2. Literature Review
2.1. Country of Origin Research
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2. Literature Review
2.1. Country of Origin Research
The first study which suggested that consumers may use the country of origin of a product (COO) for their product evaluation was published by Robert D. Schooler in 1965. He found significant differences in consumers‟ evaluations of products, which were identical in every aspect except for the name of the country appearing on the product label. The initial studies further pointed out that products made in less-developed countries were not evaluated as quality products, with a conclusion of an existing bias against products (whether it be general products, classes of products or specific products) made in foreign, especially less developed, countries (Phau & Prendegast, 2000). Since then, COO has become one of the most widely researched topics in international business and marketing (Leonidou et al., 2007).
Country of origin effects have been defined as the effect of the country of product origin on consumers‟ evaluation and purchase intention of the product. Most studies on the topic have defined a product‟s country of origin as “the country of manufacture or assembly” of a product (Bilkey and Nes, 1982, Han and Terpstra, 1988, Papadopoulos, 1993). In other words, country of origin is operationalized as the final point of manufacture of the product, which can, but does not have to be the same as the headquarters of a company (Al-Sulaiti & Baker, 1998). This was the prominent approach especially in the early research. However, some studies are not concerned with the place of product manufacture (Johansson et al., 1985).
Instead, they define country of origin as the country where corporate headquarters of the company marketing the product or brand is located. Typically, this is the home country for a company (Al-Sulaiti & Baker, 1998). More recently, researchers have also been focusing on concepts such as country of product assembly, country of product design and others.
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Country of origin (COO) product perception looks at a country as an origin of a product (Roth Diamantopoulos, 2009). This country-product perception has been defined as:
“Consumers' perceptions about the attributes of products made in a certain country; emotions toward the country and resulted perceptions about the social desirability of owning products made in the country” (Nebenzahl et al., 2003, p. 388). A narrower approach to the concept focuses exclusively on the consumers‟ beliefs about products from a particular country. It reflects product dimensions such as workmanship, innovation, design, and prestige (Pappu et al., 2007). Other frequently cited definitions of country of origin product perception include
“the total of beliefs one has about the products of a given country” (Nagashima, 1977),
“consumers' general perceptions of quality for products made in a given country” (Han, 1989, p. 222) as well as “the overall perception consumers form of products from a particular country, based on their prior perceptions of the country's production and marketing strengths and weaknesses” (Roth and Romeo (1992, p. 480). The country of origin is an extrinsic cue in product evaluations, serving as a cognitive shortcut when other product information is limited (Lee & Lee, 2009).
2.3. Country Image Definitions
Country of origin research originated with studies of evaluation of products from particular countries and comparisons across countries. A new research interest evolved from this topic later, to study a more complex construct of images of countries not only on the product level, but also from the perspective of the perception of the country, its people, its involvement in world affairs and other related areas (Roth & Diamantopoulos, 2009). This is the concept of country image, or country brand. While there is a long history and extensive body of research on the country of product origin effects, the country image construct which emerged from it is much younger and has so far been receiving considerably less attention
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(Zeugner-Roth & Diamantopoulos, 2010). As such, there is yet no universally accepted consensus on conceptualization and operationalization of the country image construct (Roth &
Diamantopoulos, 2009). Nevertheless, existing literature does propose a number of definitions which appear to describe the concept well.
Country image has been defined as “the total of all descriptive, inferential and informational beliefs one has about a particular country” (Martin and Eroglu (1993; p. 193), or as “mental representations of a country's people, products, culture and national symbols”
(Verlegh and Steenkamp, 1999, p. 525). Alternatively, some definitions also conceive the mental process of country image formation. “Country image is the sum of beliefs and impressions people hold about places. Images represent a simplification of a large number of associations and pieces of information connected with a place. They are a product of the mind trying to process and pick out essential information from huge amounts of data about a place”
(Kotler & Gertner, 2002, p.251). Other, broader definitions treat country image is a generic construct, which consists of images created from the perception of the country products, economic and political status, people, historical events, relationships, traditions, industrialization, the degree of technological advancement, and others (Lee & Ganesh, 1999).
