Capability Reputation

Capabilities are generally defined as a firm’s ability to use and combine resources to do something valuable or useful, such as produce a product or develop an innovation. Because stakeholders, whether they are customers, investors, suppliers, competitors, or someone else, do not have access to perfect information about a firm and its capabilities, they must instead use direct and vicarious observations of the firm’s actions and outcomes to make inferences about what its underlying capabilities are. Based on these inferences, stakeholders form beliefs about a firm’s skill sets and performance characteristics, such as its ability to innovate, produce high-quality products or services, provide quality management, and have strong financial performance, in addition to other aspects about what a firm can do or what it is ...