Reputation and Identity Building of Small Social Businesses in Germany

Abstract

The proposed research will examine the reputation and identity building of small, social businesses in Germany with an inductive unfolding research using semi-structured interviews and grounded theory to collect and analyse data. The sampling pool consists of all social businesses registered in the Social Entrepreneurship Netwerk Deutschland (Social Entrepreneurship Network Germany) with less than 50 employees. The research aims to provide new findings and insights adding to existing knowledge regarding the reputation and identity building of small companies. The proposed research will focus on small, social businesses which, according to the literature, have other objectives and challenges to face in the area of reputation management and identity building. Existing public relations literature and research mainly address larger companies or corporations and exclude small and medium sized companies. The proposed research aims to address this issue and provide further insights about that specific area. Therefore, this research will be helpful for further research in this field. It is also helpful, because it is likely that PR graduates will be employed in small businesses during their careers.

Introduction

The following research proposal is based on two different observations. Firstly, the area in which PR is applied has changed and so-called social businesses have emerged. Secondly, much of the research on public relations focuses on large companies or organisations. While public relations is also of importance for small companies, little research is done in this area. Especially in the field of identity and reputation building, differences compared to larger corporations can be assumed. With my research I will combine these two observations and try to find out how small, social businesses perform reputation and identity building.

The area in which public relations is normally practised has changed in recent decades. Typically, public relations is performed in three sectors, the governmental sector, the private/business sector, and the non-profit sector. In recent decades, the boundaries between these sectors have become looser, and companies that combine social/environmental goals with entrepreneurial approaches have emerged.

Since there were estimated to be approximately 25.1 million small and medium-sized enterprises (SMEs) in the European Union in 2018 (European Commission, 2019), with the vast majority of these enterprises micro-sized firms, it is likely that public relations graduates will have a job within one of these businesses during their career. However, the existing research within the field of public relations is largely focused on larger corporations (HuangHorowitz, 2015).

Identity and reputation management can be different and more challenging for smaller businesses, since they may have to be especially creative in their public relations approaches (Huang-Horowitz, 2015). This can be a challenge particularly for small businesses, since they must introduce a new type of business to the public and raise their awareness and interest in the attractiveness of its products and services as well as its social goals. In addition to that, social businesses must promote engagement with potential clients (Avidar, 2017).

This research aims to combine both small businesses and social businesses and their identity and reputation management. Even though, there are a few publications on public relations of small businesses (e.g. Komodromos, 2017; Huang-Horwitz, 2015, 2012; Burckhardt, 2008), the research on public relations in small businesses is still very marginal. The same applies to the research on public relations in social businesses. The research will focus on small, social businesses in Germany and tries to explore their reputation and identity management with an unfolding qualitative research.

Literature review

Reputation and Identity building

In general, reputation management is often described and mixed with other terms, such as corporate responsibility, corporate ethics, corporate governance and sustainability (Burkhardt, 2018). Even among scholars, there is no unique definition for reputation management. Some describe reputation as a "dominating impression people get about a company" (Bauerhof, 2004, p.17). Others see corporate reputation as an instrument that reflects the relative status of the company both internally and externally, with stakeholders and employees in its competitive and institutional environment (Bromley, 2002).

Sabrina Helm (2013) tries to combine several definitions and defines Corporate Reputation as

"...a stakeholder's overall evaluation of a firm in respect to its past, present, and future handling of stakeholder relationships that reflects a firm's ability and willingness to meet stakeholders' expectations continuously and describes the firm's overall appeal to all of its constituents when compared with other firms"

(Helm, 2013, p.7)

While reputation is primarily connected to perceptions outside of the corporation or organisation, organisational identity is seen as the organisation's culture which relates to all members of the organisation as an entity (Whetten and Mackey, 2002). The internal benefits of building a credible, consistent, and valued corporate identity can enhance the loyalty and commitment of employees and can help to maintain an organisation's legitimacy. Externally, a socially acknowledged identity leads to a good reputation and attracts potential employees and increases the recognisability among customers and business partners (Bouchikhi and Kimberly, 2008). A good reputation can also have financial advantages and profit potentials for a company in the long term (de Quevedo Puente et al., 2011).

