A tool for measuring SMEs’ reputation, engagement and goodwill. A New Zealand exploratory study

Publication Date09 January 2017
Date09 January 2017
AuthorRosalind Heather Whiting,Paul Hansen,Anindya Sen
SubjectInformation & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & Finance,Accounting/accountancy,Behavioural accounting
A tool for measuring SMEs
reputation, engagement
and goodwill
A New Zealand exploratory study
Rosalind Heather Whiting
Department of Accountancy and Finance,
University of Otago, Dunedin, New Zealand
Paul Hansen
Department of Economics, University of Otago, Dunedin, New Zealand, and
Anindya Sen
Department of Accountancy and Finance,
University of Otago, Dunedin, New Zealand
Purpose The purpose of this paper is to develop a rating and scoring tool for measuring small and medium
enterprises(SMEs) reputation, engagement and goodwill (REG), including internet presence and following on
social media, by an exploratory study undertaken in New Zealand.
Design/methodology/approach A discrete choice experiment (DCE) applying the PAPRIKA method via
an online survey was conducted to determine weights representing the relative importance of six indicators
related to SMEsREG. Usable responses were received from 159 people involved with SMEs. Cluster analysis
to identify participants with similar patterns of weights was performed.
Findings The six indicators, in decreasing order of importance (mean weights in parentheses), are:
capturedcustomer opinions about the business (0.28); contact with customer database (0.19); website traffic
(0.16); Google Search ranking (0.15); size of customer database, (0.11); and following on social media (0.11).
These indicators and weights can be used to rate and score individual SMEs. The cluster analysis indicates
that participantsage has some influence on their weights.
Research limitations/implications Only 159 usable responses for the DCE.
Practical implications The indicators and their weights provide a practical and inexpensive tool for
measuring SMEsREG.
Originality/value This is the first study to use a DCE to determine weights representing the relative
importance of indicators included in a tool for measuring SMEsREG. The tool is innovative because it
includes readily available indicators of firmsinternet presence and following on social media.
Keywords Social media, Internet, Engagement, Small to medium sized enterprises, Goodwill,
Business reputation
Paper type Research paper
1. Introduction
Major structural changes have occurred in developed economies in the last few decades.
One of the most significant changes has been the increasing importance of knowledge-based
factors of production underpinned by information communications technology and the
internet. Intellectual capital (IC) rather than physical capital is now seen as the main driver
of competitive advantage and hence of economic growth (e.g. Clarke et al., 2011). IC is
increasingly dominatin g firmscapital values, investments and sources of profit
(Granstrand, 2000). It is therefore important for firms to be able to measure their IC and
to manage it appropriately.
FirmsIC isoften categorised in tothr eemain types (Sv eiby, 1997):str ucturalcap ital,su ch as
patents, databases, trade secrets, trademarks, corporate culture, management policies; human
Journal of Intellectual Capital
Vol. 18 No. 1, 2017
pp. 170-188
© Emerald PublishingLimited
DOI 10.1108/JIC-02-2016-0028
Received 29 February 2016
Revised 7 July 2016
18 August 2016
Accepted 15 September 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
capital, which includes employee-based competencies, knowledge and skill (Gerpott et al., 2008);
and, regarded by many commentators as being the most important type of IC (Martínez García
de Leaniz and Rodríguez del Bosque, 2013), relational capital, comprising external relationships
with customers, suppliers, partners, shareholders and more widely with government agencies
and community groups, plus brand names, reputation and goodwill (Guthrie andPetty, 2000;
Martín de Castro et al., 2004). The focus of this paper is on the measurement of relational
capital specifically, firmsreputation, engagement and goodwill (REG).
Many attempts to measure both IC and reputation (both internally in the firm and
externally by rating agencies) have been made, as described in the next section. Lev (2003,
p. 2) notes that firms ownreporting tools are generally notadequate for resource allocations
or investment decisionsand that both managers and investors are at a very early stage of
grappling with the management, valuation and reporting of intangibles[1]. The inadequacy
of firmsown reporting tools is particularly so for small and medium enterprises (SMEs)[2]
which have relatively few resources available to invest in measuring reputation.
However other data that could be utilised by SMEs have now become readily available as
social media and online rating tools have burgeoned in the last decade ( Jeacle and Carter,
2011; Verhoef et al., 2014). Rating agencies, such as TripAdvisor and Google Ranking, utilise
customerscomments and their likesand hitsto rank businesses and publicise customer
reviews. The social media phenomenon can now significantly impact a firms reputation,
sales and even survival(Kietzmann et al., 2011, p. 241).
This paper reports on an exploratory study undertaken in New Zealand to develop a rating
and scoring tool for measuring SMEs REG, which includes ratingson SMEsinternet presence
and following on social media. The paper contributes to the literature on measuring REG by
conducting a discrete choice experiment (DCE) (McFadden, 1974) to determine part-worth
utilities(weights) representing the relative importance of a set of indicators related to REG,
including indicators of firmsinternet presence and following on social media. These indicators
and their weights are available as a practical and inexpensive rating and scoring tool,
intended for use by SMEs and associated parties (e.g. business consultants). A major
strength of the DCE method used is that a set of weights is generated for each individual
participant, in contrast to most other DCE methods which produce aggregated data only.
These individual-level data permit a cluster analysis (Spath, 1980) to be performed,
enabling any clustersof participants with similar patterns of weights to be identified.
In the next section, the literature about measuring REG, the significance of the internet
and social media and stakeholdersperceptions of REG is reviewed, and the implications of
this literature for the current study are discussed. In Section 3, the DCE survey and cluster
analysis methodology are explained, followed by their results in the subsequent section.
The paper closes with a discussion of the studys main findings and conclusions, including
the tool for measuring REG and the studys limitations and potential areas for improvement
if it were to be repeated.
2. Literature review
2.1 Measurement of REG
Although Guthrie and Petty (2000) define reputation and goodwill as separate elements of
relational capital, this delineation is not always observed in practice and in the literature
(Shenkar and Yuchtman-Yaar, 1997). For example, Steenkamp and Kashyap (2010) found in
their survey of New Zealand SMEs that the term goodwillis often used to refer to IC in
general. As a technical term, reputationoriginates from the economics literature but is also
variously referred to as: image (in marketing), prestige (sociology), goodwill (accountancy
and law), identity, esteem and standing (Shenkar and Yuchtman-Yaar, 1997; Wartick, 2002).
The resource-based view of the firm proposes that stakeholderscollective opinion of the
firm i.e. its reputation is a strategic resource that leads to sustainable competitive
A tool for

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