to engender respect,

develop trust and become attractive to stakeholders. At the same time, a company that has a strong and

favorable reputation is more likely to earn status over time (Abrahamson & Fombrun, 1994). A similar

relationship binds the concept of reputation to the construct of legitimacy, as Rindova et al. (2006) suggest

that legitimacy may develop from comparisons between organizations that engender appreciation,

admiration, trust and respect of one company over another and so build reputation. Thus, researchers

theorize that reputation, status and legitimacy represent three distinct components of perceived quality that

exert independent and interdependent effects on the decision-making process (Stern et al., 2011; Poldony,

1994; Jensen and Roy, 2008; Bitektine, 2011; Rao, 1994). Moreover, corporate- reputation -status and -

legitimacy constructs come together in the form of a sequential process (Stern et al., 2011; Poldony, 1994;

Jensen and Roy, 2008; Bitektine, 2011; Rao, 1994). However, this sequential process has not been

addressed whilst clients evaluate nascent PSFs in particular. Therefore, the fourth and final working

proposition is formulated as follows: ‘4) Nascent professional services firms must first be perceived as

legitimate before clients begin to evaluate the firm on status- and subsequently on reputational beliefs.’

Investigating this working proposition will prove whether nascent PSFs might benefit from this sequential

process as status is more easily earned than reputation, and to what extent legitimacy is helpful too.

2.5. Literature conclusion and conceptual model This thesis seeks to contribute to organizational studies and management research by exploring corporate

reputation and related forms of social judgements that organizational decision-makers can render with

respect to the social properties of recently founded professional services firms (PSFs). The central focus

question is formulated as follows: ‘How do nascent professional services firms manage to attract clients

whilst lacking reputational resources?’ Based on this central focus question and related sub-questions, the

literature study has given valuable insights and created a solid base to fill the remaining knowledge gaps

through primary research.

The first subquestion was focused on ‘How are organizational decisions made, and what type of

collaboration networks are possible between clients and nascent PSFs?’. It was found that nascent PSFs

and PSFs in general have substantial indirect effects on the functioning of clients through their delivery of

intermediate services by providing customized solutions through an experienced workforce to solve complex


business issues (Sonmez & Moorhouse (2010). This large and heterogeneous group of PSFs results in

various types of relationship networks with clients based on the varying intensity of the environmental vitality

in which they operate. The form of relationship between clients and PSFs follows from the type of network by

which these organizations are defined (Hooley, 2012, p. 424). There appears to be some opposing stances

in the literature on which form of network and relationship is applicable to PSFs, as sometimes collaborative

relationships are preferred over transactional relationships or vice versa. This is probably because of the

heterogenous nature of PSFs. Nonetheless, it is expected that the type of network and relationship aimed for

by the client influences also the degree to which there will be relied on reputational factors. In other words,

the task situation of the client is likely to affect the degree of risk and thus the amount of reliance on

reputational signals. However, uncertainties derive from how these findings apply to nascent PSFs.

Therefore, the first working proposition is formulated as follows:

1) Clients with a relatively high task importance are less likely to select nascent

professional services firms to collaborate with.

Exploring this working proposition will provide rich insides into the increasing phenomenon that nascent

PSFs are being selected for tasks that well-established PSFs fulfilled previously. Regardless of the type of

PSF, collaborative network, or preferred relationship, three broad decision-making elements are needed to

make a decision. Important findings are that a sequential process exists in which corporate reputation is

considered by decision-makers. The second subquestion investigated: ‘What is corporate reputation, and to

what extent do clients rely on different reputational dimensions whilst evaluation nascent PSFs?’. It was

found that corporate reputation is: based on the aggregate perception of stakeholders; comparative;

favorable or unfavorable; and relatively stable and enduring (Walker, 2010; Fombrun, 1996). This construct

however, consist of various underlying dimensions and each of these dimensions are formed by a diverse

range of attributes. Researchers (Walker, 2010; Barnett et al., 2006; Lewellyn, 2002) suggest that corporate

reputation must always be specified to a specific issue- and stakeholder group before the underlying

dimensions and attributes can be explored, but this is not yet researched in the context of this thesis. Since

nascent PSFs by definition lack a performance track-record and provide intangible products and services, it

is expected that functional reputation is much harder to get a grip on by clients than the other two types of

reputation. Thus, the second working proposition is formulated accordingly:

2) Clients rely more heavily on expressive- and social- reputational dimensions than on

functional reputational dimensions whilst evaluating nascent professional services firms.


Exploring this working proposition will give a thorough understanding of the underlying dimensions and

attributes that are taken into account by decision-makers whilst evaluation nascent PSFs. Furthermore,

answering this question will perhaps bring clarity to the discussion on corporate reputation and its lack of

distinctiveness comported to corporate identity and corporate image. Thirdly, in addition to the the passive

evaluation of clients, nascent PSFs might utilize various reputation strategies to influence stakeholder

perceptions. Thus, the third subquestion was focused on ‘To what extent can nascent professional services

firms alter their reputation in order to be perceived as reputable by potential clients?’ Three reputational

strategies were found that nascent organizations utilize to attract stakeholders, these are: reputation-

borrowing (Lee, Pollock & Jin, 2011), reputation-building (Fisher & Reuber, 2007), and reputation endowment

(Fund & Baker, 2009). Reputation-borrowing is properly named after the strategy when firms affiliate with

prestigious industry player, whereas reputation-building strategies is characterized by changing the attitude

of stakeholders by coherent and consistent positive signals to influence stakeholder perceptions. Lastly,

reputation-by-endowment is seen as a new firms’ access to resources through the experience and reputation

given by the employees, founders, or (celebrity) CEO. However, it remains unclear which strategies are

utilized by nascent PSFs and how the results of these strategies truly influence client perceptions. Therefore,

the third working proposition is formulated as follows:

3) Clients are primarily persuaded by endowment- rather than reputation-borrowing- and

building strategies whilst evaluating nascent professional services firms.’

Considering the importance of individual employees to PSFs, and the high degree of uncertainty when

collaborating with recently founded PSFs, it is expected that reputation endowment strategies are most

influential of the three. Exploring this working proposition will provide more insight into issues like, why a

nascent PSFs happens to be selected and, more importantly, what exactly such a PSF can do to become

selected have received little attention. Fourthly, corporate reputations is constructed on the basis of a wide

variety of signals and overlap with a few social forms of social judgement. Pre-research showed that

primarily corporate status and corporate legitimacy signals compensate to some extent the lack of reputation

nascent organizations face. Thus a fourth sub-question is formulated accordingly: ’How does corporate

legitimacy and -status increases the chances of nascent PSFs in being selected by clients?’. As aspected, it

was found that some signals may actually be a reflection of the reputation of alliances the focal PSF has

been involved in, which refers to corporate status. Additionally, it was found that a similar relationship binds

reputation to the construct of legitimacy, as Rindova et al. (2006) suggest that legitimacy may develop from

comparisons between organizations that engender appreciation, admiration, trust and respect of one

company over another and so build reputation. Moreover, a sequential decision-making process was found


in which these three types of social judgements are considered at different stages of the process (Bitektine,

2012). Scholars illustrate that an organization must first be seen as a legitimate market participant before

stakeholders begin to evaluate firms in terms of status- and consequently in reputational beliefs (Jensen &

Roy, 2008; Bitektine, 2012; Rao 1999). However, uncertainties derive to what extent these findings hold

whilst evaluating nascent PSFs. Therefore, the following fourth working proposition is needed to shed more

light on the factors that help nascent PSFs in being selected, and whether nascent PSFs might benefit from

a sequential process as such:

4) Nascent professional services firms must first be perceived as legitimate before clients begin to

evaluate the firm on status- and subsequently on reputational beliefs.

2.5.1. Conceptual framework

Concluding, the aforementioned working propositions and overarching central focus question will provide

more empirical evidence in the organizational buying behavior of organizations towards (nascent) PSFs. This

selection process is influenced by three broad elements: the sequential process itself; the decision-makers

making the decision; and the reputation, status, and legitimacy dimensions that are taken into account whilst

evaluating. Signaling theory proposes that these forms of social judgement indirectly inform organizations

about the qualities of a nascent PSFs, which make the procurement process less rational and formalized as

traditionally been regarded. These elements are essentially the main components that will be explored in the

primary research part of this thesis. The conceptual framework in Figure 1. illustrates the contextual factors

that induce the clients’ evaluation on (nascent) PSFs. As illustrated, the underlying corporate reputational

dimensions stem from three key sources: personal stakeholder experiences; influential coverage from

objective third-parties; and communication by the reputation holder (Keller, 1998; Barnett & Pollock, 2012;

Barnett et al., 2006; Fombrun, 1996; Klewes & Wreschniok, 2009). These components work as a multiplier

on/between various constructs in the decision-making process. The decision-making process itself starts at

the task situation, continuous to the formulation of need criteria, and eventually the decision is made to

collaborate with a PSF whilst being influenced by three forms of social judgements .

Firstly, depending upon the task importance of the client, the need criteria are created by the buying center

which affects the degree of reliance on reputational factors later on in the decision-making process. It is

expected that a “crucial” task situation involves more people, and thus more uncertainty/risk needs to be

reduced, which leads to a decrease in chances for nascent PSFs in being selected (WP 01). Someones

personal experience with the task situation either amplifies or dampens the formulation of need criteria,

process approach, and might also influence nepotism in nascent PSF selection. Secondly, corporate


reputation consists of three underlying dimensions, each shaped by a variety of underlying attributes. Of all

the dimensions and underlying attributes, it is expected that the functional dimension will have the least

influence on nascent PSFs evaluation (WP 02). Thirdly, literature showed that reputational dimensions are

likely to be amplified by the PSF though reputation-building strategies, status dimensions by reputation-

borrowing strategies, and executive reputation by reputation-by-endowment strategies. Essentially, the

notion of signaling theory is that the combined influence of strategic signaling and media coverage

disseminates favorable portrayals of nascent firms to influence stakeholder perceptions. It is expected that

the reputation-by-endowment strategy is the main strategy utilized by nascent PSFs towards clients (WP 03).

Lastly, aggregated across organizational decision-makers, social judgement perceptions crystallize

throughout the decision-making process and PSFs gain more or less: status, legitimacy, and reputation.

Each of these forms of social judgement are taken into account and different stages of the decision-making

process (WP 04).


Figure 1: Conceptual framework: ‘How do nascent professional services firms manage to attract clients whilst

lacking reputational resources?'


Chapter 3: Methodology This thesis will examine the central focus question: ‘How do nascent professional services firms manage to

attract clients whilst lacking reputational resources?’. Answering this question helps to fill the knowledge

gaps found in existing theories on organizational studies and management research by exploring corporate

reputation and related forms of social judgements that decision-makers render with respect to the social

properties of nascent professional services firms (PSFs). In order to get to the central point to which data

needs to be collected, and the central focus question can be answered, various important research decisions

have to be made in this methodology chapter.

3.1. Research design The two ends of the research continuum for conducting business research are to fill a knowledge gap on the

one end and problem solving on the other (Bryman & Bell, 2013, p. 7). Predominant in this thesis is filling a

knowledge gap because the main purpose of this thesis is to contribute to the existing stock of knowledge

driven by an academic agenda (Saunders, 2012, p. 9). Thus, although the knowledge gap stance offers a

way for applied knowledge creation, more emphasis is placed on theoretically pure research. The degree of

applied knowledge exists in the fact that the topic of this thesis originates from a particular business

phenomenon, and the theory will be tested in a particular business context. Therefore, findings of this thesis

may solve business problems.

The interpretivism philosophy is applicable to this thesis as it aims to discover the subjective meaning of

organizational decision-making regarding interorganizational collaboration. In other words, this philosophy

respects the differences between people and the objects of the social sciences (Bryman & Bell, 2011, p. 16).

Further, this philosophy finds its expression in Max Weber’s (1864-1920) Verstehen approach as this view

embraces both explanation and understanding of causal action (Bryman & Bell, 2011, p. 16). The challenge

this philosophy brings is to enter the social world of the decision-makers’ point of view as opposed to an

objective external point of view. The positivist approach would not be appropriate because gathering facts in

an objective way is better in circumstances to test pre-existing theories, whilst this thesis aims to find the

depth and breadth of answers on particular reputation related questions. Furthermore, because purchase

situations of organizations are not only unique but also complex, business researchers recognize the

interpretivism approach as a means to access the subject’s thinking and behavior (Saunders, 2012, p. 9;

Bryman & Bell, 2013, p. 16).


3.1.1. Research approach

This thesis entails elements of both inductive and deductive theory, but the deductive approach is

predominant. The combination of inductive and deductive theory manifests itself in the back-and-forth

process between theory and primary research (Saunders, 2012, p. 48). This combination of approaches is

apparent in the fact that there is a search for — and explanation of — relationships between constructs, and

at the same time intends to allow meanings to emerge from data and identify patterns and relationships to

build theory (Saunders, 2012, p. 144-148). Additionally, since the theory developed in this thesis is applied to

a specific context, the inductive aspect offers room for further theory improvement. Therefore, this study has

a deductive-inductive approach because data derives- from and creates theory simultaneously.

3.1.2. Research strategy

This thesis applies a qualitative research strategy because this strategy is a means for understanding

organizational decision-making processes (Saunders, 2012, pp. 144-148). The constructs involved are not

yet fully explored and understood in this research context, which makes a qualitative research strategy

suitable to this thesis. Thus, given the evident importance of the subject and limited amount of empirical

research to date, the overall objectives of this thesis is to conduct a qualitative study that comprises semi-

structured in-depth interviewing techniques rather than a quantitative methodology. From the deductive-

inductive theory and qualitative strategy perspective, Grounded Theory is appropriate as this thesis starts

with the formation of an initial conceptual framework, and builds its theory further throughout the research

process (Saunders, 2012, p. 548-549). In other words, collected data will lead to the generation of

predictions that will consequently be tested to confirm, or otherwise, reject the predictions. The constant

reference to data and testing does not only refer to the inductive-deductive approach, but also makes the

findings stronger (Saunders, 2012, p. 567).

3.1.3. Research purpose

The purpose of this thesis is to study a phenomenon at a particular point in time. Therefore, a cross sectional

study will be appropriate for this thesis as it provides a so called ‘snapshot’ of the research setting as it

intends to explain ‘why' and ‘how’ organizations make decisions with regards to exchange partners

(Saunders, 2012, p. 190). Furthermore, the purpose of a cross-sectional research is to describe and

determine the characteristics that exist in a certain social group (i.e. clients), differ in their decision-making,

but may share other characteristics such as collaborating with other organizations (i.e. professional services

firms) (Saunders, 2012, p.190). In the light of this time-horizon and Weber’s verstehen approach, it is logical

to do an exploratory study to see how concepts come together and interact.


3.2. Research strategy and operationalization of concepts This section presents the research context in which primary research will take place, and how the

participants will be sampled based on a specific set of criteria. Additionally, this section provides an

operationalization of the concepts presented in the conceptual framework, by elaborating on the themes and

questions that will be discussed to realize the desired response towards the research question and working

propositions.

3.2.1. Research context

This thesis seeks to contribute to organizational studies and management research by exploring corporate

reputation and related forms of social judgements that organizational decision-makers can render with

respect to the social properties of recently founded professional services firms (PSFs). The context within

which this subject will be investigated is the Marketing Communications Industry (MCI). The purpose of the

MCI is to enable advertisers to communicate effectively and efficiently with their target audiences to acquire

sustainable competitive advantage (Fill, 2011, p. 165). The MCI consists of four primary actors: the media,

the advertisers, the advertising agencies, and support organizations (Fill, 2011, p. 165). The focus of this

thesis is on the relationship between the advertising agency and the advertiser. Essentially, the advertiser is

the client of an advertising agency as it appoints an agency to provide professional services. In the context of

this study this means that (nascent) agencies are the reputation-holder and the advertisers are the

reputation-beholder or evaluator.

This context is deemed as having the ideal circumstances for primary research for several reasons. The year

2008 had a major influence on all industries and so too on the MCI as it is remembered as the year that the

world saw the most severe economic downturn. Agency FHV (BBDO) Amsterdam once had 400 employees

working at its office and today it employs 100 people, whereas another agency firm (DDB) halved its

workforce in two years (Bel, 2008). In the year 2008 to 2010, 310 marketing and communication agencies

went bankrupt in the Netherlands (Faillissementsverslag, 2011). However, 2008 was also the year with new

possibilities, as markets opened up and new media became mainstream and revolutionized the media

landscape since the introduction of television (Gass, 2010). From 2010 onwards, it was accurately predicted

that advertisers will climb out of their shell, invest in agencies again, and the industry will experience a

greater rise of smaller agencies and boutiques (Faillissementsverslag, 2011; Bel, 2008). Therefore, this

industry is deemed as the ideal context for primary research as the industry: is under heavy environmental

influence; includes many client-PSF relations; has a strong growth in nascent PSFs; and a high competitive

environment exists between larger well-established and nascent agencies.


