Certifications and Reputation: Determining the Standard of Desirability Amidst Uncertainty

We develop a theory that examines how a particular type of third-party quality signal, certifications, influences an actor’s long-term reputation by addressing two different types of uncertainty. The first type deals with the degree to which the capabilities of an actor can be inferred over time based on known performance dimensions. We label this technical uncertainty. The second type deals with assessing whether the perceived capabilities of the actor meet the standard of desirability, which we call performance standard uncertainty. We propose and test that certifications will positively influence the long-term reputation of actors in situations that involve minimal technical uncertainty, and that, across levels of technical performance, certifications will have an inverted U-shaped relationship with assessments of actors such that certifications will have the greatest impact on assessments of actors who are close to the uncertain standard of desirability. We test our hypotheses in the context of the voting for Major League Baseball’s Hall of Fame, an environment where comprehensive technical performance measures leave little technical uncertainty. Our results support our hypotheses and suggest that certifications can influence an actor’s reputation by reducing performance standard uncertainty rather than just technical uncertainty, as previously presumed.