Market signalling by microenterprises when building reputational capital

Abstract This paper addresses two gaps in our understanding: how Microenterprises (MEs) build reputational capital and how this compares with current theory (here the Stereotype Content Model or SCM). It also aims to explain our finding that MEs focus on communicating their competence but not their status. A content analysis of the relevant parts of 44 ME websites from the UK and China, is used to assess ME signalling of their ‘warmth, competence, and status’ and to identify major themes within each category. Both samples included B2B as well as B2C businesses and a wide range of business types. Data were collected during late 2021. As hypothesised from the SCM, MEs used all three types of signalling. Contrary to SCM theory, but compatible with prior work that small firms are stereotyped as lacking in competence, competence, rather than warmth, signals predominated. Status signalling was the least used option. Using a 2 × 2 experimental design survey among potential customers, competing explanations for this last finding are then tested. A tenet from the SCM, that the role of status signals is to inform competence evaluations, was not supported. Instead, status signalling was found to be potentially off-putting to customers as it can imply higher prices. The paper’s practical contributions include both examples and a thematic structure to guide the content of ME communication. The theoretical implications are that some of the SCM’s underlying theory may need modification in the context of MEs, specifically that concerning the role of both competence and status signalling.