Country of Origin Effects

110 decisions (Tse & Gorn, 1993; Ahmed & d’Astous, 1996). Most reputed brand names are associated with countries that have high COO images. However, a strong brand name can reduce the strength of COO beliefs (Heslop & Papadopoulos, 1993).

In the consumer behavior literature, a brand is defined as a symbol which distinguishes a branded entity from others. In this case, a brand is simply a name, term, symbol, design or a combination of these (Schiffman et al., 2005). The ability to recall brand is termed “brand awareness” while the extent to which a brand is valued by the consumer is termed “brand equity”. The latter is associated with brand trust and ultimately, loyalty which is dependent upon the evidence presented to consumers to attest value or quality.

111 many markets are willing to pay a premium for manufactured products from more industrialized countries. ‘Made in Germany’, ‘Made in USA’ and ‘Made in Japan’

convey the notion of high quality due to the reputation that these countries have developed over time (Gao & Knight, 2007).

These early works provided consistent empirical and observational evidence that country of origin have influenced consumer product quality perceptions (Huddleston, Good & Stoel, 2001). However, Bilkey and Nes (1982) noted several methodological limitations in the early studies, including the use of single cues, intangible product descriptions and scales of unknown reliability and validity. They concluded with suggestions to improve future country of origin research efforts.

There is no consensus to the definition of the country of origin effect (Sauer et al., 1991) though it is generally understood as the impact of a people’s perceptions about a country on their evaluation of the country’s outputs. Bannister and Saunders (1978: 562) defined the country of origin effects as ‘generalized images created by variables such as representative products, economic and political maturity, historical events and relationships, traditions, industrialization and the degree of technological virtuosity, which will have effects upon consumer attitudes additional to those emanating from the significant elements of the products’.

The country of origin of a product affects purchase decisions because consumers tend to infer quality of a country’s products from its national image (Papadopoulos & Heslop, 1993; Jaffe & Nebenzahl, 2001). Consumers are willing to pay more for products and services from countries that they perceive favorably or as having the expertise to produce those products and services (Nebenzahl & Jaffe, 1996).

The lower the image of a country, the greater the price discount that buyers expect

112 compared with an identical product from an origin with a stronger image (Nebenzahl &

Jaffe, 1996).

A meta-analysis of COO research (Verlegh & Steenkamp, 1999) concluded that COO has a larger effect on perceived quality than on purchasing intention. The existing literature indicates that a COO image is related to the perception of a country’s level of economic development (Roth & Romeo, 1992). The higher the level of industrialization of a country, the more favourable the perception of the quality of its workers (Li &

Monroe, 1992) which in turn, is reflected in the perceived quality of its products (Iyer

& Kalita, 1997).

The most frequently mentioned weakness in early COO studies is the involvement of only single cues of product quality rating, which may result in misleading conclusions (Johansson, Douglas & Konaka, 1985) and ignore the relative importance of other relevant cues in affecting consumer evaluation of products (Han &

Tepstra, 1988). Hence, those studies are insufficient to understand the overall impact of

“made-in” effects (Hong & Wyer, 1989; Howard, 1989). In contrast, later studies utilizing multiple cues indicated that COO has less impact on consumer’s perceptions (Ettenson, Gaeth & Wagner, 1988). Additionally, Pisharodi and Parameswaran (1992) addressed the weaknesses in previous COO studies, such as poor handling of a complex construct, single cue studies, and lack of methodological rigor. As we mentioned above, COO construct can be decomposed into four components: country-of-design (COD), country-of-parts (COP), country-of-assembly (COA) (Insch & McBride, 1998), and country-of-manufacture (COM).