These factors usually refer to cognitive beliefs about a country, but some studies also mention the affective component of country image (Peterson & Jolibert, 1995; Roth &
Diamantopoulos, 2009).
2.4. The Importance of Country Images
In today‟s environment, countries, like commercial organizations, have to actively create and manage their reputations in order to gain and / or retain competitive advantage in relation to other countries. Countries attempt to take advantage of this reputation to show tourist potential, attract foreign investment, develop consumer products for domestic consumption and export, in international politics and other areas. It essentially means a competition of
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nations in a commercial environment, trying to make self attractive and beat out the others (Passow, Fehlmann, Grahlow, 2005; Olins, 2002). Country image (in some literature also called country brand or country reputation) is a concept which attempts to describe how a particular country is perceived abroad by others. The „others‟ in this case can include anyone from government officials, businessmen, media representatives to the general population as consumers or tourists. Scholars, governments and managers of commercial organizations have agreed that country image is a vital information cue, which is of high interest for businesses striving to improve their competitiveness internationally, as well as for public policy makers concerned with the position of entire nations and industries on the macro-level (Roth &
Diamantopoulos, 2009).
According to Heslop et al. (2008), most country image constructs and models include the following variables:
Political and social character of the country – e.g. political stability, democracy
level, human rights, environmental control, nation‟s role in world politics, quality of life, education standards.
Capacities / competencies of the country – e.g. technological development, industrialization, economic stability, well managed economy, wealth.
Character of the people – e.g. trustworthiness, friendliness, attitude to work.
Competency of the people – e.g. education, technical capability.
Country and people evaluations – e.g. likeability, attractiveness.
Desired country associations – e.g. interest in travel, relocation or relocation to the
country, investment in the country, building closer ties with the country.
When looking at the image of a country from the evaluator‟s perspective, it would be more accurate to add a subjective dimension to the variables, i.e. perceived capabilities of the
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country, perceived economic strength etc., as consumers are unlikely to hold objective, up-to-date information about realities of all countries. In fact, most images (country, brand) are stereotypes, extreme simplifications of reality which can be dated, based on exceptions rather than patterns, impressions rather that facts, and ignorance and prejudice rather than reality.
Because of human‟s cognitive processing, stereotypical images can be long lasting and difficult to change (Kotler & Gertner, 2002). However, that does not mean that they can be ignored or excluded from political and economic debate, because perception can determine people‟s behavior as much as reality, if not more (Anholt, 2009). Also, “national images exist at different intellectual and cultural levels, and they have different meanings for different audiences” (O‟Shaughnessy & O‟Shaughnessy, 2000, p.58).
2.4.1. The Country Image – Country of Origin Relationship
The importance of country images is also widely recognized from the perspective of countries as producers of goods, and as players in the global trade (Ozretic-Dosen et al., 2007).
This is where the concepts of country image and country of origin come together. Previous experimental studies have proven that a simple manipulation of the „product origin‟ or „made in‟ label associated with a product significantly influenced people‟s attitudes and purchase intentions towards the product (Kotler & Gertner, 2002). Wang and Lamb (1983) believed that country of origin effects are inherently negative, describing them as intangible barriers to enter new markets in the form of negative consumer bias toward imported products. However, the perspectives have changed dramatically since their article was published. Marketers nowadays see the country of origin information as a tool to influence the consumers‟
valuation of a product or a brand, positioning and distinguishing products in markets, and for formulation of a multinational marketing strategy (Agrawal & Kamakura, 1999; Ozretic-Dosen et al., 2007). From this point of view, country of origin and country images function in ways very similar to a product‟s brand name and brand image. Country equity can serve as
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one of the vital purchase-decision cues for the consumer in a situation of high supply-side competition and product standardization. Consumers have a tendency to treat the product origin or product brand name as indicators of quality and acceptability of the product, as a means of simplification of information processing. Product-country images are accentuated even more strongly in the era of global brands and global products (Papadopoulos, 1993).
The desired country association can be conveyed through the brand name, company name, in advertisements, in product or package design, sales and service staff etc. Naturally, the marketer can freely choose which of the country image associations to emphasize and which ones to downplay, though they should always be believable in order for the advertising to be effective. It has been suggested that highly positive country association may be able to warrant premium product pricing, while products associated with countries with a negative image may require discount pricing strategy in order to find a market (Agrawal & Kamakura, 1999).