3.2.2. Research setting

Leading scholars on organizational buying behavior state that all organizational behavior is individual

behavior because only an individual as a member of a group can be motivated to take action, analyse the

situation, and make a decision (e.g., Webster & Wind, 1972; Jobber & Lancaster, 2012, p. 104-110; Fill,

2011, p. 77-79; Solomon et al., 2012, p. 194-195). The purchasing situation is influenced by the people

involved in the purchasing process, their job, company size, purchasing task, market, and organizational

performance. This made it necessary to examine the psychological worlds of members that initiated the

purchasing process of advertisers, and how their behavior led to a purchase decision towards nascent PSFs.

In the context of the MCI, this initiator is the marketing director of the advertiser/client that proposes to hire

an advertising agency. Due to the competitive realities of the MCI the marketing director is constantly forced

to develop new relationships with its advertising agencies and in the meantime, extend existing relationships.

Therefore, the individual most likely to provide detailed and rich insights into the selection process of

(nascent) advertising agencies is considered to be the marketing director. The rationale for choosing large

advertisers is that they have larger advertising budgets and it is therefore desired to have insights into why

these advertisers choose to collaborate with nascent advertising agencies with these larger budgets as

opposed to well-established agencies. Additionally, larger advertisers are more likely to put a stronger

emphasis on professional management of collaborative processes with advertising agencies than smaller

ones.

3.2.3. Sampling of participants

Marketing directors will be sampled that work for major advertisers in the Netherlands. The Netherlands is

not only the researcher’s county of origin, but the Dutch advertising industry is also strong and extensive

compared to other worldwide marketing-communications industries (AAI, 2016). Moreover, by some,

Amsterdam is considered as “The Silicon Valley in Advertising/Marketing” (AAD, 2014). Therefore, The

Netherlands will be the country in which marketing directors of large advertisers will be sampled. Each year,

a “Marcom 500” list is developed by Adformatie and illustrates the top 500 advertisers based on advertising

spending. This list will help in the sampling process as 500+ potential organizations are likely to hire

advertising agencies. However, since this is not certain, this 500 list will be paired with tender-process

announcements published at online marketing databases (e.g., Marketing Tribune, Adformatie). These

information pools publish information on initiated collaborations with advertising agencies. Since these

tender-process announcements include a wide variety of agencies, internet pages such as ‘New Kids On

The Block’ (e.g., Adformatie) are subsequently used to select advertisers that considered nascent advertising

agencies in particular. Thus, three information pools are combined for sampling purposes.


In terms of internal- and external validity, the ideal population would have been advertisers at the time of

decision-making that consider both well-established and nascent advertising agencies. However, due to the

researcher’s role as a full-time student, only the adoption of an external researcher is possible and thus the

researcher will not have sufficient access to decision-makers at the time of decision-making. Therefore, it is

desired to sample marketing directors who have initiated a tendering process over the last 10 months so

they could recall the tendering process, and also considered nascent advertising agencies in their decision-

making. This also to reduce the distortion of the participants’ perceptions on the event, which refers to

internal validity. Based on all these criteria, purposive self-selecting sampling is the appropriate sampling

technique. This sample technique will allow the researcher to sample specific cases to understand what the

effects are of corporate reputation whilst selecting (nascent) advertising agencies. This is not deemed

possible through other sampling techniques. Lastly, participants will sampled and interviewed until data

saturation is reached, based on other qualitative research studies on the buying behavior towards PSFs this

point of meaningful will likely be achieved around seven in-depth interviews (Turnbull, 2014; West, 1997;

Farell & Schroder, 1996).

3.2.4. The data collection process

The best possible way to answer the research question and working propositions is, as preciously argued,

through semi-structured interviewing techniques. Face-to-face interviews are ideal, as then also non-verbal

cues can be observed, but telephone interviews are also acceptable. Regardless of the type of interview, an

in-depth interview will be conducted and is by the researcher considered as a purposeful conversation

between two people for at least 40 minutes. A semi-structured ,open-ended, in-depth interview protocol will

be used, which allows discourse and divergence across interview themes and questions to confirm, or

otherwise, reject the predictions. These order of themes and questions are different than the sequence of

formulated working propositions. In fact, questions and themes regarding working proposition (1) about the

task situation will be asked first; then working proposition (4) regarding the decision-making sequence and

forms of social judgement that influence the stages; then a more in-depth exploration of working proposition

(2) which includes the types of reputational attributes; and finally an in-depth exploration of working

proposition (3) themes and questions regarding the reputational strategies that might have influenced the

decision-makers evaluation. Answers by the participants to all these questions and themes will eventually

contribute to answering the central focus question: ‘How do nascent professional services firms manage to

attract clients whilst lacking reputational resources?’ Depending upon the confidentially or sensitivity of

information, interpreting-, indirect-, or probing questions will be asked. However, sometimes the questions

are so crucial to the research project that a direct and straightforward question needs to be asked and

answered. The unfollowing paragraphs demonstrate how the working propositions will be explored.


Firstly, with respect to working proposition one, that is: ‘1) Clients with a relatively high task importance are

less likely to select nascent PSFs to collaborate with.’, themes will be discussed such as: the process itself

and its duration; the decision-making unit who made the decision and why every individual was involved; the

purchase situation itself; and their current and desired network of PSFs. Questions will be asked such as:

“Where there any steps the purchasing managers followed to make the purchasing decision, and if so, why

are these steps needed?”; and “Who were responsible to make the decision on behalf of your organization,

and what was the role of each of these persons in the process?’. Participants may diverge from answering

these questions, but not on questions regarding the purchase situation itself, such as: “What was your

organization looking for?” or “What did you organization really wanted to get done by the (nascent) agency,

and what is the strategic importance of outsourcing these services to PSFs as such?” More specifically,

participants need to reflect upon their consideration between nascent advertising agencies and well-

established ones with regard to the task importance. It is essential to have thorough comparison with- and

amongst the participants in terms of nascent versus well-established agency selection when the task

importance theme is discussed.

Secondly, with regard to working proposition four, that is, ‘4) A nascent PSF must first be perceived as

legitimate before clients begin to evaluate the firm on status- and subsequently on reputational beliefs.’,

themes and questions will be discussed regarding: what the need criteria were; what the long-list criteria

were and how nascent agencies were taken into account at this stage; and finally shortlist criteria in terms of

reputational factors to make the final decision. More specifically, questions regarding need criteria will be

asked such as “What criteria were taken into account by the decision-makers prior to the selection of any

potential (nascent) agency?”; or “What criteria were taken into account by the decision-makers to evaluate

the (nascent) agencies and their proposals?”; and “What criteria were taken into account to select the first

set of agencies and why were there (no) nascent agencies on this list?” Clear answers are desired at

questions and themes as such, whilst participants are allowed to vary on questions regarding the

reputational beliefs such as “Could you please elaborate on the last phase of the process to make the final

decision in terms of reputational factors? It is essential to have thorough comparison with- and amongst the

participants in terms of nascent versus well-established agency selection when the different forms of social

judgements are discussed at different stages of the process. Table 1. and table 2. illustrate how the

legitimacy and status constructs of this working proposition will be measured in a qualitative way. Thus,

illustrative qualitative interview questions are formulated based on the decomposed theoretical definition of

each construct, as the operationalization of a construct must be closely tied to its definition. The third

construct, reputational beliefs, will be partly addressed under this research theme, but more in-depth at the

next working proposition.


Thirdly, in the light of working proposition two, that is, ‘2) Clients rely more heavily on expressive- and social-

reputational dimensions than on functional reputational dimensions whilst evaluating nascent PSFs’, themes

and questions will be asked about the reputational dimensions and underlying attributes. Themes will be

discussed such as: the functional reputational dimensions; the social reputational dimensions; and the

expressive reputational dimensions. More specifically, questions regarding the reputational dimensions

include e.g.: “To what extent do you think the agency you selected is able to create superior solutions for

your problems?’; “Do you believe the nascent agency has the ability to act with honesty and integrity in all

stakeholder relations?”; and “To what extent does the agency’s vision appeals to you?”. Questions as such

will be asked until the dimensions and underlying attributes are fully saturated. It is essential to have

thorough comparison with- and amongst the participants in terms of nascent versus well-established agency

selection when the reputational dimensions are discussed. Table 3. illustrates how the reputation construct

will be measured in-depth in a qualitative way through illustrative questions.


Table 2

Concept 2: Corporate status

Theoretical definition: “An organization’s position in a hierarchical order. That position reflect some diffuse sense of better or worse that is indirectly tied to past behaviors, but is more directly tied to the pattern of relations and affiliations in which the actor does and does not choose to engage.” (Poldony,

2005)

Operational definition: The relative social position of an organization in the industry.

Illustrative qualitative interview questions: - To what extent reflects your organization’s status with that of the PSF? - To what extent have you communicated the collaboration with the PSF? - To what extent have you avoided PSF selection that does not reflect your own social status? - Do you think the PSF that you selected for your specific type of need is the best in the field?- To what extent do you think the PSF that you selected is central in a social network?- Where does the PSF fit in the ranked order of similar organizations?

Table 1

Concept 1: Corporate Legitimacy

Theoretical definition: ‘A generalized perception of organizational actions as “desirable, proper or appropriate within one socially constructed system of norms, values, beliefs and definitions.” (Suchman, 1995)

Operational definition: The process the purchasing organization goes through to make a decision.

Illustrative qualitative interview questions: - Do you think the PSF is accepted by other industry players? - Do you think the PSF possesses valuable industry connections? - Does the PSF belong to any class or category (which is already familiar and nonproblemattc)?- Is the nascent PSF beneficial to you or the social group you belong to?

Lastly, with respect to working proposition three, that is: ‘3) Clients are primarily persuaded by endowment-

rather than reputation-borrowing- and building strategies whilst evaluating nascent PSFs.’, three main

themes will be asked that evolve around each of the reputation strategies. Questions around the endowment

strategy will be asked such as: “To what extent have the nascent agency amplified their founders reputation

to increase organizational reputation?”. Or, regarding reputation-borrowing strategies: “Do you think the

nascent agency benefits from having prestigious affiliates such as clients, suppliers, or network?” Finally,

questions will be asked regarding the reputation-building theme, such as: “How did you noticed the nascent

agency in the industry, for example, Have you read about them?” Table 4. through 7 illustrates how the

reputational strategies will be measured in-depth in a qualitative way through illustrative questions.


Table 3

Concept 3: Corporate reputation

Theoretical definition: “Corporate reputation is a relatively stable, issue specific aggregate perceptual representation of a company’s past actions and future prospects compared against some standard.” (Walker, 2010)

Operational definition: Corporate reputation is a construct with multiple dimensions, each dimension has various attributes that contribute to the overall corporate reputation of a firm.

Illustrative qualitative interview questions: Customer Orientation/Centricity - To what extent is the PSF really committed to the relationship and responsive to opportunities/needs?- Do you think the employees of the PSF treats your business courteously (i.e. trusted)?- Do you have the feeling that this PSF is able to establish and maintain valuable b-relationships?

Illustrative qualitative interview questions: Good Employer - Did it ever occurred to you that you would be willing to work for the PSF or run it yourself? - To what extent do you think that the PSF pays attention to the needs of its employees? - To what extent do you believe that the services providers at the PSF is a winning team? - Do you think company X is a preferred employer by the industry?

Illustrative qualitative interview questions: Reliable and Financially Strong Company - To what extent do you believe that the PSF is outperforming others in the industry?- To what extent do you believe the PSF is taking advantage of market opportunities?

- Do you have faith in vision of the PSF and that they have strong prospects for future growth?

Illustrative qualitative interview questions: Product and Service Quality - To what extent did the PSF industry experience matters? - To what extent is the PSF at the forefront of innovation? - Do you think the services by the PSF are recognized by the industry and community?- What makes the PSF a preferred supplier of yours?

Illustrative qualitative interview questions: Social and Environmental Responsibility - What can you say about the PSF efforts to create new jobs? - Are you aware of any good causes that the PSF is supporting?- Do you believe the PSF has the ability to act with honesty and integrity in all stakeholder relations?


Table 4

Concept 4: Reputation-borrowing

Theoretical definition: “reputation-borrowing is based on the assumption that young entrepreneurial firms that lack their own reputation can “borrow” the reputation of third parties through affiliation with them” (Gulati & Higgins, 2003)

Operational definition: How much a young firm benefit from signaling value of affiliating with high-reputation others.

Illustrative qualitative interview questions: - Do you think the PSF benefits of having prestigious affiliates such as clients, suppliers, or network?- To what extent have you selected the PSF because of its affiliaties with other major firms in the industry?- Did the PSF to any extent signaled different endorsements or credentials from other industry players?

Table 6

Concept 6: Reputation endowment

Theoretical definition: “Reputation is defined by the previous industry experience that organizational members bring to new firms influences stakeholder perceptions about the firms’ potential and access to capital” (Beckman, Burton & O’Reilly, 2007)

Operational definition: Individual(s) started the firm has accumulated experience and based on it some personal reputational capital — that can be used by stakeholders as a signal of quality and underlying

potential for the new firm.

Illustrative qualitative interview questions: - What can you say about the location/organizational structure of the PSF? - To what extent have the PSF amplified their founders reputation?- Did you met the PSF team working on your brands? - How did the pitch meeting looked like, who were present from the agencies side?

Table 5

Concept 5: Reputation-building

Theoretical definition: “Reputation-building perspective acknowledges the inapplicability of most

strategies used by established organizations for young entrepreneurial firms and try to identify strategies that address the unique challenges faced by these firms” (Petkova, Rindova & Gupta, 2008)

Operational definition: New firms, although resource constrained, can devise some unique strategies for developing their initial reputation.

Illustrative qualitative interview questions: - How did you noticed the PSF in the industry? I.g. Have you read about them?- Have the PSF won any awards or winning contests that you are aware of? - Would you say that the PSF has to some extent awareness in the industry?- Does the PSF communicate their innovate ideas? - Do you think the PSF is doing any visibility enhancing activities? - Are you aware of the PSF progress towards milestones or reached milestones?

3.2.5. The data analyzing process

The interviews will be audio taped and later transcribed for the data analysis process. Thematic analysis will

be used to analyse the transcribed interviews through NVivo® software. This technique helps to understand

and interpret the meanings and experiences of the participants, this so researcher bias and error is reduced.

The data will be undertaken using three levels of coding: open, axial, and selective. The process will start

with a list of initial codes that are developed based on the existing literature found. The researcher will then

listen to the interview recordings and apply a content analysis on the transcripts so initial themes can be

developed. Consequently, themes will be explored further by going back and forward between interview data

and codes until the themes are fully explored and relationships between categories are recognized. Finally, a

theory will be be produced through the selection and integration of concepts.


Table 7

Concept 7: Executive reputation

Theoretical definition: Executive reputation is the collective judgment of an executive’s ability to consistently deliver value over time; something that reduces stakeholders’ uncertainty in predicting an executive’s future behavior; and an asset that also may have a positive impact on organizational

performance (Barnett & Pollock, 2012)

Operational definition: Executive reputation can be an important signal of the quality he or she delivers

over time.

Illustrative qualitative interview questions: - To what extent did you relied on the executives’ reputation instead of the PSF reputation? - What could you say about the functional background and education level of the service providers?- Do you feel attracted to the management style of the service providers?- Would you say that the PS provider working at the PSF are charismatic and have great personalities?

Chapter 4: Results Through the use of four formulated working propositions, data collection aimed to answer the central focus

question: How do nascent professional services firms manage to attract clients whilst lacking reputational

resources? This chapter presents the performed research activities and the results of the primary research

itself.

4.1. Performed research activities This section describes the performed research activities in the time-frame August 2016 through January

2017. The Marketing Communications Industry (MCI) was suited for this thesis for various reasons. First,

advertising agencies are defined as professional services firms (PSFs), as agencies employ intellectual

individuals that deliver customized solutions to complex client problems. Second, the MCI is operating under

high environmental velocity due to social, technological and economic trends. Third, the MCI includes more

nascent agencies and boutiques than ever before due to the 2008 crises and environmental trends such as

digital- and new media. Third, corporate reputation and related constructs are of particular importance to this

industry, as many social judgements are formed through social interaction and under heavy influence by third

parties such as industry periodicals and awards. Lastly, the industry contains clients of various sizes, from

fortune 500 companies to medium- to large sized firms.

