Managing Reputation in MNEs through Intangible Liabilities

Abstract

Company-specific assets, especially those of an intangible nature, are sources of value for the firm; consequently, the company should carry out a good management of them to increase the firm’s competitiveness, accesses to financing, reduce risks and improve its reputation. However, no attention has been paid to the concept of intangible liabilities that a company may create or develop and its effects on the value of the firm, and the relationship with its competitiveness and reputation, with reputation being considered as the public recognition (perception) of the quality of activities of the firm by both internal and external stakeholders of the organization. The right identification of them should allow us to better manage companies. Through literature analysis and empirical observations, we identify different sources of intangible liabilities and their effect on the value of the firm, highlighting those of them that implies a negative impact in the firm reputation. We identified which factors are greatly impacted when firm reputation decreases, so that a constructor is proposed to explain the relationship among reputation and the potential of generating implicit intangible liabilities. As result of an empirical analysis, we conclude that the factors (corporate assets, quality of management, financial soundness and long-term investment) impacting more on perception of reputation by stakeholders are those linked to the management style of the MNE. This would help MNCs to better manage both intangible assets and liabilities.