Corporate Reputation and Collective Crises: A Theoretical Development Using the Case of Rana Plaza

Abstract

Banking scandals, accounting fraud, product recalls, and environmental disasters, their associated reputational effects as well as company response strategies have been well reported in the literature. Reported crises and scandals typically involve one focal company for example BP and the 2010 Deepwater Horizon accident. As business practices change and company supply chains become more complex and interlinked, there is a greater risk of collective crises where multiple companies are associated with the same scandal. We argue that companies are likely to behave differently in a group setting compared to when faced with a crisis individually. Using an inductive approach, we examine the case of the Rana Plaza building collapse. We find that organizations with a history of similar crises adopt defensive strategies and communicate much later compared to organizations which adopt accommodative strategies. Contrary to the individual case, in a collective crisis accommodative strategies result in more negative reputational damage and a higher burden of responsibility. We propose that the relationship between crisis response strategy and organization reputation is moderated by the crisis setting. We extend the logic of crisis management and corporate reputation to incorporate the case of a collective crisis.