4.1.1. Critical methodological evaluation on the used methods and the sampling

Because corporate reputation and related constructs are not objectively given and measurable, and the

literature is scarce on nascent PSFs evaluation, a qualitative- instead of a quantitative methodology is used.

Furthermore, these constructs are heavily influenced by the context of information exchange, including the

attitudes of the decision-makers, previous interactions, and characteristics of the business environment.

Therefore, a qualitative approach is deemed as an effective way to allow rich insights to emerge about this

little known phenomenon. Quantitative research could be conducted at a later stage to test the qualitative

research findings across industries and beyond geographical boundaries by numerical data collection.

Due to the researcher’s role as a full-time student, the role of an ‘external researcher’ was appropriate. In

this role the researcher applied purposive self-selecting sampling technique. This sampling technique is

applied whilst taken into account the criteria: that organizations had to be facilitated in the Netherlands;

belong to the largest groups of clients (i.e. advertisers); and decides/decided to employ a (nascent) PSF (i.e.

advertising agency) to increases ones value creation. Thus, this sample technique allowed the researcher to

sample specific cases to understand what the effects are of corporate reputation in collaborating with

nascent advertising agencies. This was not deemed possible through other sampling techniques.


Based on these purposive self-selecting sampling criteria, the researcher identified 500+ potential

organizations within which to conduct research because these organizations are very likely to hire PSFs (see

appendix A.1. at Compact Disc). Online marketing-magazine databases from The Netherlands helped in this

process as these information pools publish information on initiated collaborations with advertising agencies

(i.e.Marketing Tribune, Adformatie, and Communication Tribune). Additionally, internet websites are used that

publishes press-releases on recently initiated tender-processes such as Marketing Tribune and Adformatie

(see appendix A.2. at Compact Disc). Lastly, pages such as ‘New Kids On The Block’ from the Adformatie

were helpful to select nascent advertising agencies (see appendix A.3. at Compact Disc). To the researcher’s

knowledge, these are the only sources of information in the Dutch MCI.

Participants were sampled and interviewed until a data saturation point was reached. Like several qualitative

research studies found on the buying behavior towards PSFs, this point of meaningful data was achieved at

a minimum of around seven in-depth interviews (Turnbull, 2014; West, 1997; Farell & Schroder, 1996).

However, the actual number of participants interviewed is ten. Table 8 illustrates the sample profile of the

interviewees, additional information in this table is retrieved from the corporate websites. Only medium- to

large-sized organizations have been sampled that had a decision-making process over the last 12 months,

this to ensure that the participants could recall the tendering process and how the social judgements were

formed. This also to reduce the distortion of the participants’ perceptions on the event, which refers to

internal validity. The ideal population would have been advertisers at the time of decision-making for a better

internal validity, but due to the researcher’s external researcher role he did not had access to such a sample.

In terms of external validity, transferability is only possible to similar purchase situations in the MCI industry

and professional services sector.


Table 8.

Sample profile of interviewees

# Gender Role Industry Sector HQ Market Revenue*

1 Male CMO Telecommunications NL Benelux 1.5

2 Female CMO Telecommunications UK Worldwide 40.3

3 Male CMO Transportation NL Europe 5.1

4 Male BM Philantrophy CH Worldwide 0.8

5 Male VPM Telecommunications UK Wordwide 48.6

6 Male BM Beverages BE Europe 0.3

7 Female CMO Food processing CH Worldwide 88.8

8 Female BM Courier NL Europe 4.25

9 Male CMO Food processing NL Wordwide 11.4

10 Male VPM Food processing UK Wordwide 51.2

*Billions $

The interviewees were asked if they have an active agency network, and whether they collaborate with

nascent advertising agencies. All participants reported to have an active agency network and work with

nascent agencies, but surely not all of them considered nascent agencies during their latest decision-making

process for the long-list (see table 9.). However, all participants were able to recall an earlier process, and

their reasons, when they chose a nascent advertising agency. Therefore, also the task situation from which

they recalled their latest decision-making process differed amongst them. Some interviewees were recently

looking for a generic strategic partner, whereas others where looking for a partner specialized in a specific

discipline. By looking at table 9., a general conclusion can already be drawn regarding the type of task

situation and the chances of nascent advertising agencies in being selected.

4.1.2. Critical methodological evaluation on the data collection process

Once access has been gained, it was desired to have conducted semi-structured in-depth interviews in a

face-to-face setting, because this increases the self-disclosure of the participants and reveals non-verbal

cues. This technique was particularly helpful because it allowed to build rapport and empathy whilst

collecting data. However, eventually four of the ten in-depth interviews were conducted via telephone.

Although face-to-face was desired, the anonymity of telephone interviews helped in terms of self-disclosure

nonetheless. Telephone interviews were, as requested, conducted in a conference room to limit participant

bias and error. The semi-structured in-depth interviews were guided by a set of themes initially informed by

literature, and formed the basis of the interview schedule (see appendix B.2. at Compact Disc). This less

structured approach enabled meanings to be explored and themes to arise whilst interviewing.


Table 9.

Sample profile of interviewees and procurement information

# Type of task situation Agency network

Longlist Shortlist Nascent chosen

1 Strategic partner need YES* NO NO NO

2 Specific discipline need YES* YES YES YES

3 Strategic partner need YES* NO NO NO

4 Specific discipline need YES* YES NO NO

5 Strategic partner YES* NO NO NO

6 Various YES* YES YES NO

7 Digital strategic partner YES* YES NO NO

8 Specific discipline need YES* YES YES NO

9 Specific discipline need YES* YES YES NO

10 Specific discipline need YES* YES YES YES

*Including nascent advertising agencies

An in-depth interview was by the researcher considered as a purposeful conversation between two people to

establish rapport and ask concise and unambiguous questions for at least 40 minutes. A pre-test interview

have been conducted with one participant randomly selected from the sampling frame. The pilot interview

enabled the researcher to reduce researcher error by adjusting terminology and questions based on the

interviewees reaction to questions. All interviews were audio-taped and later transcribed and reviewed by the

researcher (see appendix B.1. at Compact Disc). Whilst interviewing, the researcher was aware that

participants might have given socially desirable answers when question were asked such as whether there

was consensus amongst the decision-makers, as the participants interviewed were the highest in the

decision-making chain-of-command (i.e. marketing directors). Thus, depending upon the confidentially or

sensitivity of information, interpreting, indirect, or probing questions were asked. Most questions were asked

explicitly, and also follow-up questions were commonly asked. This also with respect to the semi-structured

nature of the data collection process.

4.1.3. Critical methodological evaluation on the data analyzing process

In the light of this inductive-deductive approach, the collected data has been analyzed using a number of

defined procedures between October 2016 and January 2017. Thematic analysis was used to analyse the

transcribed interviews through NVivo® software (see appendix B.3. at Compact Disc). This technique helped

to understand and interpret the meanings and experiences of the participants, this so researcher bias and

error is reduced. The data was undertaken using three levels of coding: open, axial, and selective. The

process started with a list of initial codes that were developed based on the existing literature found. The

researcher then listened to the interview recordings and applied a content analysis on the transcripts so

initial themes were developed. Consequently, themes have been explored further by going back and forward

between interview data and codes until the themes were fully explored and relationships between categories

are recognized (see appendix B.4. at Compact Disc for grounded theory map). Finally, a theory have been

produced through the selection and integration of concepts. The researcher called or emailed the

participants to do final checking only for the verbatim translated quotes used in the results section to check

for factual accuracy. This also helped to increase internal validity, and to clarify cause and effect relations in

the findings.

.


4.2. Results theme 1: Task importance The first theme that was covered was the ‘task importance’ theme. It was found that every advertiser has an

agency network which amongst the participants varies in nature. On the one hand, a very organic network

exists, and on the other a highly hierarchical network is apparent amongst advertisers. Regardless of the

type of collaboration network, the place in the network for which the advertiser searches an agency has a

strong influence on the degree to which decision-makers evaluate the social properties of nascent agencies.

It was found that a crucial task situation involves an agency being selected for having a central, strategic,

role in the advertisers’ network, whereas a less important task situation involves the need for a specific

discipline. Although some advertisers decide to take the lead in their own hands (e.g., Participant 04), others

appoint a lead agency to orchestrate the network of smaller agencies (e.g., participant 05). Additionally,

another type of network was reported by Participant 07, “With my team and agencies, I function as a co-

strategist for all the other marketing departments of our business units, we function as safety-net or

knowledge-base for complex marketing issues.” Additionally, she (Participant 07) said: “The agency that has

the lead varies per project, yet smaller agencies are least likely to get the lead as they are more focused on

a specific execution.” Moreover, half of the participants said something in line with Participant 03, as he

explained that “It is more and more common for us and the industry that we let agencies work together for

best results.” Thus, is appears that advertisers spread the risk by having a combination of agencies, in which

smaller — nascent — agencies have a more subordinate role to the well-established strategic agencies.

4.2.1. Relationship types

Within this network of agencies, it was found that advertisers have three types of relationships with agencies.

First, a strategic (creative) partnership relationship was noted as the strongest relationship possible with

advertising agencies, this is also the type of task situation in which most people are involved as it involves

large annual budgets. As mentioned by Participant 04: “A strategic sparring partner was desired by our team,

a partner that looks at our business in a creative and objective way, a partner that can challenge us and

prove us wrong.” Similarly, Participant 03 illustrated “The strategic fundament of the network is the

relationship with our N=5 agency, they set the course of our strategy and provide some but surely not all

executional activities.” Statements as such are in line with the vast majority of the participants, only one

participant mentioned that a nascent agency might take the lead, as reported by Participant 07: “The agency

that has the lead varies per project, yet smaller agencies are least likely to get the lead as they are more

focused on a specific execution but sometimes it might happen.”

The second type of relationship mentioned by all participants is defined by its specific media/communications

discipline, for below-the-line and through-the-line communications primarily. As reported by Participant 02,


“We have various nascent agencies as partners that help us with special disciplines such as a particular

vision, talent, and below-the-line communication such as direct mailing.” In the same light, Participant 06

said “We work with various smaller agencies that are specialized in a specific discipline, here a generic — a

more well-established — agency can better not do this.” This type of relationship is recognized by all

participants, and suggests that nascent advertising agencies are primarily chosen for specific specialization

and smaller budgets. However, as reported by Participant 01, “It is very common that a big agency

represents a small proportion of the overall purchasing budget. It may happen that agencies are not always

of value and simply represent a small proportion of the purchasing budget.”

Finally, media planning and media purchasing is a third type of relationship that emerged, amongst the

minority of participants. “We have a variety of agencies for specific disciplines, but additionally we have a

different agency that solely buys the media for us.” (Participant 06). Additionally, participant 08 said, “Vizeum

is our full-service media agency, they fulfill a strategic role but most of the time they propose media solutions,

media buying, and media planning.”

4.2.2. Buying center

The ‘task importance’ is to a large extent determined by, and influenced by, the decision-makers making the

decision. In general, the closer the place the prospected advertising agency will occupy in the advertisers’

network, the more budget is involved and thus more people need to make the decision. As reported by

Participant 05, “The process is only attended by the people that concerns the purchasing decision, and the

type of purchase situation effects the amount of people involved.” Likewise, Participant 06 said that “the

decision process is attended by various levels of the organization due to the importance and the profound

decisions that often have to be made in a spare amount of time.” In terms of the amount of people involved

in the process, Participant 03 said: “There were around five to seven people that participated during the

process, each person has his/her contribution to the overall process.” Similarly, Participant 5 mentioned “I

have appointed five to six people to help me making the decision, these persons are my fellow marketing

managers but also co-directors from our headquarters, such as finance and corporate reputations.” Like the

majority of the participants, Participant 08 elaborated more specifically on the agency- and budget size

relationship and the role of finance, as she said: “We have a wide variety of agencies working for us, in which

larger agencies handles larger budgets and smaller agencies handles smaller budgets for specific

disciplines.” However, an unorthodox yet interesting answer was given by Participant 01, as he said that “To

our company it is also very common that a big agency represents a small proportion of the overall

purchasing budget, and the larger proportion is dispersed amongst smaller agencies.” These findings

suggest that when the task situation involves more risk then more people are involved. At moments as such


there is more reliance on reputational factors which makes it least likely for nascent firms in being selected.

At times when there are nascent firms being selected to collaborate on a strategic level, then advertisers

decide to spread the risk amongst a group of smaller agencies.

The final trend that differs considerably amongst participants is the different role sets people occupy during

the decision-making process. As explained by Participant 03 “I was the initiator and head of the decision-

making unit but also daily head of the marketing department”. “I have appointed someone who did the

planning and paperwork, but also others of the marketing department were present such as the commercial

director.”, he (Participant 03) continuous. Participant 07 reported “We believe in collaboration and seeing

each other as equals, there is always consensus in the decisions we make”. Oppositely, Participant 05 said

”The power and role of someone in the decision-making unit is similar to the normal chain-of-command,

country directors will always have a greater say than me.” In the same light, yet a different finding was found

in the quote of Participant 01, as he said “Bottom line is that the ones who work with the potential agency on

a daily basis have a greater say in the overall evaluation than others”. Findings as such suggest that

particularly decision-makers at the highest hierarchical position of the decision-making unit are likely to

influence others whilst decision-making. Thus, hypothetically, marketing directors who have close ties with

nascent advertising agencies are able to recommend these firms and let them participate in the process.

However, no clear findings were found that support such a hypothetical statement whilst exploring this

theme, yet the theme presented in section 4.4. will provide some evidence regarding the initiators’ decision-

making power.

Concluding, the aforementioned results suggest that particularly well-established agencies are chosen for

creative strategic partnerships whereas specific media disciplines and media buying relationship are more

transactional and specified to nascent agencies. However, it does happen that nascent agencies are being

selected for creative strategic partnerships but only under certain reputational conditions as this results

section will explain later (see section 4.4). At this point, it can be concluded however that one of these

conditions are the superior social ties the nascent agency has with the leading decision-maker.

Consequently, the initiator influence others in the decision-making process through their expertise,

experience, and persuasion. However, overall, the chances are little for a nascent agency in being selected

as creative strategic partner for multiple brands, as the purchasing situation involves high levels of risk

because a new type of collaboration will be contracted for multiple years. At moments as such, the

advertisers’ organization is faced with an unstructured problem and aims to solve it as quickly as possible

with a special group of people. In contrast, ‘media purchasing’ and a ‘specific communication discipline’

involves less risk, as this is a structured problem or occurring situation, and increases the chances of


nascent agencies in being selected. In terms of risk, it can be concluded that the task situation of advertisers

is influenced by various taxonomies of risk. Particularly: financial- (i.e. agency investment), performance- (i.e.

making the right agency choice to realize/maintain corporate performances), social- (loosing ones respect

towards coworkers), psychological- (i.e. loosing ones job for making wrong decision), and time-risk (i.e.

maintain response to market opportunities). Moreover, it is recognized by the participants that these types of

risk increases when strategic creative services are being purchased. The more risk, the more people are

involved, the longer the process, and the less likely nascent firms are selected.

4.3. Results theme 2: Decision-making process and related constructs The second theme that emerged was the ‘decision-making process’ theme. Findings suggest that the

amount of decision-making stages differs amongst participants. However, regardless of the amount of

stages, the following three stages are always evident: 1) the request for briefing at which need criteria are

defined; 2) the request for information at which selection criteria are taken into account to request

information from a specific set of agencies; and 3) the request for proposals which involves the advertiser

evaluating the prospected agency based on reputational factors. In other words, there are three sets of

criteria that influences the advertiser at different stages of the decision-making process: need criteria, search

criteria, and evaluation criteria. Essentially, the decision-makers move from a position of being unaware of

the problem to being convinced that the services of a particular agency or agencies are the most appropriate

to solving the advertisers’ problem. Indeed, it was found that the advertiser might decide to hire more than

one agency if the opportunity arises.