Extensive research on COO effects has been reported in the international business, marketing, and consumer behavior literatures. COO is the country of manufacture, production, or growth of a product. It is believed that the COO has an

113 impact on consumers’ product evaluations and purchasing intentions (Kim &

Pysarchik, 2000; Lee & Ganesh, 1999; Teas & Agarwal, 2000). Researchers identified two major causes of the COO effect. The first is the social-economic differences among countries, especially the differences in technology capability and product quality between developed and developing countries (Schooler, 1971). Another cause is consumer’s cognitive bias. Studies have shown that consumers may tend to have a preference for products from their own country (ethnocentrism) or may have preference for or aversion to products that originate from certain countries due to their country image stereotypes (Nagashima, 1970).

The globalization of economies and markets has dramatically changed the two factors mentioned above. As Thomas Friedman (2005) argued in his best-selling book, globalization has changed core economic concepts, making the world “flat” in the sense industrial and emerging market countries are now competing on a level playing field.

Worldwide technology transfer and diffusion has also lessened the gap in product quality between developed and developing countries.

Extensive research has found that COO affects a consumer’s product evaluation. Following several single-cue studies, the COO effect on multiple attributes was investigated (Cattin, Jolibert & Lohnes, 1982; Han & Terpstra, 1988; Nagashima, 1977; Papadopoulos, Heslop, Graby & Avlonitis, 1988). Most studies, however, failed to measure the COO effect on product evaluations when information on other product attributes was available to consumers. Johansson and Nebenzahl (1986) found that cars produced in developed countries were rated much higher in quality than those assembled in developing countries. Similar conclusions were drawn by Han and Terpstra (1988). According to Hooley, Shipley and Krieger (1988), the name of a country evokes a general image about the country and its products.

114 According to Hong and Wyer (1989), when consumers are presented with the COO cue together with other cues, such as price and brand, the effects of COO in their cognitive process can be observed in two ways:

(1) the halo effect; and (2) the summary construct.

When consumers are not familiar with the products of a country, the country image acts as a “halo” that directly affects consumers’ beliefs about these products and indirectly affects their evaluation of the products (Erickson et al., 1984; Johansson et al., 1985). That is, the mention of a particular country triggers feelings, positive or negative, in the consumer’s mind. These latent feelings are thought to endure since they are conditioned by country-specific feelings. In contrast, when consumers are familiar with a country’s products, a summary construct model operates in which consumers infer a country’s image from its product information, which then indirectly influences brand attitudes (Han, 1989). Country image then serves as an indirect channel in affecting product attributes and brand attitudes.

However, well-known domestic brand names in developing countries do compensate partially and contribute to favorable quality perceptions (Kinra, 2006).

Several studies in the past have also shown that consumers in developing countries generally seek to emulate Western consumption practices and lifestyles and purchase foreign brands (Peterson & Jolibert, 1995; Supphellen & Rittenburg, 2001).

According to the summary effect, the COO cue is regarded as the sum of their knowledge of product attributes in relation to a specific country (Lee & Lee, 2009).

Thus, Lee and Lee (2009) emphasized a particular country image indirectly provides clues of product quality. As such, they asserted that COO is used as a surrogate indicator for consumers’ product evaluation.

115 Country of origin is a multi-dimensional construct that suggest a wide range of cognitive responses (Han & Tepstra, 1988; Nebenzahl & Jaffe, 1996; Hong & Yi, 1992;

Lim & Darley, 1997). It can be separated into two discrete components. The first is informational; CO provides cues to consumers regarding the quality, dependability, and value for money of the product, when more specific information is not readily available (Han & Tepstra, 1988; Hong & Wyer, 1989). The second component of the CO cue relates directly to one’s group affiliation, i.e. national loyalty, and reinforces one’s sense of national identity (Bruning, 1997).

Thakor and Katsanis (1997, pp. 79-80) defined country of origin as “the country in which the product is made”. However, the concept has been represented by different terms used in the literature to refer to the country where a product is produced, such as country of production (e.g. Nebenzahl & Jaffe, 1996), country of manufacture (e.g.

Amonini et al., 1999; Samiee, 1994) and country of origin (e.g. Maheswaran, 1994;

Thakor & Katsanis, 1997). Additionally, the impact of country of origin on consumer perceptions or evaluations of products is called the “country of origin effect” (Samiee, 1994).