Can a good reputation encourage risk taking from businesses?

A good reputation is something that most businesses strive to obtain, and so one would imagine such a reputation has only benefits to the organization.  Alas, a recent study from the University of Georgia suggests that there are flipsides to a strong reputation that aren’t so positive.

Whilst the upside brings benefits such as the ability to attract better talent or charge higher prices, it also comes with extremely high expectations that can be incredibly difficult to meet.

“As much as people like to say that the stock market is blind to prejudicial behavior, because it’s run by humans there are a lot of human biases baked into it—and we exposed one,” the authors say. “Reputation is inherently a psychological construct. So, if you do a lot of good over a period of time, people start to expect more from you. If you keep delivering the same old thing, even if it’s a great product, the market may not reward you for it.”

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