4.3.1. Need criteria

Need criteria are taken into account by all participants during the request for briefing stage. The participants

said that this stage includes the type of service requirements that the advertiser needs in order to solve its

business problem and maintain competitive advantage. In essence, it describes the advertisers’ needs,

motives, and/or goals it aims to achieve through the purchase of extern resources based on a set of

prerequisites. As illustrated by Participant 04: “Before we contact any agency, we come up with an internal

task description which includes what the problem is and what we need, this is then translated into a briefing

for the potential agencies.” This statement is in line with the majority of the participants, additionally however

Participant 06 reported: “Once the tendering team is composed, the briefing or problem definition stage is the

first most critical part of the whole process and takes most of the time.” Thus, not only is the need defined by

the task situation but also other (need) criteria are taken into account. These criteria are by some also

termed as ‘lockout criteria’, because organizations may be “locked out” from participation. Three types of

criteria as such emerged: 1) agencies should not have any conflicting accounts; 2) the agencies should be


facilitated the Netherlands not only because of the close spacial proximity but also in order to understand the

Dutch culture and thus able to localize campaigns; and 3) agencies must have the industry knowledge in

which the advertiser operates.

The conflicting account criterion is reported by all participants and elaborated on by Participant 08, as she

said that: “No matter the size of the agency, when they are working for the competition a conflict of interest

occurs at their side and thus we will not consider such an agency.” This suggest that both well-established

and nascent agencies are unlikely to be selected when they are working for an advertiser that directly

competes with the evaluating advertiser. Second, the local presence criterion is given by the majority of the

participants, as Participant 07 illustrates: “Our organization thinks global but acts local, of course it helps to

have international agencies working for you but we need to specify campaigns to the Dutch market.”

Answers as such suggest that nascent agencies could outperform well-established ones, or in particular

international agencies, because nascent agencies are primarily localized. Finally, with regards to the industry

knowledge criterion, Participant 05 clearly reported that “An agency must have the industry knowledge that

we are active in, they must have some degree of knowledge of our business.” A statement as such is

reported by half of the participants. Overall, some participants stated that there should not be too much

criteria at this stage, otherwise, as illustrated by Participant 03: “We should not define and specify too much

because otherwise you will get the ‘Lamppost in the middle of the asphalted parking lot’ phenomenon.”

Combining these findings suggests that a nascent advertising agency must have the industry knowledge of a

potential client, whilst not having any accounts from other advertisers that compete with the evaluating client

in the same industry. This might seem as a paradox for a nascent advertising agency, but it also stresses the

importance of executive reputation to nascent PSFs as executives could have the industry knowledge/

experience on an individual level.


Table 9.

Need criteria before any agency is searched for

Criteria Mentioned Importance*

Conflicting Accounts 10 times Crucial*

Local Presence 7 times Crucial*

Client Industry Knowledge 5 times Important*

*Particularly considered whilst evaluating nascent agencies

4.3.2. Selection criteria

The second stage described by all participants is referred to as the request for information stage. This stage

is considered as a general information search stage to select the first set of potential advertising agencies,

also termed as the long-list. As illustrated by Participant 05 ”The actual decision-making process starts with a

broad group of agencies, roughly eight, based on a set of criteria.” Additionally, as explained by participant

03, “The information search stage is used to acquire information about the agencies.” When questions were

asked that involve the type of criteria that were taken into account, all participants referred to attributes that

are particularly part status dimensions. As illustrated by Table 13, six criteria are taken into account to

formulate the long-list of agencies. The most notable result with respect to the status dimensions is that large

advertisers want to work with the best advertising agencies out there regardless of the league in which they

are playing. As reported by Participant 01: “The question you have is complex and the level of execution is

high, so you (an advertiser) wants to work with the best in its category.” Similarly, Participant 04 said ”Within

certain agency categories we look for the best of its kind, apart from all the other criteria we take into

account.” These statements are in line with almost all participants interviewed. These findings suggest that if

nascent agencies manage to outperform in a particular agency league, then also these nascent firms will be

considered and could be selected for the long-list.


Table 13.

Status dimensions of advertising agencies

Dimension Cited Relevancy Illustrative interview quote

Status level 9 Important* “The question you have is complex and level of execution is high, so we want to work with the best in its category.” (Participant 01)

Status match 9 Less important “As long as you have big advertisers there have to be big agencies to which advertisers are able to lean to, international or not.” (Participant 10)

Status

dependency

6 Less important* “The agencies we discuss should not be too dependent on our work, they must have work from other advertisers.” (Participant 01)

Status

signaling

5 Important "The relationship we have with most advertising agencies is very visible, you have to approach this very carefully and consciously.” (Participant 07)

Network

centricity

4 Important “If a prospective agency knows that our current relationship is not well, or that we are planning to work on something new, and them they ask us to drink a coffee, then chances are high we will work with them without further agency consideration or place them at longlist” (Participant 04)

Vision (Match) 8 Crucial* “The vision of the agency on the current environment is of critical impotence and must match with that of ours. This vision will be reflected in their work and thus on the solutions for us” (Participant 03)


In additional to the ´status level´ criterion that is taken into account by advertisers, it was found amongst the

vast majority of the participants that advertisers aim to select agencies for the long-list that match in terms of

capacity. With that they mean that agencies must handle the relative amount of workload that an advertiser

might assign to a particular agency. As reported by Participant 10 “As long as you have big advertisers there

have to be big agencies to which advertisers are able to lean to, international or not.“ Thirdly, it was found

that agencies should not be too dependent on the work of the advertiser, whether an agency is nascent or

well-established. This criterion is by half of the participants called ‘status dependency’, and is considered as

a different criterion than ‘status match’ because an agency might be lower in status but must not be

dependent on the high-status advertisers' work. As mentioned by Participant 01, “The agencies we discuss

should not be too dependent on our work, they must have work from other advertisers.” These findings

suggest that both well-established and nascent agencies should not be too dependent on an advertisers’

work. This criterion provides the advertiser knowledge that an agency is stable, decreases potential conflicts

of interest, and guarantees a firms objectivity so it will not make strange moves to hold the advertisers’

account. One might say that the ‘status match’ criterion might prevent nascent agencies to compete against

the larger ones, however as Participant 01 illustrated this is not always the case: “It is very common that a

big agency represents a small proportion of the overall purchasing budget. It may happen that big agencies

are not always of value and simply represent a small proportion of the purchasing budget as opposed to

nascent agencies.”

Beyond status level and status dependency, another interesting yet less mentioned criterion was ’status

signaling’. As mentioned by Participant 07, “The relationship we have with most advertising agencies is very

visible, you have to approach the selection of agencies very carefully and consciously.” This is in line with

Participant 03, as he said that “tender announcements, tender process progress, and considered agencies

are being mentioned in press-releases to keep the industry and outside world informed.” “When it involves

huge budgets some advertisers are forced to make public announcements as they are (semi) governmental”

he continuous (Participant 03). This criterion might be of particular importance when agencies are

considered on a more superficial level, simply by evaluating the degree of reputation favorability in terms of

status position at that particular moment in time. In other words, these results suggest that advertisers might

select nascent agencies at that particular point in time rather than looking at past- or potential behavior of

that agency, this either help or hinder nascent agencies in being selected. Questions such as “how are we,

as an advertiser, and this potential agency, perceived by others in the industry and to what extent is this

logical?” are asked by the advertiser to reduce business risk and uncertainty.


A different important finding amongst the minority of the participants was the ‘network centricity’

criterion. Participant 04 said: “If an agency knows that our current relationship is not well via other

connections of ours, or that we are planning to work on something new, then chances are high we will put

them at the long-list.” A statement that says more or less the same yet from a different angle is given by

Participant 05, as he said that: “Nascent agencies we work with have managed to embrace well-established

ones, which is a huge plus. These nascent agencies add something to the well-established ones.” Lastly, it

was found that the vision of the (nascent) advertising agency is an important criterion to the majority of the

participants too. As illustrated by Participant 03: “The vision of the agency on the current environment is of

critical importance and must match with that of ours. This vision will eventually be reflected in their work for

us and the solutions they come up with.” Moreover, as some participants reported and so too Participant 03,

“Without a vision there is no agency, a vision gives an agency a reason of existence. It is their fresh view on

the world and the industry that makes them different from the rest.” Findings as such suggest that even

nascent agencies that are low in economic class (i.e. having a lack of capital or handling larger advertiser

budgets) might be perceived as being high in status because of their unique vision, specialization, or

combination of both. Thus, results suggest that the vision of the nascent agency might give them access to a

particular league to play in, but only if this vision is accepted by the potential client and the industry. Indeed,

a unique vision that hits the sweet spot of the advertiser might outperform a well-established ones’ vision in

terms of long-list selection, and/or may make advertisers decide to give nascent agencies the strategic lead

whilst giving well-established ones the task to execute the ideas with their capacity and scope of disciplines.

4.3.3. Evaluation criteria Almost all participants reported that at the end of the request for information stage, 2 to 4 agencies are

selected and provided with the tender briefing and continue to the final stage. This stage is by nearly all

participants called the ‘request for proposals stage’, may take several months, and involves the advertiser

evaluating the prospected agency based on reputational factors factors. Additionally, the majority of the

participants reported that also the creative/strategic plans the advertising agency has in mind are presented

and assessed based on the same set of reputational criteria. As illustrated by Participant 03 “At this stage

the agencies have to come up with a strategic proposal base on our briefing, also some extra key questions

are asked.” Only one participant (Participant 04) said that “Sometimes it is so clear that there is a perfect-

match that we stop the process directly after the request for information stage and start working together.”

The next paragraph briefly introduces some general evaluation criteria whereas the next section elaborates

further and in full on the evaluation criteria — that is — the reputational dimensions and underlying attributes.


At the ‘request for proposals stage’ some advertisers decide to invite the potential agencies to the

advertisers’ office, whereas other advertisers visit potential the advertising agencies. As explained by

Participant 03, “At the second request for information stage, or request for proposals stage, we visit the

agencies and they present their credentials.” Additionally, he said: “This also so we can see whom will be

working on the account.” (Participant 03) Likewise, Participant 07 mentioned that their organization will visit

the agencies to see whether there is a chemistry but also to see whether their assumptions made in the

request for information stage are correct. Furthermore, as reported by Participant 06: “Based on the quality

of the proposal, the desired results, and a combination of budget and chemistry, the actual decision is made

at this stage.” Participant 08 added, “the request for proposals stage sometimes also includes the request for

a quotation document, which refers to the agency’s hour rates and how they divide the budgets that we will

assign to them.” Moreover, Participant 03 said that “It is also common to ask for a request for value

document, this refers to a questionnaire asking questions how the agency can further be of value to the

advertiser.” These findings highlight the importance of executive reputation, as credentials include the work

developed in the past and specific details regarding the agencies account team. Furthermore, this stage

suggest an additional effect when the legitimacy- and status perceptions at the previous stages are

confirmed at the evaluative stage and are congruent with each other.

4.4. Results theme 3: Reputational dimensions and underlying attributes The need and selection criteria have been explored in the previous section as they are linked to the first two

stages of the process, whereas this section explores the evaluation criteria that come into play at the last

stage of the decision-making. Evaluation criteria are taken into account by all participants during the request

for proposals stage, whilst assessing the agencies involved, its personnel, various documentations, as well

as the final product that agencies propose to solve the advertisers’ problem. Essentially, these evaluation

criteria evolve around the four broad reputational dimensions: functional reputational dimensions, social

reputational dimensions, expressive reputational dimensions, and executive reputational dimensions. These

dimensions and underlying attributes will be presented in the subsequent paragraphs.

4.4.1. Functional reputational dimensions and underlying attributes

When questions were asked that suit the functional reputational dimensions various underlying attributes/

criteria came to light with respect to nascent agencies as well as well-established ones. Table 10 illustrates

the functional reputational dimensions with the underlying attributes, and to what extent these attributes are

by the participants described as important. The most notable results with respect to the functional

reputational dimensions and how this differs amongst larger — well established — agencies and nascent

agencies can be explained through four main criterion, these are: scope, scale, specialization, and


adaptability. Whereas scope and scale are primarily decisive when well-established agencies are evaluated,

nascent agencies are chosen for its specialization and adaptability to environmental trends. However, this is

not as black as white as it may seem as subsequent paragraphs will demonstrate.

Firstly, in general, large advertisers prefer well established — generic — agencies when their business asks

for a scope of disciplines. As reported by the majority of the participant, “In some scenarios it is better to

outsource to a larger agency because of their diversity of people and disciplines. This is something nascent

agencies have not realized or find it difficult to realize.” (Participant 07) However it do is becoming more

common for advertisers to hire a combination of nascent agencies to achieve the same scope. As mentioned

by participant 02, “Recently, we changed our preferred supplier list which resulted in various decision-making

processes or pitch processes for specific disciplines. Here we chose a combination of nascent agencies with

various disciplines to achieve a broad scope of specializations that we can muster.” A quote as such is

reported by the minority of the participants, and suggest that nascent agencies can be chosen over well-

established ones when the scope of a combination of nascent agencies surpasses that of the well-

established ones. Even though the costs of a model as such can be more expensive, this can be

compensated by a more effective orchestration by the advertiser as findings revealed. Thus, it appears a

nascent agency that is open and willing to collaborate with well-established agencies and agencies of similar

sizes, are likely to be chosen over well—established agencies. This would refer to the network centricity of

the agency, the criterion that is also part of the status construct.

A criterion that clearly distinguishes the selection of well-established agencies over nascent ones is the

capacity or scale. The capacity of a well-established agency is needed when an advertiser needs to respond

quickly to market opportunities, or when the direction changes of the campaign along the way. As described

by Participant 01 “What I need as a large advertiser is the scale within an agency, large advertisers are not

the most efficient clients as we might make changes along the way. You need an agency that can handle

such as change.” In the same light, Participant 04 said “There are small agencies with brilliant ideas, the

question is whether they have the capacity to handle our account.”. These findings together with similar

quotations by the majority of the participants clearly distinguishes well-established selection from nascent

agencies, as nascent agencies appear to lack manpower and a diversity of disciplines. Moreover, capacity is

by the minority of the participants also characterized by the regional or global presence of advertising

agencies. Because, sometimes, campaigns are launched outside the Dutch market which then requires the

capacity to localize the campaigns across regions or continents.


In contrast to the criterion that make well-established advertising agencies being selected over nascent

ones, two criterion of the nineteen attributes were found at which nascent advertising agencies surpass their

well-established counterparts in being selected. These criterion are, the innovativeness and adaptability of

nascent advertising agencies, and the (financial) growth prospect that these type of agencies have. Indeed,

nascent agencies outperform well-established ones because they are more agile in nature, or are founded

as a response to new market opportunities or environmental trends. As explained by Participant 02, “We

chose a nascent agency because they were able to help us with their particular expertise, unique vision, and/

or remarkable talent. Something well-established ones find very difficult to achieve because they are more

generic or thematic.” Similarly, Participant 01 said “I believe larger advertising agency groups need to

recalibrate from time to time to new environments. This can be very difficult for well-established agencies as

opposed to nascent agencies.” Statements as such are provided by half of the participants. Thus, nascent

agencies are better in adapting to environmental changes than well-established ones, which results in a

more specialized agency that is good in: unique idea generation, a particular vision, technical skills, or a

combination of these.

Lastly, nascent advertising agencies have been positively evaluated on the (financial) growth prospect by the

decision-makers as opposed to well-established ones. If nascent advertising agencies can demonstrate that

they are profitable and that they can make financially sound decisions, but more importantly have a plan for

future (financial) growth, then these firms are more likely to be chosen than well-established ones. As

reported by Participant 07 “We want to select nascent agencies with whom there is a high growth prospect,

with whom you can have children with. It is like selecting your prospective fiancee.” Additionally, she said

(Participant 07): “We truly believe in getting better and stronger together” Combining the functional

reputational results, it can be concluded that the main question asked by decision-makers whilst evaluating

nascent agencies is whether these firms are capable of serving its original purpose and can allocate

resources effectively. Nascent agencies must prove their competence and demonstrate the required

successes. In the client-agency relationship, this is measured by its profits, expertise, and growth prospect.



Table 10.