Public Relations in small businesses

In particular, the existing frameworks in public relations are difficult to relate to small companies. Grunig and Hunt's (1984) four models and the later developed two-way symmetrical model has often been criticised for referring only to large companies with many resources and implying that public relations is only executed by professional PR-practitioners. In smaller businesses this is very often not the case. The same can be stated about the later developed Excellence Theory by Grunig et al. (2002), which excludes smaller companies due to the design of the Excellence study by conducting research on mainly large companies with often thousands of employees. The situational theory of publics and the contingency theory do not take the large variety of organizations into consideration and ignore or require variables, such as access to large financial resources (Huang-Horowitz, 2012).

There is a general consensus among scholars that a good reputation management is beneficial for companies. A study by Gray et al. (2004) identifies a connection between the application of PR techniques and a high rate of growth, even though not many of the examined small companies used a large variety of PR techniques. Most of the literature pays little or no attention to small companies and ignores possible differences in the practice of public relations and the management of reputation (e.g. Grunig et al., 2002; Hung, 2005).

Often larger financial and personnel resources are required in order to perform a good reputation management as proposed in the existing literature. Otterbourg (1966) was one of the first scholars addressing the point that the practice of public relations is necessary within smaller businesses. However, he suggested that it is not possible for smaller businesses to copy the practice of public relations from larger companies. Public relations practice varies from those of large corporations (Goldberg et al., 2003). Evatt et al. (2005) researched on how small firms practice public relations and discovered that small firms are more likely to focus on relationship building rather than trying to gain publicity. Huang-Horowitz (2015) found that small businesses rely on internal training, human capital as leverage, and consistency to build organisational identity and on credibility, transparency and legitimacy to build reputation. Komodromos (2017) presents similar findings which show that reputation building of small businesses is based on consistent internal and external communication, internal resources (i.e. capital and manpower), transparency, credibility, and trained employees. A difference in organisational identity building between small businesses and large companies is due to the fact that in large companies, identity management is mostly distributed between several business functions, such as marketing, top management, or corporate communications, whereas in small businesses identity building responsibilities are often bundled with the owner or entrepreneur who holds a key or "unifying position with the firm" (Abimnola, 2007, p.343)

Social businesses

A general definition for a social business goes back to Muhammad Yunus (2007):

The company itself may earn a profit, but the investors who support it do not take any profits out of the company except recouping an amount equivalent to their original investment over a period of time. A social business is a company that is cause-driven rather than profit-driven, with the potential to act as a change agent for the world. p.22

In addition, Yunus differentiates between two types of social businesses. On the one hand, there are social businesses that are focused on creating a social benefit rather than on maximizing profit for the owners. In this term, creating social benefit can mean "poverty reduction, healthcare for the poor, social justice, or global sustainability" (Yunus, 2007, p.28). On the other Hand, a social business can be owned by "the poor" and the dividends generated by the profit maximizing businesses will benefit the poor (Yunus, 2007, p. 28). Even though, there are some general definitions for social businesses an accurate definition for social business regarding legal and tax issues is still missing (Avidar, 2017). The European Commission describes social businesses as enterprises:

• that are commercially active due to a societal objective of the common good
• that mainly reinvests its profits to achieve this social objective
• "where the method of organisation or the ownership system reflects the enterprise's mission, using democratic or participatory principles or focusing on social justice" (European Commission, n.d.).

Compared to regular profit maximizing businesses, social businesses face several problems regarding identity and reputation building, since social businesses must introduce the concept of business to their publics and raise their awareness for the products they sell as well as the social goals they try to achieve (Avidar, 2017). Some scholars (e.g. Benziman, 2009) claim that social businesses often have to cope with bad reputations because their products are associated as low-quality products that were produced by vulnerable communities. Social businesses also get accused of exploiting their own employees and weak populations by paying very low wages. A study by Avidar (2017) shows, that the general public has little idea or almost no opinion on social businesses. In the context of businesses and social values, research is mostly focused on corporate responsibility.

Research Questions and operationalisation

The literature review reveals that there are already a few studies regarding reputation and identity building in small social businesses. These studies demonstrate that reputation and identity building are indeed relevant and beneficial for those companies. Still, the theory and literature around reputation and identity building is focused on larger corporations. To fill this gap, further research on smaller enterprises is needed. Social businesses seem to have different challenges regarding reputation and identity building. Furthermore, the field of social businesses is emerging, and the majority of those companies were founded within the past decade. Therefore, most social businesses are small rather than large. Thus, it is assumable that small social businesses have a similar approach in building reputation and identity. In addition to that, the literature on identity and reputation building of social businesses presents that social businesses might have additional challenges to face regarding reputation building (Avidar, 2017). The proposed research aims to explore these additional challenges and how small, social businesses cope with them.

