made in china

Made in China but sold at FAOSchwarz: country-of-origin effect

and trusting beliefsSertan Kabadayi and Dawn Lerman

Graduate School of Business, Fordham University, New York, New York, USA

Abstract

Purpose – The purpose of this paper is to investigate the moderating effect of trusting beliefs about astore on country-of-origin (COO) effects. The paper suggests that three trusting beliefs (ability beliefs,benevolence beliefs and integrity beliefs) about a retail store moderate negative effects of COO onproduct evaluation and purchase intention. However, under high manufacturer risk conditions, onlybenevolence beliefs moderate the negative COO effects.Design/methodology/approach – The toy industry is chosen as the study context. The first threehypotheses are tested with survey data collected from 224 participants. The last hypothesis is testedwith data collected from 338 participants. Hierarchical moderated regression was used in the testing ofthe hypotheses.Findings – The results show that while only benevolence and integrity beliefs about a storeweaken the negative effect of COO on product evaluations, all three trusting beliefs lessen the negativeimpact of COO on consumers’ purchase intentions. However, when manufacturer risk is high, onlybenevolence beliefs have a significant moderating effect.Practical implications – The findings show that manufacturers can reverse the negative cycle, or atleast minimize their losses, if they choose those retailers that consumers have high trusting beliefsabout as their channel members. Similarly, if they can signal that they are benevolent and honeststores, retailers can balance their customers’ negative evaluations of products made in certaincountries with negative image.Research limitations/implications – Given the recent product recalls and concerns, the toyindustry presents an ideal case to study the effect of trusting beliefs on COO effects. Nonetheless, thefocus on a single industry does limit the generalizability of the findings. The authors recommend thatfuture researchers examine these relationships in studies focusing on other product categories.Originality/value – To the best of authors’ knowledge, this is the first study that investigates theimpact of individuals’ trusting beliefs about a store on COO effects.

Keywords Country of origin, Trust, Beliefs, Consumer behaviour

Paper type Research paper

Introduction“Made in China” has become the title of many marketers’ worst nightmare. Amidstmassive toy recalls, tainted toothpaste scares and poisonous pet food incidents,consumers around the globe started thinking twice before buying Chinese-made goods(Roberts, 2007). The setback to the “Made in China” brand has affected a wide varietyof products distributed all over the world (Blecken, 2007). Almost 40 percent of UKconsumers are less likely to buy Chinese-manufactured products because of the 2007toy recall crisis, while 38 percent of Hong Kong consumers reduced their purchases ofChina-made products with the toy and food sectors the worst affected (Blecken, 2007).

Like their counterparts worldwide, US consumers have become very hesitant to putChinese products in their shopping carts (Blecken, 2007). Given that China is one of thelargest sources of US imports, this hesitancy has dramatically affected industry both atthe manufacturing and the retail level. One of the hardest hit industries has been toys,an industry in which over 80 percent of total US imports come from China (Dyer, 2007).In response to the product recalls, concerned parents and grandparents reportedly

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International Marketing ReviewVol. 28 No. 1, 2011pp. 102-126r Emerald Group Publishing Limited0265-1335DOI 10.1108/02651331111107125

Received March 2010Revised August 2010Accepted November 2010

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started asking whether toys are made in China (Smith, 2007). Mattel, the world’sbiggest toymaker, reported that the recall of more than 21 million Chinese-made toys asa result of design flaws and dangerous lead levels in paint adversely affected both salesand profits (Pimlott, 2007).

Interestingly, some toy retailers were spared from this fate. Toys “R” Us, for example,announced that holiday same-store sales at its US toy stores grew by 3.1 percent,a performance that out-paced primary competitors Wal-Mart and Target. Sales alsoboomed at upscale toy retailer FAO Schwarz, despite the fact that most of its toys aremade in China (Smith, 2007). Of course, this situation is not unique to the toy industry.To the degree that country-of-origin (COO) effects contribute to sales growth, it wouldbe helpful for retailers to understand those factors that motivate consumers to buyproducts with a negative “made in” claim.

In this paper, we investigate the moderating effect of trusting beliefs on negativeCOO effects. While early studies documented the influence of COO information onconsumer response, more recent research suggests that COO has a relatively weak oreven insignificant effect when other extrinsic cues such as store image or brand nameare available (Pharr, 2005). We introduce trusting beliefs about a store as extrinsic cuesthat have yet to be examined in this context. Specifically, we examine consumer’strusting beliefs about a store as moderators of COO’s negative effect on productevaluations and purchase intentions. We hypothesize that the ability, benevolence andintegrity beliefs that consumers hold about a store moderate the negative COO effectson evaluations of and intention to buy products with a specific “made-in” label. We alsoexamine the role of consumer perception of manufacturer risk on the trustingbeliefs-COO effect relationship. We suggest that the specific trusting belief drivingthis effect depends on whether consumers perceive the product manufacturer as highor low risk.