Functional reputational dimensions and underlying attributes of advertising agencies

Dimension Attribute Cited Relevancy Illustrative interview quote

Services Experts 10 Crucial* “The agency has knowledge that we simply do not

have” (Participant 06)

Quality/

Creativity

10 Crucial* “The agency is superior in developing campaigns in an

integrated way.” (Participant 02)

Specialism 10 Crucial* “Young agencies excel on a specific discipline, this is

something the larger generic agencies should not

copy.” (Participant 06)

Capacity/

scale

7 Crucial “There are small agences with briljant ideas, the question is

whether they have the capacity to handle our

account” (Participant 04)

Scope 8 Crucial “Some agencies must be able to broaden there scale and

scope.” (Participant 03)

Fulfills needs 6 Crucial* “They won because their idea had the dynamics and content

that we were looking for won.” (Participant 05)

Efficiency 6 Important* “I am convinced that there are no expensive agencies, only

inefficient ones.” (Participant 01)

Customer

centered

2 Less

Important

“We look at whether clients are coming or leaving

agencies.” (Participant 07)

Innovation Innovative 7 Crucial* "They must handle the latest media tools and techniques to

reach our customers in a creative way.” (Participant 02)

Adaptability 6 Important* “We live in different times, interaction is in the digital domain,

you need specialist agencies that have adapted to

this” (Participant 02)

Advanced 2 Less

Important

“We chose the agency with a sophisticated concept that is

useful for various parts of our organization.” (Participant 05)

Recalibrating 2 Less

Important

"I also look at whether agencies recalibrate, e.g., their vision,

from time to time to environmental shifts” (Participant 01)

Performance Capital 6 Crucial “We have various financial conditions, such as required

financial capital on the agency’s side.“(Participant 05)

Profitable 7 Crucial* “We look at whether the agency is financially healthy.” (Participant 06)

Growth

prospect

2 Crucial* “We want to select nascent agencies with whom there is a

high growth prospect, with whom you can have children with.

It is like selecting your prospective fiancee” (Participant 07)

Outperforms competition

5 Important* “The question you have is complex and level of execution is high, so we want to work with the best in its

category.” (Participant 01)

Continuity 4 Important* "Can they continue when employees are ill” (Participant 06)

Makes sound

decisions

3 Important* "To what extent can agencies deliver with the budget

given.” (Participant 06)

Held in high

regard

4 Important “We look for example whether they have successfully

maintained long relationships” (Participant 07)


4.4.2. Expressive reputational dimensions and underlying attributes

When questions were asked that suit the expressive reputational dimensions various underlying attributes

came to light. Table 11 illustrates the expressive reputational dimension with the underlying attributes/criteria,

and to what extent these attributes are by the participants considered as important. The most notable result

with respect to the expressive reputational dimension is that there is not much of a variance between larger

— well-established — agencies and nascent agencies. Once agencies, regardless of sort, are perceived as

a legitimate partner to work with, but also held in high regard in terms of status, there is no clear distinction

amongst the expressive reputational dimensions and attributes. In other words, expressive reputational

dimensions are perceived by the decision-makers as obvious, or as a prerequisite to be called an advertising

agency in the first place. The first expressive reputational dimension is the ‘emotional appeal’ of the

advertising agency. This dimension is determined by trust, likability, good feelings, and a sense of admiration

towards the agency. Additionally, also a so called ‘association desire’ with the (nascent) advertising agency

was found as important, as decision-makers are sensitive to impactful campaigns and industry awards of

agencies. Thus, nascent agencies that have developed impactful campaign and awards helps these firms in

gaining corporate reputation in the eyes of the decision-makers. The second expressive reputational

dimension found is characterized by its ‘vision and leadership’. A clear vision, excellent management, and

working structure are considered by decision-makers whilst evaluation nascent agencies and advertising

agencies in general. Criterion such as excellent management and management vision stresses the

importance of executives to advertising agencies. A nascent advertising agency is most likely to be selected

when the assumptions or criteria at the previous stage are confirmed at this last reputational stage.

Particularly when the vision and inspiring criterion are congruent with each other in terms, then decision-

makers are trilled to work with nascent firms. In other words, once the credibility of the legitimacy, status, and

reputational signals are enhanced by corroborating and aggregated evidence the likelihood of a (nascent)

advertising agency in being selected increases.


4.4.3. Social reputational dimensions and underlying attributes

When questions were asked that suit the social reputational dimensions various underlying attributes came

to light. Table 12 illustrates the social reputational dimensions with the underlying attributes, and to what

extent these attributes are by the participants described as important. The most notable result with respect to

the social reputational dimensions is that there is not much of a variance between larger — well established

agencies and nascent agencies. The only criterion mentioned by the minority of the participants at which

there is a difference between these type if firms is ‘dependability’, as larger — well-established — agencies


Table 11.

Expressive reputational dimensions and underlying attributes of advertising agencies


Emotional

appeal

Trust 2 Crucial “You need to trust the agency that they are committed to work

for you, that they can fulfill your needs” (Participant 04)

Likability 3 Crucial “The process though which they took as was very pleasant” (Participant 03)

Good feeling 2 Crucial “Does the agency appeals to us” (Participant 04)

Admiration 2 Important “Is the agency known in the industry and admired, this is also

where we look at” (Participant 06)

Association

desire

5 Important “When agencies create beautiful campagnes and sometimes

even win wards it makes me jealous” (Participant 07)

Extension of

ourselves

4 Important “You need to make sure you find a partner with whom you only

have to share half a word to understand each

other.”(Participant 01)

Vision and

Leadership

Clear vision 8 Crucial “The vision of the agency is very important, it defines who they

are and why they exist in the industry” (Participant 02)

Excellent

management

7 Crucial “The signature of an agency is given by its management , and

needs to be maintained, the management’s job it to maintain

this signature, otherwise the output differs. (Participant 01)

Well organized 6 Crucial “We look at a variety of factor but for example the working

structure amongst others” (Participant 05)

Personal

integrity

6 Important “It is like a potential wedding-kandidate, you observer the

looks, but also the know-how and ones honesty.” (Participant

07)

Effective

communicators

5 Important “I also observe, how do they communicate with each

other” (Participant 10)

Inspiring/

Motivating

1 Less

important*

“The last meeting was attended by the agency’s CEO who

have written his own book, Power Brands, this meeting was

based on this book and very inspiring and interactive“ (Participant 03)


are less likely to be dependent on the work of a larger advertiser than recently founded agencies. This is in

line with the status dependency criterion, and suggests that the decision-makers confirm the observations of

the first search stage (i.e. the status stage) at the latter stage through reputational criteria. As illustrated by

Participant 01, “An agency should not be too dependent on our account, some smaller agencies can do

strange moves when they work for clients that are too large.” Other criterion found that belong to the

corporate governance dimension are transparency of the agency activities, and legal requirements such as

supplier conditions. Additionally, regarding the workplace dimension, it was found amongst a few participants

that an inspiring office helps in being selected. However, as reported by Participant 03: “Our procurement

department sets very strict rules because we are semi-government. We have to approach the selection

process in an objective way which results in a strict amount of face-to-face minutes and visits. Sometimes we

are not allowed to visit an agency at all.” Findings as such reduces the decision-makers exposure to

expressive- and social attributes, but also further stresses the importance of executive reputation to nascent

agencies because in scenarios as such only the functional dimensions and qualities/expertise of the

executives remains.


Table 12.

Social reputational dimensions and underlying attributes of advertising agencies


Corporate

governance

Dependability 4 Crucial* “An agency should not be too dependent on our account,

some smaller agencies can do strange moves when they

work for clients that are too large” (Participant 01)

Transparant 5 Important “I expect a fair price/quality ratio, I know some agencies

apply an open-door policy” Participant 08)

Legal 4 Important “Agencies should also have the proper legal- and supplier

conditions in place, or they have to meet ours, such as

whether the account team stays the same” (Participant 01)

Workplace Inspiring office 3 Less Important

“At one of the latter stages in the process we visit the agency’s inspiring office, some are designed like a museum.” (Participant 03)


4.5. Results theme 4: Reputational strategies This last result section explores the three reputational strategies that (nascent) advertising agencies could

utilize to influence stakeholder perceptions, and so too client perceptions. Empirical findings revealed that

the reputation-borrowing and reputation-building strategies explicitly refer to reputation in terms of decision-

makers perceptions about the nascent PSF, whereas the reputation-by-endowment strategy is focused more

narrowly on decision-makers perceptions of the uncertainty inherent in the nascent PSF. In other words,

reputation-building and reputation-borrowing differ in their emphasis on awareness versus evaluation as

representing a nascent firm’s reputation. Thus, the ways in which these strategies are operationalized and

can be measured differ and this is taken into account whilst collecting and analyzing data. The subsequent

paragraphs elaborate further on the results of each of these strategies.

4.5.1. Reputation-building strategies that influence the judgement of decision-makers

Three trends emerged whilst exploring the brand-building strategies that advertising agencies could utilize to

influence the perception of advertisers. The first theme that emerged is described by the vast majority of

participants as coming from ‘industry awards’, as reported by Participant 02: “We look at whether they win

prices such as the SAN, ADCN or EFFIE’s.” However, as reported by Participant 03, “I am part of the SAN

jury and agencies pay around 600 euros per campaign to be considered.” Therefore, industry aways can be

seen as a form of brand-building strategies as they will get coverage from being nominated. In terms of

nascent agencies, Participant 07 said “Particularly young agencies that won an award with a beautiful

campaign for others in the industry makes me jealous, and makes me consider to contact them. This is also

how my team decided to contact our latest agency.” Thus, nascent advertising agencies can outperform well-

established ones by signaling their successes, gained in a relative short amount of time, by participating in

industry award nominations through registration fees.

A second theme that was found amongst the majority of participants was brand-building through

‘professional journals and online presence’. As discussed by Participant 06, “My team knows a lot of

agencies, but sometimes we actively search for nascent agencies via the internet or professional journals.”

In the same light, Participant 07 said: “My team follows the progress of agencies, through industry channels

such as Adformatie and Marketing-Tribune.” Similarly, Participant 08 said “We follow agencies and know

which campaigns they are making and for whom, so some agencies are already on the long-list once

because of our favorability towards their work.” Lastly, Participant 01 reported “We as advertisers simply

know what the signature of a certain agency or agency network is, we just read about it or experience it from

their communications through industry channels.”


The third and final theme that emerged with respect to brand-building strategies amongst the minority of the

participants is that of ‘positive touch-points interaction’ between the decision-makers and the evaluated

agencies throughout the decision-making process. As reported by Participant 08, “We surely do not only use

hard-factors whilst evaluating nascent agencies, it involves softer factors such as social chemistry”.

Additionally, Participant 08 said: “Each time we meet potential agencies everything is well prepared and the

atmosphere is very positive, especially at nascent firms you feel very welcome as they can be more

enthusiastic to work for you.” Similarly, Participant 03 said, “Some agencies give some sort of lecture at the

last phase of the process to present their work, but I prefer a co-creation session, this is also how the last

agency won by letting us do a big proportion of the work.” These findings suggest that when a nascent

agency orchestrates the meetings with the potential clients well it increases their chances in being selected.

4.5.2. Reputation-borrowing strategies that influence the judgement of decision-makers

Three themes emerged with respect to the reputation-borrowing strategies that agencies utilize to influence

the perceptions of advertisers. The first theme that emerged amongst all participants is the partner network

of an advertising agency that might help in gaining reputation. As reported by participance 02, “It would be

useless for prospective agencies to hire suppliers themselves, but we do want to let agencies work together

though.” This is in line with Participant 04, as he said “More often agencies start to build a network but then

the disciplines complement each other instead of overlap, only then they are of value to support us as

advertiser.” Lastly, as reported by Participant 01, “If agencies need to hire suppliers themselves that could

work, but then I do not want to see these costs on the monthly invoice, otherwise we could just hire our own

additional agency.” A second theme that emerged amongst the vast majority of the participants are the

‘prominent clients’ for whom agencies work. As reported by Participant 03, I think that when such an agency

(nascent) has well recognized brands in its portfolio that would contribute to the decision-making process.” In

the same light, Participant 01 said, “I do believe that if an agency work for prominent brands it do contributes

to the evaluation process.” However, as reported by Participant 02, “A prestigious client portfolio can be

impressive, but you only know what an agency truly has to offer when you worked on a project together.”

Thus, it can be concluded that nascent advertising agencies benefit from signaling (prestigious) clients for

whom they work, but also their collaboration with other agencies that complement the nascent agency in

value creation for the advertiser.

The last and third theme that emerged amongst the minority of the participants is whether the agency is part

of an ‘international network’. As reported by Participant 01, “The fact that they are a global player does not

matter much, because communication services ask for a local solution.” In the same light, Participant 07

said, “I have to choose an agency within our internationally defined network of agencies, however, I do have


the freedom sometimes to hire others like nascent agencies.” “I am responsible for the Dutch market, it helps

to have international agencies working for you but we need to specify campaigns to the Dutch market.” she

(Participant 07) continuous. Concluding, findings suggest that the reputation-borrowing and reputation-

building strategies explicitly refer to reputation in terms of decision-makers perceptions about the nascent

advertising agency. Nascent advertising agencies could sometimes be chosen over well-established

agencies because well-established ones can often be part of an international network. Advertisers might

prefer working with agencies that are real experts at a local level, which might be harder to achieve by

international agencies at which internal employees can be working as well.

4.5.3. Reputation-by-endowment strategies that influence the judgement of decision-makers

Three themes emerged with respect to the reputation-by-endowment strategies that agencies utilize to

change the perceptions of advertisers. Firstly, the prospective brand-team that will be working on the

advertisers’ account was mentioned by half of the participants as an influencing factor. As reported by

Participant 04, “We look very carefully at the people that will be working for us, and the projects they have

together worked on in the past.” Additionally, Participant 07 said, “The agency brand team is the single most

important thing we discuss, we work with smart and kind people, that is why our agency relationships last

that long.” Moreover, Participant 02 reported, “It is the people that make an agency, if there is a lot of

movement in an agency and the brand-team it is a legitimate reason to end the contract. Particularly the

brand-teams of nascent agencies are by some participants considered as ‘friends’ or people with ‘strong

social ties’ that are more robust and used to each other than creative teams at well-established ones. This

manifests itself in more efficient work and high-creative output, as reported by Participant 04, “Ideally you

want to work with smaller agencies, because they have less ‘slick’, are cheaper, but also more creative and

on ‘the edge’.”

A second theme that emerged amongst the majority of the participants is the ‘network’ advertisers have with

the partners or founders of the (nascent) agencies involved. As described by Participant 07, “Everyone that

is internally involved in the process is able to bring along their own list of agencies.” Furthermore, as

reported by Participant 03, “I visit just a few agencies before the tendering process goes live, this so I

already have an idea what the agencies are able to do for us.” In the same light, Participant 04 said “Every

time we go through this process we have a few usual suspects, but if so then we want to experience how

good these guys really are.” Additionally he (Participant 04) reported, “Sometimes agencies figure out that

we need a new agency and ask us to drink a cup of coffee, and if the timing and feeling is right we might

simply choose this agency on the spot.” Moreover, as reported by Participant 03, “Once you are further in the

process, and two to three agencies are remaining, I think it does not even matter which one you choose,


they are all very experienced and able to solve our problems.” Findings as such suggest that it is crucial for

(nascent) agencies to have a broad network of industry connections and potential clients, as the vast

majority of the participants reported to muster their own personal network of contacts.

The third theme that emerged amongst all participants is the educational background, qualities, and

experience of the agency partners. As described by Participant 02, “Partners of recently founded agencies

have at least a University degree, smart people are working at agencies.” Additionally, Participant 07 said,

“We primarily look at the vision whilst evaluating nascent agencies, and the quality of the partners.”

Furthermore, as reported by Participant 06, “Although an agency can be young, the founders of the agency

have a lot of industry experience and often solved communication problems for other brands that we are

facing right now, that is why these firms are of value.” Moreover, as reported by Participant 03, “One partner

of the agency we work with has written his own book, and based on his theories we tried to find the strengths

of our brands.” These findings suggest the importance of executive reputation to advertising agencies,

however, no clear distinctions between nascent agencies and well-established ones can be drawn with

respect to this third theme.


Chapter 5: Discussion This chapter presents the discussion on the results by answering the working propositions and central focus

question. The significance of the findings, also with regard to theory, are elaborated on as well as the

aspects that this thesis was unable to answer satisfactorily. Lastly, implications for real-world practices and/or

policy are presented.

5.1. Critically answering the central focus question The central focus question of this thesis is ‘How do nascent professional services firms manage to attract

clients whilst lacking reputational resources?’. This question originates from the phenomenon that more

often, organizational decision-makers choose to collaborate with nascent professional services firms (PSFs)

over well-established ones although the industries within the PSF sector are known for its high degrees of

risk and uncertainties. The overall sector pressures have been increased by competition from various

directions, technological advancements, globalization, and more demanding- and sophisticated clients.

These complex environmental pressures make the professional services sector a high-velocity environment

in which clients need to evaluate potential exchange partners whilst being exposed to considerable change

and uncertainty. Consequently, uncertainty with respect to service quality, and the inability of decision-

makers to make good judgements, make it worthwhile to investigate how nascent PSF manage to be

selected whilst lacking reputational resources in environments as such.