It is generally accepted that country image and country-product perception are two distinct, but in most instances correlated variables. Past research provides evidence that favorable country image generally leads to a favorable perception of products made in the country (country-product perception) (Pappu et al., 2007; Roth & Diamantopoulos, 2009). Heslop and Papadopoulos (1993) provide an empirical confirmation of the presence of explicit correlation between country image and product perceptions. They also present a breakdown of the country image construct and suggest that favorable product evaluations are most strongly linked to images of well managed, technologically advanced nations, with citizens who are described as hard-working, likeable, trustworthy, admirable for their role in world politics and possessing a refined taste. In relation to product evaluation, the impact of the country of product origin and its image is largest in relation to the perception of product quality (Pappu et al., 2006). Perceived product quality has been defined in many ways, for example as
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“consumer‟s judgment about a product‟s overall excellence or superiority” (Insch & McBride, 2004, p.257).
2.5. Country Familiarity
Consumers‟ familiarity with the country (or knowledge of the country) is a variable that has been linked to the research of country images and perception of country products only recently and its impact has not yet received sufficient attention (Lee & Ganesh, 1999;
Josiassen & Karpen, 2007). However, its role should not be overlooked, as it is contended that country familiarity strongly affects country evaluation (Ahmed & d'Astous, 2008).
As for country familiarity in COO research, the majority of studies to date have used large, developed countries (United States, Germany, Japan, France) for their country-product evaluations. These countries are big, global exporters with rich cultural and historical traditions, and they are also very involved in world affairs. Consumers are likely to have a fairly high level of self-perceived knowledge of such countries, as they often come across information, products or people connected to the countries. However, the same may not necessarily be the case for smaller, developing or newly industrialized countries.
Most people probably “have no distinct image of any foreign country that is not the image of the region” (O‟Shaughnessy & O‟Shaughnessy, 2000, p.57). It is wrong to assume that people have strong, clear beliefs and sharp images of other nations in the world. The lack of general familiarity with a country may create a substantial problem for the country image and perception of the country products. “By default, relatively unfamiliar countries are expected to receive neutral to lower attributions” (Chattalas, et al., 2008, p.61). Indeed, in his comparative study of national images, Anholt (2009) shows that smaller, less-visible, high-income countries (Singapore, South Korea, United Arab Emirates) received significantly worse evaluation from international respondents on all dimensions of the research, in
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comparison with large, high-income countries. Small countries with very limited brand exposure and marginal role in world affairs (Ecuador, Estonia) were rated towards the bottom of the list. Ahmed et al. (2002) show on the example of Asian Newly industrialized countries (Korea, Singapore, Taiwan), that consumers abroad tend to have a very stereotypical, and often somewhat negative, view of these countries. In an unrelated research, Hayo (1999) shows that knowledge of the European Union and European Monetary Union among citizens of European countries was positively related to respondents‟ support for the institutions.
Theoretical foundation for this proposition can be found in the psychological theory of „mere exposure,‟ which maintains that repeated exposure to a stimulus leads to greater positive affect for the object portrayed and id a sufficient condition for attitude enhancement (Zajonc 1968). This effect has been found for a wide variety of stimuli and is quite robust (Han, 1994).
2.5.1. Objective and Subjective Knowledge
There are two major approaches available for operationalizing and measuring familiarity with any given category (country, product, brand). One is to measure familiarity in terms of how much a person actually knows about the category (objective knowledge, objective familiarity). The other approach is to measure familiarity in terms of how much a person thinks he or she knows about the category (subjective knowledge, subjective familiarity) (Park and Lessig, 1981). Subjective knowledge includes the individual‟s degree of confidence in his/her knowledge, whereas objective knowledge only refers to what the individual really knows (Brucks, 1985). Therefore, subjective knowledge is likely to provide a better understanding of the biases and beliefs of decision makers than objective knowledge does. It is also believed to increase the reliance on previously stored information (Brucks, 1985). Corresponding to intuition and real-life situations, there is a strong positive correlation between objective knowledge and subjective knowledge (Raju, Lonial, Mangold; 1994).
