Accumulating Reputation through Strategic Action Flows: Lessons from Amazon.com and Its Competitors in Internet Retailing

A growing body of strategy research has recognized that a firm's reputation, defined as collective beliefs in the organizational field about a firm’s identity and prominence, as one of its most valuable assets. Yet research today has not examined how this asset is built, especially by new firms. Drawing on the idea that a firm’s reputation is accumulated through flows of strategic actions (Dierickx & Cool, 1989), we analyzed the actions of Amazon.com, Barnesandnoble.com and CDNow between 1995 and 1998 in order to understand how these e-commerce firms built their reputations. We categorized the actions of these firms in three actions flows -symbolic, competitive, and relational – and analyzed differences in the pattern of these flows. The analysis suggested that certain patterns of the action flows can be viewed as generating reputation enhancing effects, which facilitate the accumulation of reputation. The paper induces three such effects – expectations for dominance, focal point of exchanges, and prototypical identity, and presents a framework that links patterns of action flows to these effects and to the accumulaiotn of reputation by new firms.