Empirical findings suggest that nascent PSFs can convince skeptical stakeholders that they fit with the

industry norms and rules by utilizing uncertainty-reduction activities to compete with well-established firms,

and/or that clients have the intrinsic motivation to proactively select a nascent PSF on the basis of its

superior social ties. In case of the former, nascent PSFs legitimate not only themselves and their solutions

through positive signaling, but also the new emerging category that they are trying to create by

demonstrating fast progress in environmental adaptation through e.g. their particular vision on the industry

(i.e. legitimacy). When stakeholders assess and compare organizations, then legitimacy may develop from

comparisons between organizations that engender appreciation, admiration, trust and respect of one firm

over another and so build reputation. Communications in the form of entrepreneurial success stories and

industry-awards appear particularly relevant in this regard, as these features can be utilized to explain the

vision, strategy and activities of the nascent PSF. For example, (nascent) PSFs that win repeated contests

appear on multiple “best of” lists and consequently build status relative to its competition (i.e. status).

Endorsements by-, and affiliations with, third parties, particularly prestigious clients, signals different

reputational values and could reduce the uncertainty about a nascent PSF by verifying that the nascent firm

meets industry criteria. Lastly, in many cases reputation resides with the founding partners of the nascent


PSF, or in a handful of individuals that form an expertise-based group within the nascent PSF. These experts

have substantial experience of specific types of problems experienced and acknowledged by the client, and/

or understand client opportunities better than well-established ones (i.e. executive reputation). Consequently,

it is difficult for well-established PSFs to overcome the superior social ties nascent PSF have with potential

clients, even though they might have many other reputational advantages.

Overall, the significant of these findings are that it corroborates prior research that not only nascent

organizations but also nascent PSFs in particular utilize reputational strategies to convince various

stakeholder groups. Thus, also in a business-to-business professional services context, decision-makers

form perceptions on positive signals which ultimately constitute the evaluative dimensions of reputation. This

thesis contends that PSFs benefit most of all business-to-business and business-to-consumer situations by

utilizing uncertainty-reduction activities because of the intangibility of the services, the degree of uncertainty,

and amount of risk involved. Additional significant findings are the strong internal motives of clients to hire

nascent PSFs in todays world. Not only are nascent PSFs perceived as being more dedicated, strategic, and

creative in providing client solutions, but also capable to bundle capabilities with other PSFs for individual

client needs. This in contrast to is well-established firms that are considered by clients as cumbersome and

generic. In other words, nascent PSFs are chosen because of its dedicated teams and greater degree of

open-sourcing of talent and capability. That said, the managerial challenge for a nascent PSF is to amid the

leveled playing field of well-established firms by bringing something new to the client that their established

counterparts do not have or are not good at it.

From a clients’ perspective, the main differentiation of well-established PSFs, their core-activity, can be

sourced from anywhere and so too from nascent firms. Therefore, decision-makers do not only have to know

about the nascent PSF existence, and being convinced of its capability to deliver services of certain value

and quality, but also need to perceive a fully developed functional structure so it assures decision-makers

that the nascent firm is indeed a “real organization” that fits with industry practices. However, the functional

structure of nascent PSFs appears to have its limits, as well-established PSFs are still chosen over nascent

firms for its scale (i.e. capacity) and scope (i.e. variety of services). Capacity- and scope is something

particular larger clients need from established PSFs, and that is why these larger — well established —

PSFs still receive the gross of purchasing budgets from clients as opposed to nascent firms.

Moreover, an interesting and notable result evolves around the need itself that changed towards PSF

support. Findings suggest that, historically, business was straightforward, as clients hired PSFs to create

solutions based on a particular expertise and activities in a rather stable environment. Nowadays however,


clients seek radically different ways from PSF support groups to maintain competitive advantage in high-

velocity environments. On the one hand, well-established firms are needed for capacity and scope, whilst

nascent firms are defending their competitive positions by staying relative agile and doing innovative

advancements by e.g. specializing in a particular expertise. Thus, some clients will build a combination of

nascent and well-established PSFs around them in a flexible network, and orchestrates the activities

themselves, whereas others reject strategic risk by assigning a leading PSF with its own network of

supporting agencies.

Concluding, clients have the need to manage their business operations across different components of the

value chain through various supporting organizations such as (nascent) PSFs. This thesis contributed

primarily to the marketing- and sales component of the value chain by exploring the advertiser-advertising

agency relationship, this limits the ability the generalize the conclusions to other services such as

accounting, legal, strategic consultancy, and other procurement situations. The central focus question is

answered satisfactory as this thesis provided more insight into issues like, why a nascent PSF happens to be

selected and what these firms can do to become selected. Moreover, it was verified that also in employing

PSFs, legitimacy, status, and reputation represent three successive and distinct components that exert

independent and interdependent effects on the decision-making process of organizations. However, findings

suggest that a firms’ corporate identity is very important in legitimating ones existence, further research could

explore this construct in this particular context either from a clients’ or nascent firms’ perspective. The

findings of this qualitative study can be put to test across PSF industries and beyond geographical

boundaries by numerical data collection and a quantitative methodology. Qualitative research, on the other

hand, can complement this study by investigating how these (nascent) PSF support groups are/can be

structured and utilized by clients in efficient ways and how nascent firms can increase their stake in this

network. Overall, this study investigated the role of reputational factors in entering a relationship with

(nascent) PSFs, further research could also investigate what the role of reputation is in relationship-

maintenance and -termination decision-making processes. A more detailed discussion on this central focus

question is provided in subsequent sections whilst discussing the answers to each of the working

propositions.

5.2. Critically answering working proposition one The first working proposition that is formulated in this thesis is: ‘Clients with a relatively high task importance

are less likely to select nascent professional services firms to collaborate with.’. This working proposition

stems from the observation that a relatively complex task situation involves more people, and thus the

collective amount of perceived risk and uncertainty is higher because decision-makers are faced with an


irregular problem, resulting in more reliance on reputational beliefs. It is expected that situations as such

decreases the chances of nascent PSFs in being selected, as nascent firms are by definition surrounded by

higher degrees of risk and uncertainty. Thus, decision-makers will be inclined to choose a well-established

PSF with a more suitable reputational track-record.

As correctly presumed, empirical findings corroborates on prior research as it suggests that a more complex

purchasing situation involves less task familiarity, because of the unstructured organizational problems that

clients are facing, whereas a familiar task involves less risk and uncertainty due to a structured

organizational problem. It was found that nascent PSFs are defined by short-term outsourcing relationships

to solve structured problems, whereas incubent PSFs are seen as long-term exchange partners closer to the

client in terms of collaboration frequency and solving both structured and unstructured problems. At this

highest collaboration level, combined capabilities are needed to increases the clients’ value and/or margins.

The decision-makers are faced with an unstructured problem, and aims to contract a new type of

collaboration through a orchestrated process in which various reputational values are evaluated. During

processes as such, strong reputational beliefs are formed by each of the decision-makers at different

decision-making stages, which results in nascent PSFs being winnowed out more quickly than well-

established firms. The main reason is that nascent firms are financially screened, particularly by prestigious

clients in unstructured task situations, and lack the financial capital and cash-flow to handle the client’s

account of that size. Even though the nascent PSF is excellent in serving its original purpose, e.g. allocating

resources effectively with talented executives, these firms are unfit nonetheless. However, it must be noted

that this thesis investigated solely prestigious clients, and chances are high nascent PSFs “perfectly suit”

clients that are lower in status and/or having limited budgets.

Nonetheless, results suggest that although nascent PSFs can be operating in high-status leagues, their

growth in economic class remains behind. This is a remarkable finding because it suggests that the

performance on a given status level by a nascent PSFs is not always a guarantee to enter a higher status

group. Rather, the status position is established and accepted through behavioral “negotiations” amongst

objective third parties, by decision-makers during that particular task situation, and fellow industry

professionals. In fact, clients have the strong tendency to ask fellow industry connections for (nascent) PSF

suggestions even whilst internal-negotiations are taking place. Findings as such stresses the importance of

having superior social ties with the industry as a nascent PSFs, but also the excessive amount of information

that clients need to digest. The decision-makers inabilities to process all information on alternatives is due to

their day-to-day workload, the amount of alternatives, and/or time-pressure which results in decision-makers


not always making the best choice. In other words, decision-makers are likely to satisfice in choosing a

(nascent) PSF rather than maximize value for the parent organization during the decision-making process.

This inability to process all the information result in choosing the nascent PSFs over that of well-established

ones, or simply increases the chances of the well-established firms in being selected. Moreover, other

important findings suggest that this decision can be pushed or directed by one of the decision-makers. For

example, the initiator of the decision-making process is also likely to be the highest in day-to-day chain-of-

command, and their biased view towards a particular PSF might influence subordinate others. In fact, a few

times the (nascent) PSF chosen was the one proposed by the initiator at the beginning of the process.

Findings as such on intra-group behavior are very valuable in deepening our understanding towards

(nascent) PSFs selection, however further research should more specifically focus on intra-group

negotiations to draw a more thorough conclusion in this regard.

Concluding, the significance of these findings are that the industry and academic observations on the

phenomenon of nascent PSFs being chosen over well-established ones is partly incorrect. In general,

nascent PSFs are chosen for other task situations than well-established ones. Correctly observed however,

is the vast growth in nascent PSFs as they managed to be of superior value to clients, at some aspects even

better than well-established ones (which will be further discussed the next section). Particularly in the

industry in which this working proposition was tested, nascent PSFs have significantly outnumbered well-

established ones, resulting in these nascent firms receiving larger propositions of the total purchasing budget

than they did in the past. Thus, the formulated working proposition is answered satisfactory and is correctly

proposed, no further research is needed on this particular working proposition.

5.3. Critically answering working proposition two The second working proposition of this thesis is formulated as follows: ‘Clients rely more heavily on

expressive- and social- reputational dimensions than on functional reputational dimensions whilst evaluating

nascent professional services firms.’. This working proposition is formulated because it was expected that

due to the lack of “tangible” and/or “proven” performance track-record these nascent PSFs lack functional

reputational attributes on which decision-makers can render social judgements. In other words, since

nascent PSFs by definition lack a performance track-record and tangible products and services, it was

expected that nascent PSFs benefit primarily from expressive- and social- reputational dimensions.

However, empirical findings suggest that decision-makers rely less on expressive- and social reputational

dimensions than on functional reputational dimensions whilst evaluating nascent PSFs. The leading question

for decision-makers is whether or not a nascent PSF is able to serve the client with its original purpose in


allocating resources effectively and efficiently. Thus, nascent PSFs that drop out early in the decision-making

process do not score poorly on their expressive- and social reputational attributes, but rather on the lack of

positive evaluation of their competence and performance. To be more specific, expressive- and social

reputational dimensions such as ‘emotional appeal’, ‘vision’, ‘leadership’, and ‘corporate governance’ are

perceived by clients as a prerequisite for (nascent) PSFs to be a legitimate market participant.

Therefore, important findings are that nascent PSFs must prove their competence and demonstrate the

required successes, measured by its profits, expertise, and growth prospect. It is a synthesis of each

decision-maker’s attitude towards a nascent PSF based on two functional reputational elements: the past

behaviour of the executives and the firm, and future prospects. Thus, functional reputation is also constituted

by the objectives and/or vision of a nascent PSF and serves as an indicator for professional competence,

which have not clearly been taken into account by prior research. From a managerial perspective, these

finings suggest that a new market participant such as a nascent PSF must not only amplify who they are, but

also what they are capable of doing and where they see themselves in the near future. However, nascent

PSFs should not just focus on its functional aspects, because there are always three overall dimensions

considered, and, more importantly, these dimensions interact to form the overall reputation of a (nascent)

PSF. Whereas the social judgments for functional reputational dimensions are fact-based and ethically based

for the social reputational dimensions, it is judgements of taste and appeal that dominate expressive

reputation. All three dimensions are needed and strengthen each other, they cannot be seen as separate. To

what extent these dimensions and underlying attributes interact with each other towards (nascent) PSFs

selection, should be tested by further research through a quantitative methodology across industries.

Concluding, these findings are quite notable as secondary research directed the working proposition to great

chances in being confirmed, whilst empirical research proves the working proposition to a large extent being

incorrect. Particularly from a business practitioners perspective these findings brings its difficulties, as it is

challenging in terms of reputation management to balance expectations in the dimensions of functional and

social reputation, and differentiation and uniqueness in the dimensions of expressive reputation. With respect

to the expressive- and social- reputational dimensions in particular, it was found that there is not much of a

variance whilst selecting larger — well established — PSFs and nascent ones, quantitative methodology

should further elaborate on findings as such. Thus, from a managerial point of view, it is relevant to utilize

reputational strategies as a nascent PSF because there are less attributes on which true competitive

differentiation can be gained, this will be further discussed in the next section.


5.4. Critically answering working proposition three The third working proposition that is formulated in this thesis is: ‘Clients are primarily persuaded by

endowment- rather than reputation-borrowing- and building strategies whilst evaluating nascent PSFs.’. This

working proposition originates from the observation that PSFs are primarily characterized by its executives

delivering the professional services, so nascent PSFs are more likely to apply uncertainty-reduction activities

by signaling the executives reputation that transferred some of their personal reputations to their start-ups

(i.e. reputation-by-endowment strategies) than borrowing reputation from prestigious clients that they by

definition lack (i.e. reputation-borrowing strategies), or build on the limited collective reputational attributes

that the nascent firm has (i.e. reputation-building strategies). However, empirical findings suggest that the

reputation-by-endowment strategy is focused more narrowly on decision-makers perceptions of the

uncertainty inherent in the nascent PSF, whereas the reputation-borrowing and reputation-building strategies

explicitly refer to reputation in terms of decision-makers’ perceptions about the nascent PSF. Moreover,

reputation-building and reputation-borrowing differ in their emphasis on evaluation versus awareness as

representing a nascent PSFs’ reputation, as well as the ways these reputational strategies are

operationalized and measure reputational values. Thus, the three uncertainty-reduction strategies offer

different and complementary signals during the evaluation process of clients towards nascent PSFs, which

brings difficulties in answering this working proposition.

Overall, findings verify the theories on reputational strategies that the three perspectives comprise different

uncertainty-reduction activities by which also nascent PSFs increase/obtain reputation. Thus, similar to

nascent organizations in both business-to-business and business-to-consumer situations, also nascent PSFs

utilize strategies as such. From a reputation-borrowing perspective, evaluating clients consider the already

affiliated prestigious clients as a reputation ‘granting authorities’ or ‘endorsers’ as they are likely to have

access to superior information that motivate them to affiliate with this nascent PSF. Reputation-by-

endowment, on the other hand, occurs internal to the nascent PSF when founders transfer personal

(reputational) capital into the nascent firm, which signals that the internal uncertainty is low because

executives believe and trust in the firm they started and its prosperity. However, it was found that both

perspectives attribute a passive and static role to the nascent firm in developing its reputation, as it is more

an outcome of previous efforts. In contrast, it was found that reputation-building attributes a lot of reputational

weight to the nascent PSF, initiated by its own actions and communications based on e.g. industry awards

and successes. Therefore, the reputation-building strategies in particular have a critical role in helping a

nascent PSF reaching its potential clients, and thus decision-makers generate favorable reputational beliefs

towards the nascent PSF. Moreover, it was found that reputational-building strategies help nascent firms in

attracting major (perhaps more important) reputation granting authorities and endorsers such as the media,


industry experts, and analysts that form their opinions on the nascent PSF. Findings suggest that third-party

coverage is one of the main sources of information decision-makers use to formulate reputational opinions.

However, further research should investigate solely the role of these (objective) third parties and its influence

on the decision-making process of clients towards nascent PSFs, as this thesis investigated primarily the

personal experiences of the beholder and the perceptions formed by the beholder based on communication

by the reputation-holder.

