Order matters: How altering the sequence of performance events shapes perceived quality formation

Abstract

Reputation research often employs rankings which combine both the prominence and perceived quality dimensions of reputation. Though this approach has merit, it neglects nuances in the formation of perceived firm quality – i.e., how stakeholders perceive a firm's capabilities. Since perceptions are influenced by how information is presented, we posit that the patterns of a firm's performances – their order and interval – explain variance in perceived quality beyond valence (absolute performance level), alone. We employ two experiments and an archival study to manipulate product ratings and collect perceived quality scores (experimentally), and use trajectory of performance outcomes to predict market valuation as a perceived quality proxy (archivally). Results suggest that while valence matters most for a firm's perceived quality, presenting identical performance events with distinct orders and intervals changes perceived quality impressions, at least until new information is presented. We enumerate our findings and outline areas for future research on stakeholder perceptions.