Corporate reputation has become an important concern of managers and corporate stakeholders worldwide (Fombrun, 2007; Hall, 1992; Hofstede, Van Deusen, Mueller, & Charles, 2002; Sarstedt, Wilczynski, & Melewar, 2013). It represents what stakeholders think about a firm in relation to their expectations; furthermore, reputation includes a variety of stakeholders—not just shareholders and CEOs (Barnett & Pollock, 2012; Doh, Howton, Howton, & Siegel, 2010; Fombrun, 1996). Many benefits result from a favorable reputation (Sarstedt et al., 2013), such as improved financial performance, higher quality employee recruitment, and greater support from communities and governments (Deephouse, 2000; Fombrun, Gardberg, & Barnett, 2000; Turban & Cable, 2003).

While interest in reputation is growing worldwide among practitioners, scholarly attention to reputation as a worldwide phenomenon has been limited. Some recent empirical research reported that reputation varies across countries (Deephouse & Jaskiewicz, 2013; Soleimani, Schneper, & Newburry, 2014). However, a gap in our knowledge is that no theoretical reasons have been developed and tested for these cross-national differences (Brammer & Jackson, 2012; Newburry, 2012). This gap is not surprising because most research since the dawn of management research on reputation 25 years ago focused on single countries and applied signaling theory (Fombrun & Shanley, 1990; Philippe & Durand, 2011).

We develop a theoretical explanation to begin filling this gap using the comparative institutional approach because it has been commonly used in past studies of cross-national differences (e.g., Crossland & Hambrick, 2011; Hartmann & Uhlenbruck, 2015; Sun, Peng, Lee, & Tan, 2015). For instance, Gaur, Kumar, and Singh (2014) examined how institutional and firm resources affected the transition from exports to foreign direct investment by Indian firms. Institutions are stable rules, values, and meaning systems that constrain certain actions and serve as resources that enable other actions (Commons, 1970; North, 1990; Scott, 2014). Institutions influence the behavior of corporations and the expectations of stakeholders for corporate behavior (Jackson & Deeg, 2008; Redding, 2005). Thus, institutions should be related to corporate reputation. Following North (1990, 1994), we conceptualize institutions as consisting of formal and informal components. Formal components include rules and organized structures to guide human and organizational action. Following past research on international business, we focus on the overall institutional development of a country in terms of its educational, legal, economic and other sectors (Chan, Isobe, & Makino, 2008).