The aforementioned findings are important and contribute to reputation- and management research in a few

important ways. First, the three uncertainty-reduction strategies can be illustrated on a continuum ranging on

outcomes versus process in terms of contributing to reputational beliefs. Because, the reputation-borrowing

perspective clearly demonstrates the benefits of having prestigious clients (i.e. outcomes), whereas the

reputation-building perspective focus primarily on the factors contributing to the development of reputation

throughout the process that lead to desired outcomes. Reputation-building strategies provide the nascent

PSF with additional reputational information and might either amplify or dampen the effect of its initial

reputation, whereas reputation-borrowing strategies offer only to a limited extent room for utilization because

affiliations are fixed and offers less room for tweaking towards a favorable reputation. Besides, it was found

that nascent PSF affiliations with e.g. prestigious clients also strongly depends on whether the decision-

makers’ perceive these clients as prestigious. Lastly, reputation-by-endowment fall somewhere in between

outcomes and process, with a strong emphasis on outcomes because executives cannot pretend being

better than they are, but also process because executive-reputation is build whilst interacting with the

decision-makers throughout the decision-making process. Moreover, it was found that a clients’ decision-

making process could involve aspects of co-creation with the (nascent) PSF, thus decision-makers can be

seen as both external and internal stakeholders as they can both build and evaluate the executives

reputation of the (nascent) PSF simultaneously because of the interactivity between them. Further research

could investigate the difficulties or benefits of forming reputational beliefs in co-creation processes as such.

Concluding, a discrepancy between internal and external reputational perceptions of nascent PSFs are

particularly critical when there is interaction between the executives of the nascent PSF and its potential

clients. This brings many managerial challenges in finding the right balance for a nascent PSF to what extent

reputational benefits can be stretched through reputational strategies. For example, decision-makers could

easily be felt misguided by flattering reputation-building signals whilst later in the process these reputational

assumptions are not confirmed or even contradictory during face-to-face interaction. On the other hand,

when reputation-building signals are confirmed at different stages of the process an additional effect occurs

and reputational beliefs are strengthened towards a favorable reputational attitude. It is therefore to the


nascent firms’ executives to ensure that the gap between internal and external reputational perceptions

remains small. Moreover, particularly as opposed to well-established firms, nascent PSFs might have a

reputational advance because the success (i.e. reputation) of well-established firms might be attributable to

past solutions and efforts provided by executives who are no longer employed by the established PSF.

Although findings as such may be true, in the same regard it can be stated that successes of the nascent

PSFs’ founders may be due to industry-, environmental- and team-based factors. Furthermore, nascent

PSFs are started by various individuals with different accumulated reputations. Thus, it makes assessing

executive quality a difficult, uncertain, and arbitrary matter. Overall, it can be concluded that reputation-by-

endowment signals are likely to be beneficial at one of the last stages of the process when the nascent PSF

meets the potential client (i.e. decision-makers). Therefore, from a managerial standpoint, it would be better

to utilize reputation-borrowing and reputation-building strategies at earlier stages in order to be considered at

the clients’ long-list of PSFs, and consequently utilize reputation-by-endowment strategies when interaction

takes place. Prior research have not made this distinction. Thus, even though the working proposition is to a

large extent incorrect, the working proposition is satisfactory answered and no further research is needed.

5.5. Critically answering working proposition four The fourth working proposition that is investigated in this thesis is formulated as follows: ‘Nascent

professional services firms must first be perceived as legitimate before clients begin to evaluate the firm on

status- and subsequently on reputational beliefs.’. This working proposition stems from the notion that

reputation, status and legitimacy represent three distinct, and successive, components of reputation that

exert independent and interdependent effects on the decision-making process. Although it was expected that

the sequence of constructs are not likely to differ amongst well-established PSFs and nascent ones, it do is

presumed that the legitimacy- and status construct help nascent PSFs in being selected as these constructs

are more easily “earned” than reputation. Empirical findings suggest that indeed a sequential process is

evident amongst these constructs whilst evaluating (nascent) PSFs. In other words, legitimacy and status

differ in evaluation from reputation, as it was found that once a potential (nascent) PSF is considered as a

legitimate market participant operating in a particular league, status is used to arrive at a long-list of

candidates. Subsequently, it was found that decision-makers narrow-down their choice based on reputational

beliefs on both the collective (nascent) firms’ reputation and the executives reputation. Particularly in the

context in which this working proposition was tested, executive reputational beliefs appears to follow the

collective reputational beliefs of the nascent PSF. This distinction have not been made by prior research.

Thus, the findings of this working proposition support and complement prior research on the existence of a

sequential process at which different reputational beliefs are formed at different points in time.


More specifically, it was found that legitimacy is a judgement of appropriateness, an evaluation of

“correctness”, guided by rational/pragmatic criteria such as whether the (nascent) PSF has local-presence;

does not have any conflicting accounts that could harm the clients’ business; and whether the firm has

sufficient client-industry knowledge. These factors particularly help nascent PSFs to legitimate their access

and operations in specific leagues, as e.g. a nascent PSF cannot claim to provide international solutions to

international clients whilst having a local office with local executives. Another remarkable finding is that status

is more easily observed by decision-makers than reputation, but not per se easier gained by the nascent

PSF. Status beliefs are particularly helpful and used as a way of narrowing down the options based on

whether the nascent firm matches in terms of status; are the best in its operating league; and what their

particular vision is on the industry. Thus, these findings contradict prior research that status is not per se

easier “earned”, but rather less difficult to observe than reputation. Finally, it was found that nascent PSFs

are in the last phase subjected to a more thorough analysis based on a set of complex reputational

dimensions, these are: functional-, expressive- and social- dimensions with all its underlying attributes.

Although one could argue that executive reputation falls within the corporate reputation, particularly during

the evaluation process of PSFs it was found that executive reputation is assessed at the final stage once the

client meets the potential (nascent) PSF and the decision-makers can develop reputational beliefs on the

PSF executives’ educational background, qualities, and experience.

Furthermore, a significant finding is that when corporate legitimacy, status, and reputation are congruent with

each other, there appears to be an additional effect. In other words, the three different constructs act to

confirm each other, meaning the credibility of the underlying attributes of each construct is enhanced by

corroborating evidence. Moreover, once face-to-face interaction occurs, often at the last stage(s) of the

process, a favorable attitude towards the executive reputation has an supplementary effect on the other

constructs as well. At situations as such, it was found that high performing (nascent) PSFs are characterized

by broadly experienced, functional diversified, and charismatic executives and top management. In fact,

when decision-makers have a shorter, less structured, process, the likelihood of a nascent PSF in being

selected by an incumbent client as an exchange partner is much higher. Because, it was found that in the

context of PSF selection clients have the tendency to shorten the decision-making processes in which they

leap from a long-list of agencies (i.e. formed by status beliefs) to face-to-face interaction with potential

exchange partners (i.e. forming executive reputation beliefs), thus skipping a thorough evaluation on

collective reputational beliefs. These findings have not been theorized before by prior research. Findings as

such are important because, from e.g. a business practitioners perspective it might save a nascent PSF time

and effort in doing their best in being selected by potential client following a thorough decision-making


process with a lot of decision-makers. On the other hand, when nascent PSFs know processes are shorter,

they can allocate their resources and executives more effectively to win the clients’ account.

Concluding, in situations in which reputational information on nascent PSFs is not available, scarce, or it

would be too costly for decision-makers to obtain, then, alternatively, decision-makers are influenced by

other constructs such as legitimacy and status. Therefore, in addition to those attributes that contribute to a

nascent PSFs’ reputation, even additional information that is not directly related to the transaction under

consideration are taken into account. Thus, the working proposition formulated is correct and no further

research is needed. However, more research should investigate the multidimensional construct of ‘corporate

identity’, as findings suggest that a PSF’s corporate identity helps in gaining accesses to particular operating

leagues, thus increases ones status and builds on reputational dimensions. Essentially, this thesis verifies

prior research that the construct of ‘corporate reputation’ clearly follows from ‘corporate status’ and ‘corporate

legitimacy’. Additionally, this thesis contends that executive reputation follows this sequence as corporate

reputational beliefs are often also formed by the decision-makers whilst not having met the (nascent) PSFs

under consideration. Overall, these findings make the process less sequential and causal as initially

illustrated in the conceptual model provided in the literature review, as the lines between the constructs are

not very visible. Thus, a new conceptual model can be drawn based on these new insights.

5.6. Adjusted conceptual model Whilst analyzing the data and writing the results, it came to the attention that the decision-making process of

clients towards (nascent) PSF selection is less causal than initially illustrated during the secondary research

part of this thesis. Based on all the insights and theory testing, a new process is outlined in Figure 2 and

starts with the application legitimacy judgments to identify the broadest PSF category — an organizational

population or industry — with which the clients wants to have a potential exchange (model to a certain

degree based on the theory of Bitektine, 2011). Subsequently, status judgment is used as a more fine-

grained filter to winnow out PSFs of unsuitable rank. Finally, corporate reputation- and executive judgments

are used in the final selection of the potential exchange partner, sometimes simultaneously but more-often

separately judged upon. In contrast to legitimacy and status judgments, these two reputation-based forms of

judgment require a thorough examination of the prospective (nascent) PSFs reputational features and,

hence, are reserved for the final stages of the decision-making process. These forms of judgements under

consideration can be manipulated or strengthen by a (nascent) PSF through three uncertainty-reduction

activities: reputation-borrowing strategies, reputation-building strategies, and reputation-by-endowment

strategies. As reported by Bitektine (2011), “one can expect that in highly institutionalized domains legitimacy

will play a more important role in partner selection, while in contexts where institutional forces are less


influential, the firm’s reputation will play a greater role.” Additionally, this model contends that the entire

process is also under heavy influence of time (see below).

Figure 2: The Ideal-Type Sequence of Forms of Judgment in the Process of (Nascent) Professional Services

Firm Selection


Reputation-Borrowing StrategiesCorporate Status Judgement

Corporate Reputation Judgement

Corporate Legitimacy Judgement

Executive Reputation JudgementReputation-by-

Endowment Strategies

Reputation-Buiding Strategies

The number of organizations in the selection set

The final choice

Objective Third-Parties Multiplier

Chapter 6: Conclusions This chapter summarizes the: central focus questions and the research questions on which the literature

review initially started; the working propositions that were consequently formulated; the approach in

answering these working propositions and supporting arguments on why this approach was deemed as an

effective way in answering the propositions; the results; the discussion; and suggestions for further research.

6.1. Concluding the central focus question This thesis started with the following formulated central focus question: ‘How do nascent professional

services firms manage to attract clients whilst lacking reputational resources?’. This central focus question

was formulated based on the phenomenon that new, flexible and fast-moving entrants increasingly threaten

— and sometimes even outperform — established industry players (Rugman et al., 2011; Gompers & Lerner,

2001; Nordenflyght, 2010). The researcher found it relevant to contribute to reputation- and management

research by investigating how reputation is managed by these nascent professional services firms (PSFs) in

particular, because its reputation strongly depends on delivering high-quality services, but these

organizations need reputation to attract clients to deliver services in the first place (Lee, Pollock & Jin, 2011;

Williamson, 2000; Pollock, Porac, & Wade, 2004). Thus, even though a vicious reputation circle evolves

around nascent PSFs they manage to generate reputation early in an organization’s life. Moreover, just a few

studies have addressed this question directly but none of the studies was focused on PSFs in particular.

Thus, a qualitative research methodology is used to answer this question because corporate reputation and

related constructs are not objectively given and measurable, and the literature is scarce on nascent PSFs

evaluation. Furthermore, these constructs are heavily influenced by the context of information exchange,

including the attitudes of the decision-makers, previous interactions, and characteristics of the business

environment (Walker, 2010; Fombrun, 1996). Therefore, a qualitative approach is deemed as an effective

way to allow rich insights to emerge about this little known phenomenon, even though it limits the ability to

generalize towards a heterogenous sector as such (Nachum, 1996). The formulation of four working

propositions helped in answering the central focus questions, each of these propositions will be concluded in

the subsequent sections.

In general, empirical findings on the investigated working propositions suggest that nascent PSFs can

convince skeptical stakeholders that they fit with the industry norms and rules by utilizing uncertainty-

reduction activities to compete with well-established firms, and/or that clients have the intrinsic motivation to

proactively select a nascent PSF on the basis of its superior social ties. The importance of these findings are

that it corroborates prior research that not only nascent organizations but also nascent PSFs in particular

utilize reputational strategies to convince various stakeholder groups. Thus, also in a business-to-business


professional services context, decision-makers form perceptions on positive signals which ultimately

constitute the evaluative dimensions of reputation. This thesis contends that PSFs benefit most of all

business-to-business and business-to-consumer situations through the utilization of uncertainty-reduction

activities because of: the intangibility of the services; the degree of uncertainty; and amount of risk involved.

Additional significant findings are the strong internal motives of clients to hire nascent PSFs. Not only are

nascent PSFs perceived as being more dedicated, strategic, and creative in providing client solutions, but

also capable in bundling capabilities with other PSFs for individual client needs. In other words, nascent

PSFs are chosen because of its dedicated teams and greater degree of open-sourcing of talent and

capability. However, decision-makers do not only have to know about the nascent PSF existence, and being

convinced of its capability to deliver services of certain value and quality, but also have the need to perceive

a fully developed functional structure so it assures decision-makers that the nascent firm is indeed a “real

organization” that fits with industry practices.

Thus, where historically business was straightforward as clients hired PSFs to create solutions for problems

in a rather stable environment, nowadays clients seek radically different ways from PSF support groups to

maintain competitive advantage in high-velocity environments. On the one hand, well-established firms are

needed for capacity and scope, whilst nascent firms are defending their competitive positions by staying

relative agile and doing innovative advancements by specializing in particular fields of interest. Thus, some

clients will build a combination of nascent and well-established PSFs around them in a flexible network, and

orchestrates the activities themselves, whereas others reject risk by assigning a leading PSF with a bunch of

nascent PSFs attached to it. The central focus question is answered satisfactory as this thesis provided

insight into issues like, why a nascent PSFs happens to be selected and what these firms can do to become

selected. The findings of this qualitative study can be tested by further research through a quantitative

methodology across PSF industries and beyond geographical boundaries by numerical data. The same

methodology can be used to measure the factors that explain the varying effectiveness of: different

reputation-building strategies; and/or the special skills and capabilities needed for the implementation of a

reputation-building strategies by nascent entrepreneurial firms; and/or the different functional backgrounds

and industries of the founders that affect their reputation-building strategies. In terms of further qualitative

research, researchers can complement this study by investigating: how these (nascent) PSF support groups

are/can be structured and utilized by clients in efficient ways and how nascent firms can increase their stake

in this network; and/or why some entrepreneurs engage in reputation-building efforts earlier than others in

the industry; and/or investigate what the role of reputation is in relationship- maintenance and -termination

decision-making processes towards nascent and/or established firms.


6.2. Concluding the task situation theme The literature review initially started with the task situation and related question: ‘How are decisions made,

and what type of collaboration networks are possible between clients and nascent PSFs?’. Secondary

research showed that the PSF sector includes a heterogenous group of industries and organizations

(Nachum, 1996), that solve complex business issues for clients through a mastered expertise (West, 1997;

Nachum, 1996; Sonmez & Moorhouse, 2010). Once clients are in search for a potential exchange partner

there are various interrelated variables that determine how this eventual decision is made, these variables

can be classified in three broad elements: process (i.e. the decision-making process), structure (i.e. buying

center), and content (i.e. reputational factors) (Jobber & Lancaster, 2012, p. 104-110; Fill, 2011, p. 77-79;

Solomon et al., 2012, p. 194-195). However, the process starts with a task situation describing what the

clients needs (Fill, 2011, p. 67-79), the desired form of relationship (Hooley et al., 2012, p. 425; Lambert et.

al.1996; Taylor, 2005), and the type of network by which these organizations will be hold together (Hooley,

2012, p. 424; Cravens et al., 1996). Based on these and other insights it was expected that the type of

network and relationship aimed for by the client, influences the degree to which there will be relied on

reputational factors. In other words, the task situation of the client is likely to effect the degree of risk and

thus the amount of reliance on reputational signals. Therefore, the following working proposition was

formulated for primary research: ‘Clients with a relatively high task importance are less likely to select

nascent professional services firms to collaborate with.’. Interviewing key-decision-makers on the clients side

was regarded as an effective and reliable technique to shed light on this working proposition as the PSF is

less likely to provide sufficient insights into a theme as such. Whilst collecting data on this research theme, it

was essential to have a thorough comparison with- and amongst the participants in terms of nascent versus

well-established PSF.

Whilst interviewing marketing-directors of the largest advertisers of the Netherlands, it was found that

particularly well-established agencies are chosen for creative strategic partnerships whereas specific media

disciplines and media buying relationship are more transactional and specified to nascent agencies.

However, it does happen that nascent agencies are being selected for creative strategic partnerships but

only under certain reputational conditions. One of these conditions are the superior social ties the nascent

agency has with the leading decision-maker of the decision-making unit, which is in this particular context the

marketing-director. Once creative strategic partnerships are strived for, data revealed that the purchasing

situation involves high levels of risk because the organization is faced with an unstructured problem. Thus,

more decision-makers are convened and the process is likely to last longer than in other scenarios. In

contrast, ‘media purchasing’ and a ‘specific communication discipline’ involves less risk, as this is a

structured problem or occurring situation, and increases the chances of nascent agencies in being selected.