Since the research is qualitative, inductive, and unfolding, the research questions are more general rather than specific. This gives the interviewees the opportunity to answer in length and in vivid detail to formulate their experiences and knowledge (Rubin & Rubin, 2012).

RQ1: How do small, social businesses create and negotiate their corporate reputation?

RQ2: How do small, social businesses create and negotiate their organisational identity?

Definitions

To answer the research questions appropriately, a definition of small, social businesses is necessary. To define a business as small, different approaches can be chosen. In most cases, companies are categorised according to their turnover, profit, or number of employees. The definition in this study is derived from existing studies researching small businesses (e.g. Huang-Horowitz, 2015). Since most companies do not provide any information about their turnover or profit, and it is not mandatory in Germany to publish this information before reaching a certain level of turnover or profit, this information will not be considered. Instead the definition of small companies relies completely on the number of employees. Regarding this, the study will examine companies with fewer than 50 employees and follow the definition for small companies by the European Commission (European Commission, n.d.). This range also includes the definition for "micro" companies, with fewer than 10 employees.

Following the literature review, the definition for social businesses is vague rather than specific. The definitions presented in the literature review define social businesses as businesses that are cause rather than profit driven and that mainly reinvest profit to produce a defined social value. Since these variables are difficult to trace, the selection process is based on the web presentation of the businesses that are registered in the Social Entrepreneurship Netzwerk Deutschland e.V. (Social Entrepreneurship Network Germany). Companies that publicly state that they are dependent on donations will be excluded. The precise procedure is explained in the sampling section. Only companies that meet both definitions will be examined.

Methodology and theoretical framework

The proposed research is unfolding, qualitative, and inductive. In order to answer to the research questions, grounded theory approach (Glaser & Strauss, 1967) from a constructivist perspective will be used for this study. Choosing the constructivist paradigm allows the researcher to emphasise on the rhetorical and constructive aspects of knowledge and to look at facts as socially and or individually constructed (Silverman, 2013, p.105). The researcher is interested in contending and overlapping versions of reality and takes the role of a respectful observer, who recognizes that his or her own slant affects what is learned. This influences the data generation and the analysis (Rubin & Rubin, 2012, p.23). The grounded theory approach will help gain a better perspective on reputation building of small, social businesses and will help conceptualise a theory. The approach for this research was chosen to analyse the generated data in its context (Gubrium & Holstein, 2001, p.679). The grounded theory approach is based on four components. Theoretical sensitivity helps to go "beyond the entities themselves and to identify characteristics of these entities" (Oktay, 2012, p.11). Constant comparison will beused to compare case by case to determine similarities and differences and to categorise. Theoretical sampling helps to choose the right cases by choosing thorough exploration of appropriate concepts. Theoretical Saturation defines the ending of data generation, which occurs when no new concepts are emerging from the generated data (Oktay, 2012). The grounded theory approach has been chosen, since it makes its greatest contribution in areas in which little research has been done so far (Punch, 2006, p. 104).

Sample and sampling

Since there is no statistic or data on how many small social businesses, regarding the aforementioned definition, exist in Germany, the sampling pool consists of all businesses that are registered in the Social Entrepreneurship Netwerk Deutschland (Social Entrepreneurship

Network Germany) and employ less than 50 people. This information will be obtained via the business's websites. The sample is based on the approach of variety and includes a range of different sectors, such as education, poverty, climate change, migration, and health.

Following the grounded theory approach theoretical sampling will be used in this research. Regarding theoretical sampling, approximately 15 semi-structured telephone/skype interviews will be conducted in a cyclical process. This is just an assumption, because theoretical sampling is applied until theoretical saturation is reached (Chun Tie, 2019, p.3). In theoretical sampling, data collection and data analysis are closely interwoven. This allows the researcher to analyse the gathered data and make decisions on the selection of the next interview partners. The first interview partners will be selected by purposive sampling and the conducted interviews will be transcribed and analysed by initial, intermediate (focused), and theoretical coding. This process gives the researcher the opportunity to make decisions based on the analysed data and newly gained insights. The semi-structured interviews will be conducted in German or English and will be later translated into the English language semi-structured interviews have the advantage in giving the participants the possibility in answering in length and depth and formulating their experience and knowledge. Furthermore, this also enables the researcher to react and reply to topics mentioned by the interviewee. Semi-structured interviews are based on topics and subtopics which will be created in advance. In combination with grounded theory and theoretical sampling, semi-structured interviews provide an avenue to add and change topics within the interview and for the next round of interviews. This implies, that definitions can evolve during the process of theoretical sampling and multiple sessions of recoding might be required (Rubin & Rubin, 2012, p.204).

