Signalling reputation in international online markets

Although online technology enables young and small firms to gain access to buyers in foreign markets efficiently, it does not overcome the liability of being an unknown seller among a sea of largely unknown firms. In order to internationalize effectively through online markets, such firms need to establish an online reputation within a context where there are a large number of competitors, most of (or all of) are relatively unfamiliar to customers. The purpose of this article is to explore how they might do so. Drawing on economics-based signalling theory as well as past research in the areas of strategic management, marketing, and MIS, we hypothesize that firm-controlled reputation signals with credible commitments—price, advertising, and umbrella branding—will impact reputational performance and moderate the impact of user-generated reputation signals. We test the hypotheses using data collected about software products sold on the Web site Download.com. Our results show that signalling by advertising and umbrella branding affects reputational performance. The article provides insights about signalling in online markets for managers developing reputation-building strategies, as well as for international entrepreneurship researchers. Copyright © 2009 Strategic Management Society.

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