A Study On The Problem Of Enterprise Reputation

The reputation problem is not only a new domain in the investigation of economic theory but also the great puzzle during the operation of practical economy. In the process of transition from plan economy to market economy, many kinds of anti-reputation phenomena come out in China which hinders healthy development of economy. Therefore, to analyze and search into systematicly the reputation problem is not only practical demand but also an unavoidably important subject in the economics investigation.This paper concentrates on the general factors that affect the reputation of firm, and by which, the lack of reputation in transitition process in China is analyzed. This paper has borrowed some reasonable factors from western economic theory, adopted methods of the combination of normal analysis and positive analysis, aimed at the situation in china, investigated the essence connotation, construction feature and determinant factors of firm reputation deeply and systematically. This paper argues that times of games; formal institutions such as property rights and law; informal institutions such as norms; competitive setting and government action are determinant factors that affect firm reputation. Repeatable transaction is very important for firm to establish and maintain reputation. If games are repeated, the players will give up short-term benefit gained by cheating for long-term benefit, and the enterprise will be inclined to keep faith. Property rights are the base of reputation system, law and rule is the safeguard of reputation system. The basic function of property system is to provide a stable expectation to pursue long-term benefits and the rule of repeater games for people. If property rights are not delineated, one need not toe the mark for one's action and can not gain long-term benefits which is deserved to he (she) because of keeping faith. Ownership structure is chosen to encourage co-operation inside a enterprise. The allocation of ownership matters even in long-term relationships, if the agents have no enough patience. Informal institutions also affect reputation. Once conventions or norms about fidelity and keeping faith become one's ideology, one will view reputation rule as one's goal. Therefore, informal institutions can reduce cost that should have been expended when technical rule and formal institutions is used to inhibit transactor. In firm networks, reputation is mainly maintained by informal institutions. Competition play an important role in preserving reputation, it is competition that generates outside option for transactor that is necessary to keep firms on their toes. Competition in product market gives consumers the power of choosing between the offerings of rival suppliers whose prices adjust to their reputation, moral hazard can be depressed with the help of competition in manager and capital market. The government action is one of factors affecting firm reputation. As an important economy body, government should follow the fundamental of keeping faith and fidelity, which play the role of model for cleansing social condition of credit.During the process of transition in china, there are five reasons that lead to the lack of firm reputation. The first is property rights system; the second is imperfect competitive mechanism; the third is excess regulation; the fourth is the lack of credit management system; the fifth is the conflict between informal institutions and principle of market economy. The policy implications of this paper are that modern property rights system should be established, administrative monopoly should be eliminated and exoteric competition should be introduced, stern punishment system should be found, industry of credit management should be developed and credit notion should be strengthened to boost social consciousness of credit.