The data collection process following theoretical sampling is presented in following timeline.

Proposed Timeline

Semi structured interviews (round 1), April 2020

Semi-structured interviews (round 2), Mai 2020

Semi-structured interviews (round 3), June 2020

This proposed timeline is a tentative plan and might change and extend over the period of data collection, since theoretical sampling is conducted until theoretical saturation is reached. The exact date of the interviews may depend on the availability of the participants.

Data Analysis

As explained, grounded theory implies the interweaving of data collection and analysis and is based on the three coding methods initial, focused, and selective coding. Initial coding is the process of fracturing, investigating, and conceptualising the data with the intention of comparison with other segments from the same or other data sources. During this process memos from the researcher will be included and considered. As soon as categories and patterns emerge from the transcribed interviews, intermediate coding begins. Intermediate coding helps advance the final theory by identifying relationships between categories and by using diagramming. The last and final step of the coding process is the advanced or theoretical coding. Theoretical coding implies writing the so-called storyline, which provides the narrative of the grounded theory and will aid in finding gaps in the evolving theory during the final phase. Theoretical codes are the last step of the data analysis and are "advanced abstractions that provide a framework for enhancing the explanatory power of [the] storyline and its potential as theory" (Mills & Birks, 2014, p.115). The coding process of the transcribed interviews will be conducted with the help from the NVivo software.

Ethical Issues

The success of the research depends highly on the willingness of the interview partners to participate in it. Therefore, ethical issues of the study must be considered. Before the interviews, the participants will be informed that their data will be treated confidentially and will be published in an anonymized form. The participants have the possibility to view the raw transcripts at any time and to withdraw without providing reasons. The data will be treated confidentially and will not be passed on to third parties. All collected data is securely stored on a password-protected device. When conducting the interviews, it will be ensured that they take place in a quiet and confidential setting. In order to ensure that the ethical issues will be considered and addressed, consent forms meeting the standards of the General University Ethical Panel will be used to state this.

Implications and Conclusion

The proposed research study aims to generate first findings about small, social businesses in Germany by using the approach of the grounded theory. Although there are already few studies on the reputation and identity building of small businesses, the proposed research focuses on small, social businesses, which may face other problems in reputation and identity building due to their different objectives. Presumably, the results of the study are similar to those of existing studies regarding reputation and identity building of small businesses (e.g. Komodromos, 2017; Huang-Horowitz, 2015). The literature analysis has identified areas such as transparency, credibility, human capital, and consistent internal and external communication as important components for the reputation and identity building of small businesses. It is assumable that the proposed research will generate similar findings.

Grounded theory is used to conduct an inductive, unfolding research. However, it is not possible to predict exactly which new findings will emerge due to the special nature of small, social businesses.

The strengths of this research are the in-depth analysis and the flexibility provided by the semistructured interviews and the theoretical sampling. The research can evolve during the investigation and will be able to adapt to new findings. Thus, the findings can lead to and help further research in this area. At the same time, the lack of generalisation and transferability are a general issue within in-depth analysis and can be applied to this research as well. Further problems of qualitative research that could emerge while examining this research could be the possibility of participants not responding when contacted for an interview and the subjective nature of the researcher while coding and interpreting the data.

This presented research follows the call for further research in the field of reputation and identity building of small businesses and focuses on social businesses, which have also hardly been researched in the context of these variables. Therefore, an inductive unfolding research as presented before can be significant and relevant.

References

Abimbola, T., & Vallaster, C. (2007). Brand, organisational identity and reputation in SMEs: an overview. Qualitative Market Research: An International Journal, 10(4), 341-348. doi: 10.1108/13522750710819685

Avidar, R. (2017). Public relations and social businesses: The importance of enhancing engagement. Public Relations Review, 43(5), 955-962. doi: 10.1016/j.pubrev.2017.03.015

Bauhofer, B. (2004). Reputation Management. Glaubwuerdigkeit im Wettbewerb des 21. Jahrhunderts Reputation Management. Credibility in the competition of the 21st century, Zuerich

Bouchikhi, H., & Kimberly, J. (2008). The soul of the corporation. Upper Saddle River, NJ: Wharton School.

