As much as 75% of a company’s value derives from its intangible assets. One of the most important of these intangible assets is corporate reputation. The Britain’s Most Admired Company surveys into corporate reputation includes nine characteristics, one of these is a company’s ‘capacity to innovate’. Surveys between 1990 and 2009 show that a good reputation for innovation does not guarantee a good overall reputation; nor does a reputation for innovation lead to business success. However, where a company has a reputation for innovation and is able to manage other characteristics, there is a better chance that this company will develop its innovation capability into long-term competitive advantage and profitability. Central to this conclusion is converting innovation into enhanced processes, products or services through effective implementation. The research identifies key attributes of companies that combine a reputation for innovation, with a good corporate reputation overall and business success.
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The Schumpeterian assumption that ‘static firms rapidly face losses and thus bankruptcy,’ (Kurz 2007) provides a compelling case for organisations to be innovative. However, Repenning’s (2002) view that 'the history of management practice is filled with innovations that failed to live up to the promise suggested by their early success' is indicative of the case against. Hawn (2004) echoes the view suggesting that; ‘some of the most innovative companies in the history of American business have been colossal failures’. Innovation alone is insufficient; it does not guarantee delivery of corporate objectives, competitive advantage or a superior, sustainable, corporate reputation, either in the medium or long term.
The analysis of the relationship between innovation and corporate reputation is intended to provide insight into the paradox between the objective of innovation as a route to prosperity and the actuality of innovation practice, which can be fraught with difficulty (Dougherty & Heller, 1994). Do those companies that achieve a high reputation for innovation have philosophies or practices that can help in the solution to this paradox?
There has been research into the relationships between innovation and profitability (Xin, Yeung & Cheng, 2010); firm performance (Artz, Norman & Cardinal, 2010) and the role of institutional investors (Kochhar & Parthiban, 1996). Other areas of interest include the relationships between innovation and the dynamics of organisational innovation (Monge, Cozzens & Contractor, 1992; the effectiveness of knowledge management (Vaccarro, 2010) cooperation and collaboration (De Faria Lima & Rui, 2010); and organisational change and renewal (Dougherty, 1992). Tzeng (2009) identified three classifications, or schools of thought about innovation from this research, namely those of capability, corporate entrepreneurship and culture.
There is less research into the linkages between innovation and corporate reputation. The findings from the BMAC surveys suggest that there are elements from each of Tzeng’s three classifications.