Reputation Traps: Social Evaluation and Governance Failures

Reputations and the related social processes of evaluation are increasingly hailed as one of the most promising mechanisms sustaining cooperation in a variety of mixed-motive set- tings, ranging from neighborhood communities and formal organizations to online mar- kets. But if reputation is such a powerful route to sustain cooperation, why do we then see cooperation breaking down so frequently? The present essay argues that such reputa- tion failures should be conceived as part of a broader set of governance traps as they result from institutional designs that are based on misconceived assumptions about human na- ture. My argument comes in five steps. Using a social rationality approach, I first outline the contours of an alternative explanatory framework. Distinguishing between two types of managerial control philosophies (rational vs. normative) and two forms of control (bu- reaucratic vs. collegial) I then review the four major theoretical templates that currently inform the design of institutions and organizational governance structures: agency, stew- ardship, reputation, and social identity theory. Drawing on available empirical evidence, I subsequently describe how each of these design principles may trigger vicious cycles of cooperation decay. I refer to these processes as incentive, reputation, empowerment and identity traps. I contend that the common denominator behind each of these sustain- ability traps is that the structures in place fail to support the normative frame required to sustain joint production motivation. I then present findings from selected empirical stud- ies showing how specific relational support structures may prevent the emergence of these sustainability traps, or mitigate their consequences. The essay concludes with a discussion of implications for future research on cooperation