Bromley, D. (2002). Comparing Corporate Reputations: League Tables, Quotients, Benchmarks, or Case Studies?. Corporate Reputation Review, 5(1), 35-50. doi: 10.1057/palgrave.crr.1540163

Burkhardt, R. (2008). Reputation management in small and medium-sized enterprises. Hamburg: Diplomica Verlag. https://ebookcentral.proquest.com/lib/stir/detail.action?docID=616843

Chun Tie, Y., Birks, M., & Francis, K. (2019). Grounded theory research: A design framework for novice researchers. SAGE Open Medicine, 7, 205031211882292. doi: 10.1177/2050312118822927

European Commission. (November 26, 2019). Number of small and medium-sized enterprises (SMEs) in the European Union in 2018, by size (in 1000s) [Graph]. In Statista. Retrieved December 06, 2019, from https://www.statista.com/statistics/878412/number-of-smes-in-europe-by-size/

European Commission. What is an SME? - Internal Market, Industry, Entrepreneurship and SMEs - European Commission. Retrieved 1 December 2019, from https://ec.europa.eu/growth/smes/businessfriendly-environment/sme-definition_en

Evatt, D. L., Ruiz, C., & Triplett, J. (2005). Thinking big, staying small: Communication practices of small organizations. International Association of Business Communicators Research Foundation.

Glaser, B., & Strauss, A. (1967). The discovery of grounded theory.

Goldberg, A. I., Cohen, G., & Fiegenbaum, A. (2003). Reputation building: Small business strategies for successful venture development. Journal of Small Business Management, 41(2),

Gray, D., Davies, F., & Blanchard, K. (2004). Does use of public relations promote a higher growth rate in small firms?. Corporate Communications: An International Journal, 9(4), 294-301. doi: 10.1108/13563280410564039

Grunig, J., & Hunt, T. (1984). Managing public relations. New York: Holt, Rinehart and Winston.

Grunig, L. A., Grunig, J. E., & Dozier, D. M. (2002). Excellent public relations and effective organizations: A study of communication management in three countries. Mahwah, NJ: Lawrence Erlbaum Associates.

Gubrium., J., & Holstein, J. (2001). Handbook of Interview Research. [Place of publication not identified]: Sage Publications, Inc.

Helm, S., Liehr-Gobbers, K., & Storck, C. (2013). Reputation Management. Berlin: Springer Berlin.

Huang-Horowitz, N. (2012). Conceptualizing a Theoretical Model for the Practice of Public Relations in the Small Business Environment. Public Relations Society Of America, 6(3).

Huang-Horowitz, N. (2015). Public relations in the small business environment: Creating identity and building reputation. Public Relations Review, 41(3), 345-353. doi: 10.1016/j.pubrev.2014.10.018

Hung, C. F. (2005). Exploring types of organization–public relationships and their implications for relationship management in public relations. Journal of Public Relations Research, 17(4)

Komodromos, M. (2017). Public Relations and Reputation in Small Organizations: Creating Identity and Building Reputation for Success. Global Business And Economics Review, 19(5), 1. doi: 10.1504/gber.2017.10004430

Mills, J., & Birks, M. (2014). Qualitative methodology. Los Angeles, London, New Delhi, Singapore, Washington DC: SAGE.

Whetten, D., & Mackey, A. (2002). A Social Actor Conception of Organizational Identity and Its Implications for the Study of Organizational Reputation. Business & Society, 41(4), 393-414. doi: 10.1177/0007650302238775

Whetten, D., & Mackey, A. (2002). A Social Actor Conception of Organizational Identity and Its Implications for the Study of Organizational Reputation. Business & Society, 41(4), 393-414. doi: 10.1177/0007650302238775

Oktay, J. (2012). Grounded theory. New York: Oxford University Press.

Otterbourg, R. (1966). Public relations for smaller companies. Public Relations Quarterly, 11(1), 2-54. Punch, K. (2006). Developing effective research proposals (2nd ed.). London: SAGE.

Rubin, H., & Rubin, I. (2012). Qualitative Interviewing. The Art of Hearing Data (3rd ed.). Los Angeles, London, New Delhi, Singapore, Washington DC: SAGE Publications.

Social Entrepreneur Netzwerk Deutschland (SEND) e.V. Retrieved 1 December 2019, from https://www.send-ev.de/

Yunus, M. (2007). Creating a World Without Poverty. Social Business and the future of Capitalism. 1st ed.New York: PublicAffairs.