The Effect of Public Relations and Corporate Reputation on Return on Investment

Abstract

The tangible value of public relations to corporations remains unsolved in the domain of public relations research. It is similar in the case of quantitatively proving the value of corporate reputation. In general, it is regarded that public relations is an effective strategy to acquire a higher corporate reputation that would ultimately contribute to the organisations’ return on investment (ROI). This study attempted to identify the causal relationships among variables such as organisation size and complexity, public relations department size and formality, and corporate reputation, and how these variables affected economic ROI. The top 300 South Korean corporations were surveyed and their responses were analysed using structural equation modelling. Sizes of public relations departments and organisations were the most important variables affecting ROI. Both public relations and corporate reputation positively affected ROI. There was a positive correlation between the complexity of an organisation, and the size and formality of a public relations department. This suggested that even a smaller corporation could enhance its reputation and thus ROI by having a well-established public relations or strategic communication department. Implication of findings and suggestions for future study were made.