As correctly presumed by the working proposition, empirical findings corroborates on prior research and

suggests that a more complex purchasing situation involves less task familiarity because of the unstructured

organizational problem that clients are facing, whereas a familiar task involves less risk and uncertainty due

to a structured organizational problem. It was found that nascent PSFs are defined by short-term outsourcing

relationships, whereas incubent PSFs are seen as long-term exchange partners closer to the client in terms

of collaboration frequency. At this highest collaboration level, combined capabilities are needed to increase

the clients’ value and/or margins. The decision-makers are faced with an unstructured problem, and aims to

contract a new type of collaboration through a orchestrated process in which various reputational values are

evaluated. During processes as such, strong reputational beliefs are formed by each of the decision-makers

at different decision-making stages, which results in nascent PSFs being winnowed out more quickly than

well- established firms. This is a remarkable finding because it suggests that the performance on a given

status level by a nascent PSFs is not always a guarantee to enter a higher status group. Rather, the status

position is established and accepted through behavioral “negotiations” amongst objective third parties, by

decision-makers during that particular task situation, and fellow industry professionals. Findings as such

stresses the importance of having superior social ties with the industry as a nascent PSFs, but also the

excessive amount of information that clients need to digest. The decision-makers inabilities to process all

information on alternatives is due to their day-to-day workload, the amount of alternatives, and/or time-

pressure which results in decision-makers not always making the best choice. In other words, decision-

makers are likely to satisfice in choosing a (nascent) PSF rather than maximize value for the parent

organization during the decision-making process.

Concluding, the significance of these findings are that the industry and academic observations on the

phenomenon of nascent PSFs being chosen over well-established ones is partly incorrect. In general,

nascent PSFs are chosen for other task situations than well-established ones. Correctly observed however,

is the vast growth in nascent PSFs as they managed to be of superior value to clients, at some aspects even

better than well-established ones (which will be further discussed the next section). Particularly in the

industry in which this working proposition was tested, nascent PSFs have significantly outnumbered well-

established ones, resulting in these nascent firms receiving larger propositions of the total purchasing budget

than they did in the past. Thus, the formulated working proposition is answered satisfactory and is correctly

proposed, no further research is needed on this particular working proposition. Further research should

particularly however focus on the intra-group negations to select PSFs.


6.3. Concluding the decision-making process theme With respect to the decision-making process research theme, the literature review originally started with the

question: ‘How does corporate legitimacy and -status increases the chances of nascent PSFs in being

selected?’. Literature review showed that exploring corporate reputation in the context of recently founded

organizations is a too simplistic view on the performance of these firms (Stern et al., 2011), as these

organizations signal also other perceived quality concepts such as status (Poldony, 2006; Washington &

Zajac, 2005). Additionally, some scholars pointed to the fact that a firm first has to be seen as a legitimate

market participant before stakeholders begin to evaluate firms in terms of status beliefs (Jensen & Roy,

2008; Bitektine, 2011; Rao, 1994). However, this sequential process of constructs have not been merged and

validated by other scholars in the context of evaluating nascent PSFs as a potential exchange partner.

Therefore, the following working proposition was formulated to direct primary research: ‘A nascent

professional services firm must first be perceived as legitimate before clients begin to evaluate the firm on

status- and subsequently on reputational beliefs.’. The best approach to explore this working proposition was

deemed to be using semi-structured qualitative interviewing techniques rather than a quantitative

methodology, and interview the same sample profile as for the task-situation theme yet with an additional set

of themes and questions. In particular, these themes and questions were: what the need criteria of the client

were before any agency was considered; what the long-list criteria were and how/why (nascent) agencies

were taken into account at this particular stage; and finally shortlist criteria were discussed in terms of

reputational factors to make the final decision. Whilst collecting- and analyzing the data on this research

theme, it was essential to have a thorough comparison with- and amongst the participants in terms of

nascent versus well-established PSF.

Interview data revealed that the amount of decision-making stages differed amongst participants, but three

stages are always evident: 1) the request for briefing stage at which need criteria are defined; 2) the request

for information stage at which selection criteria are taken into account to request information from a specific

set of agencies; and 3) the request for proposals stage which involves the advertiser evaluating the agencies

based on reputational factors. In other words, there are three sets of criteria that influences the advertiser at

different stages of the decision-making process. Firstly, combining the ‘need criteria’ findings it suggested

that a (nascent) advertising agency must have the industry knowledge of a potential client, whilst not having

any accounts from other advertisers that compete with the evaluating client. This might seem as a paradox

for a nascent advertising agency, but actually stresses the importance of executive reputation as executives

could have the industry knowledge/experience on an individual level and transfer it to the nascent firm.

Secondly, ‘search criteria’ findings revealed that even nascent agencies that are low in economic class (i.e.

having a lack of capital or handling larger advertiser budgets) might be perceived as being high in status


because of their unique vision, specialization, or combination of both. Lastly, findings on ‘evaluation criteria’

highlight the importance of executive reputation, as credentials need to be shown including the work

developed in the past and specific details regarding the account team working at the agency. Based on these

primary research findings, it can be concluded that there is a clear theoretical overlap: legitimacy with need

criteria; status with search criteria; and reputation with evaluation criteria.

Empirical findings suggest that indeed a sequential process is evident amongst these constructs whilst

evaluating (nascent) PSFs. In situations in which reputational information on nascent PSFs is not available,

scarce, or it would be too costly for decision-makers to obtain, then, alternatively, decision-makers are

influenced by other constructs such as legitimacy and status. In other words, legitimacy and status differ in

evaluation from reputation, as it was found that once a potential (nascent) PSF is considered as a legitimate

market participant operating in a particular league, status is used to arrive at a long-list of candidates.

Subsequently, it was found that decision-makers narrow-down their choice based on reputational beliefs on

both the collective (nascent) firms’ reputation and the executives reputation. Particularly in the context in

which this working proposition was tested, executive reputational beliefs appears to follow the collective

reputational beliefs of the nascent PSF. This distinction have not been made by prior research. Furthermore,

a significant finding is that when corporate legitimacy, corporate status, corporate reputation and executive

reputation are congruent with each other, there appears to be an additional effect. In other words, the three

different constructs act to confirm each other, meaning the credibility of the underlying attributes of each

construct is enhanced by corroborating evidence. In fact, when decision-makers have a shorter, less

structured, process, the likelihood of a nascent PSF in being selected by an incumbent client as an

exchange partner is much higher. Because, it was found that in the context of PSF selection clients have the

tendency to shorten the decision-making processes in which they leap from a long-list of agencies (i.e.

formed by status beliefs) to face-to-face interaction with potential exchange partners (i.e. forming executive

reputation beliefs), thus skipping a thorough evaluation on collective reputational beliefs. These findings have

not been theorized before by prior research. Thus, the working proposition formulated is correct and no

further research is needed. Essentially, this thesis verifies prior research that the construct of ‘corporate

reputation’ clearly follows from ‘corporate status’ and ‘corporate legitimacy’. Additionally, this thesis contends

that executive reputation follows this sequence as corporate reputational beliefs are often also formed by the

decision-makers whilst not having met the (nascent) PSFs under consideration. Further research could

explore in a qualitative way: how a nascent PSF might convince prestigious actors (apart from clients) to

affiliate with the firm; and/or whether there are any benefits (and if yes, what are they?) for established

industry players (apart from clients) to affiliate with young professional services firms.


6.4. Concluding the reputational dimensions theme The reputational dimensions theme initially started with the following research question: ‘What is corporate

reputation, and to what extent do nascent professional services firms rely on different reputational

dimensions?’. Secondary research showed that corporate reputation is: based on the aggregate perception

of stakeholders; comparative; favorable or unfavorable; relatively stable and enduring; and issue/stakeholder

specific (Walker, 2010; Fombrun, 1996; Rindova et al., 2015). Reputation consists of various underlying

dimensions and each of these dimensions are formed by a diverse range of attributes (Eisenegger, 2008;

Fombrun & Van Riel, 1997; Abrahamson & Fombrun). Functional reputational dimensions relate to the

performance goals of the organization based on a set of cognitive and rational objective factors, expressive

reputation refers to the emotional attractiveness of organizations’ character and according to how unique

they appear, and social reputation describes to what extent organizations are responsible based on ethical

social norms such as ‘corporate governance’, and ’workplace and ‘citizenship’ (Fombrun & Van Riel, 1997;

Abrahamson & Fombrun). Since nascent PSFs by definition lack a performance track-record (Starbuck,

1992; Greenwood et al., 2005), and tangible products and services (Feser & Proeger, 2015), it is expected

that nascent PSFs benefit primarily from expressive- and social- reputational dimensions instead of

functional dimensions. Therefore, the following working proposition is formulated for primary research:

‘Clients rely more heavily on expressive- and social- reputational dimensions than on

functional reputational dimensions whilst evaluating nascent professional services firms.’. The best approach

to explore this working proposition was deemed to be a qualitative methodology rather than a quantitative

methodology. Because, corporate reputation must always be specified to a specific issue- and stakeholder

group before the underlying dimensions and attributes can be explored, and since there is a lack of research

on nascent PSF selection a qualitative methodology was chosen over a quantitative one. In contrast to the

other working propositions, a wide variety of themes and questions were discussed to answer this

proposition because each of the three reputational categories includes a variety of dimensions and

numerous attributes.

Firstly, combining the functional reputational results, it can be concluded that the the criteria that determine

whether to choose a nascent agency or well-established one can be explained through four main criterion,

these are: scope, scale, specialization, and adaptability. Whereas scope and scale are primarily decisive

when well-established agencies are evaluated, nascent agencies are chosen for its specialization and

adaptability to environmental trends. However, findings also illustrate that this is not as black as white as it

may seem. Secondly, the most notable result with respect to the expressive- and social reputational

dimensions are that there is not much of a variance between larger — well-established — agencies and


nascent agencies. It was found that once agencies, regardless of sort and type, are perceived as a legitimate

partner to work with, but also held in high regard in terms of status, there is no clear distinction amongst the

expressive- and social reputational dimensions and attributes amongst nascent and well-established

agencies. In other words, expressive- and social- reputational dimensions are perceived by the decision-

makers as obvious, or as a prerequisite to be called an advertising agency in the first place. These findings

suggests that the decision-makers confirm the observations of the first stages at the latter stage through

these reputational dimension criteria, and further stresses the importance of executive reputation to nascent

agencies because in scenarios as such only the functional dimensions and qualities/expertise of the

executives remains.

Interpreting the empirical findings, it suggest that decision-makers rely less on expressive- and social

reputational dimensions than on functional reputational dimensions whilst evaluating nascent PSFs. The

leading question for decision-makers is whether or not a nascent PSF is able to serve the client with its

original purpose in allocating resources effectively and efficiently. Thus, nascent PSFs that drop out early in

the decision-making process do not score poorly on their expressive- and social reputational attributes, but

rather on the lack of positive evaluation of their competence and performance. Therefore, important findings

are that nascent PSFs must prove their competence and demonstrate the required successes, measured by

its profits, expertise, and growth prospect. However, nascent PSFs should not just focus on its functional

aspects, because there are always three overall dimensions considered, and, more importantly, these

dimensions interact to form the overall reputation of a (nascent) PSF. These findings are quite notable as

secondary research directed the working proposition to great chances in being confirmed, whilst empirical

research proves the working proposition to a large extent being incorrect. Particularly from a business

practitioners perspective these findings brings its difficulties, as it is challenging in terms of reputation

management to balance expectations in the dimensions of functional and social reputation, and

differentiation and uniqueness in the dimensions of expressive reputation. To what extent and how these

dimensions and underlying attributes interact with each other towards (nascent) PSFs selection, should be

tested by further research through a quantitative methodology across industries. Thus, from a managerial

point of view, it is relevant to utilize reputational strategies as a nascent PSF because there are less

attributes on which true competitive differentiation can be gained.


6.5. Concluding the reputational strategies theme With regard to the reputational strategies theme, the literature review originally started with the question: ‘To

what extent can nascent professional services firms alter their reputation in order to persuade potential

clients?’. By other scholars it was found that nascent organizations utilize three reputation strategies to

change the perceptions of stakeholders, these are: reputation-borrowing (Pollock et al. 2010, Reuber &

Fisher 2005; Stuart et al., 1999), reputation-building (Fisher & Reuber, 2007; Petkova, et al., 2008; Rao,

1994), and reputation endowment (Beckman et al., 2007; Beckman & Burton, 2008; Pollock et al., 2009).

However, it remained unclear to what extent these strategies are utilized by nascent PSFs and how these

strategies influence client perceptions. Since nascent PSFs are unlikely to borrow reputation from current

prestigious clients, nor able to build on the collective reputational attributes because these firms lack

collective reputation, it is expected that PSFs primarily utilize reputation-by-endowment strategies by

signaling the transferred executive reputation to the nascent firm. Therefore, the related working proposition

was formulated as follows: ‘Clients are primarily persuaded by endowment- rather than reputation-borrowing-

and building strategies whilst evaluating nascent PSFs’ . Similar to the other working propositions, qualitative

in-depth interviewing was regarded as an effective and reliable technique to shed light on this particular

working proposition. Questions and themes were discussed regarding each of the strategies and its

underlying constructs, these are: corporate status, corporate reputation, and executive reputation. Although it

can be difficult to measure such activities external to the firm, a thorough operationalization of concepts and

semi-structured interviewing techniques helped in this process.

Combining the empirical findings of the related working propositions and questions specifically designed

regarding reputation strategies, a few important conclusions can be made. It was found that the reputation-

by-endowment strategy is focused more narrowly on decision-makers perceptions of the uncertainty inherent

in the nascent PSF, whereas the reputation-borrowing and reputation-building strategies explicitly refer to

reputation in terms of decision-makers’ perceptions about the nascent PSF. Moreover, reputation-building

and reputation-borrowing differ in their emphasis on evaluation versus awareness as representing a nascent

PSFs’ reputation, as well as the ways these reputational strategies are operationalized and measure

reputational values. Thus, the three uncertainty-reduction strategies offer different and complementary

signals during the evaluation process of clients towards nascent PSFs, which brings difficulties in answering

the formulated working proposition. Overall, findings verify the theories on reputational strategies that the

three perspectives comprise different uncertainty-reduction activities through which also nascent PSFs

increase/obtain its reputation. However, it was found that reputation-borrowing and reputation-by-endowment

perspectives attribute a passive and static role to the nascent firm in developing its reputation, as it is more

an outcome of previous efforts. In contrast, it was found that reputation-building attributes a lot of reputational


weight to the nascent PSF, initiated by its own actions and communications based on e.g. industry awards

and successes.

The aforementioned findings are important and contribute to reputation- and management research in a few

important ways. First, the three uncertainty-reduction strategies can be illustrated on a continuum ranging on

outcomes versus process in terms of contributing to reputational beliefs. Because, the reputation-borrowing

perspective clearly demonstrates the benefits of having prestigious clients (i.e. outcomes), whereas the

reputation-building perspective focus primarily on the factors contributing to the development of reputation

throughout the process that lead to desired outcomes. Reputation-by-endowment fall somewhere in between

outcomes and process, with a strong emphasis on outcomes because executives cannot pretend being

better than they are, but also process because executive-reputation is build whilst interacting with the

decision-makers throughout the decision-making process. Therefore, a discrepancy between internal and

external reputational perceptions of nascent PSFs are particularly critical when there is interaction between

the executives of the nascent PSF and its potential clients. From a managerial standpoint, it would be better

to utilize reputation-borrowing and reputation-building strategies at earlier stages of the decision-making

process, this in order to be considered at the clients’ long-list of PSFs. Consequently reputation-by-

endowment strategies can be utilized when interaction takes place. Prior research have not made this

distinction towards reputational strategies. Even though the formulated working proposition is to a large

extent incorrect, the working proposition is satisfactory answered and no further research is needed. Further

research could investigate however: the role of (objective) third parties and its influence on the decision-

making process of clients towards nascent PSFs; and the best practices in building reputation for nascent

firms and which strategies work better versus later for nascent PSFs in different markets throughout its

organizational lifecycle.


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Appendices A digital copy of this thesis can be found in the appendices on the Compact Disc, as well as the sampling-,

data collection-, and data analyzing files.


I. Cover page UvA - Januari 2017

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