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2.6. Variables Influencing the Product Perception
Most of the recent COO research has treated product-country perceptions in a multi-cue variable context, and recognized a wide range of variables that affect it. The following section will review the variables which may play a role in consumer evaluations of country products, or influence the link between country of origin information and product evaluation. These variables will then either be directly included in this study, or they will be controlled for.
2.6.1. Product Category, Product Characteristics, Product Involvement
Consumers are more sensitive to the COO cues when evaluating some product categories and less sensitive with others. For example, in the automobile category, individual brands are almost always visibly affiliated with the country of origin of the brand, and the country cue is also frequently used in advertising (e.g. „Volkswagen: Das Auto‟ is an obvious reference to Germany). The COO serves here as highly diagnostic information, as it conveys additional information about product quality and other relevant ascriptions (Balabanis &
Diamantopoulos, 2008). In other instances, it is quite unlikely that country superiority is attached to a product category. Research indicates that COO information is assigned high importance for products that are durable, expensive, high-involvement (products where the buyer is prepared to spend considerable time and effort in searching prior to purchase; Day, 1970). On the other hand, country of origin is often non-diagnostic and unsubstantial with frequently purchased, inexpensive, non-durable, low-involvement products, where consumers assign little importance to the purchase (Hsieh, 2004; Samiee, Shimp, Sharma, 2005).
Consequently, most COO research is conducted with high-involvement products, which present high monetary risk and also higher hedonistic value. Nevertheless, a weak to moderate, though still significant COO effect has been confirmed even in low-involvement products, such as food (Ahmed et al., 2004). The product categories which appear most often in COO research are consumer electronics, cars and textiles / apparel / shoes (Usunier, 2006).
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Some particular product categories bear strong links to a particular country, usually the actual country of invention or strong tradition (i.e. vodka with Russia), or a group of several countries (Usunier & Cestre, 2007). In the minds of most consumers, wine is associated with France, fashion with Italy, watches with Switzerland and cars with Germany, Japan or the United States. When given the choice, consumers are likely to prefer products with such association, despite potential differences in price (Chattalas, Kramer, et al., 2008).
These associations are known as „Product-country matches‟, or „Product ethnicity‟ (Usunier
& Cestre, 2007). Similarly, „product-country associations‟ refer to the consumers‟ ability to evoke a country when the product category is mentioned (Pappu et al., 2006). Other than a stereotypical product-country association, a product-country match should occur when the perceived strengths of a country are important for the product features, or beneficial in that particular product category (Roth & Romeo, 1992). However, consumers from different countries don‟t necessarily make the same product-country or country-product associations.
Moreover, most product categories do not carry such associations with a particular country.
2.6.2. Product-Category Expertise
One of the context-specific factors believed to play a role in the relationship between country image and product evaluation is product knowledge and expertise (Usunier, 2006).
Previous studies mention several different types of knowledge, namely knowledge (expertise) of the product category, experience with country products, and knowledge of product brand (Lee & Ganesh, 1999).
Product-category expertise refers to how knowledgeable a consumer is about a given product category (Josiassen et al., 2008), or to the consumer information about functional attributes of products and about brand differences on attributes (Lee & Lee, 2009). This concept has been conceptualized either through subjective assessment of self-perceived expertise in a particular product or product category, or in a more objective fashion through
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behavioral considerations such as product information search experience, product usage experience, and product ownership status (Park & Lessig, 1981). Some studies, such as Brucks (1985) tested objective product category knowledge through asking the respondents product-related questions. It appears that the experience-based measures of knowledge are less directly linked to behavior than are the other types of knowledge measures. Subjective product class knowledge is likely to affect consumers‟ confidence in using information stored in memory. In the case of country of origin, consumers with high subjective expertise in the product category are likely to be more confident in using the COO cue, and therefore more likely to rely on COO than consumers with low subjective product expertise (Schaefer, 1997).
Existing literature suggests several ways in which product expertise may influence product evaluation in connection with the country of product origin information. Some of the early studies on the subject suggested that COO is a proxy variable for missing product characteristics, only having value when more specific product information is unavailable.
People with limited knowledge of a product category have to rely more heavily on their
People with limited knowledge of a product category have to rely more heavily on their