While prior research has tested the effect of constructs such as store reputation orprestige, to the best of our knowledge this is the first study that examines the impact oftrusting beliefs about a store on COO effects. In our study, we show that trusting beliefsweaken the effect of negative COO on consumers’ product evaluations and purchaseintentions. Also, our research offers further support for the notion that COO effectsweaken when used with other external cues. Specifically, we propose that while COOremains important, it has less of a negative effect on a product evaluations andintentions as consumer’s trusting beliefs about a store strengthen.

Manufacturers know all too well that they must take steps to counteract thenegative attitudes and intentions caused by the COO of their products. The same rulecan be applied to retailers who may need to find a way to manage the COO effects of theproducts they carry in their stores. In sending signals that facilitate trust (c.f. Schlosseret al., 2006), retailers can counteract negative COO effects. That is, while customersmay have negative perceptions about a country and its manufacturing capabilitieswithin a certain category, their evaluations of products coming from that country maybe mitigated by their trusting beliefs related to the store where those products are sold.

COO effectsDefinitionFor the past four decades, the effect of a product’s COO on buyer perception,evaluations and intentions has been one of the most widely studied phenomena inthe international business, marketing and consumer behavior literatures[1]. Whilethe effects of COO on consumer evaluations and behavior appear quite robust, the

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definitions and conceptualizations of COO effects are diverse. Samiee (1994), forexample, defines the COO effect as any influence or bias that consumers may holdresulting from the COO of a product. Yet, Nagashima (1970) defines it as the picture, thereputation and the stereotype that businessmen and consumers attach to products of aspecific country. In this paper, we follow Gurhan-Canli and Maheswaran (2000) indefining COO effects simply as the extent to which the place of manufacture influencesconsumer evaluations and related decisions.

Recently, researchers have started to argue that consumers attach little importanceto the country where a product is manufactured. Moreover, they argue the effectof COO is no longer a major issue for international marketing operations in light ofmultinational production, global branding and the decline of origin labeling in WorldTrade Organization (WTO) rules (Hugstad and Durr, 1986; Usunier, 2006). However,there exists little consensus on the matter. Winter (2004), for example, found that 93percent of study participants do indeed deem it “important” to know the origin ofa product. In fact, Papadopoulos (1992) argues that higher levels of globalization makeproduct country image that much more important. Heslop et al. (2010) found thatcountry image is important not only in individuals’ evaluations of products, but also ofevents like the Olympics. We tend to agree with Josiassen et al. (2008) that there isinsufficient evidence that consumers are indifferent to COO. Rather, we would arguethat recent product recalls have brought “made-in” labels and COO to the forefront ofconsumers’ attention. As a result, COO research remains highly relevant for marketingpractice.

The vast COO literature has inspired a number of review articles, all of whichemphasize the influence that COO has on consumer perceptions, evaluations andintentions (e.g. Bilkey and Nes, 1982; Demirbag et al., 2010; Usunier, 2006) Statisticallysignificant COO effects have been documented for general products (e.g. Darling andWood, 1990; Lin and Sternquist, 1994), specific categories of products (e.g. Cordell,1993; Hong and Wyer 1989; Roth and Romeo, 1992) and even for certain brands(e.g. Han and Terpstra, 1988).

COO research has mainly focused on the use of COO from an informationprocessing perspective, that is, as a cognitive cue used by consumers when formingattitudes and beliefs about a product, which subsequently affects their behaviors withrespect to that product (Bilkey and Nes, 1982). Since COO can be manipulated withoutchanging the physical product – and is typically operationalized or communicatedthrough the phrase “made in” – it constitutes an extrinsic cue (Thorelli et al., 1989). Assuch, it serves as a surrogate for product characteristics that cannot be evaluateddirectly (Huber and McCann, 1982; Han, 1989), and can be used as a signal for overallproduct quality and quality attributes such as reliability and durability (Li and Wyer,1994).

Earlier studies investigated the COO effect as a single cue and found it to be asignificant predictor of individuals’ product evaluation (Bilkey and Nes, 1982).However, more recent studies investigate how the availability and consistency ofother extrinsic cues and their interaction with the COO cue affect consumers’ productevaluations and intentions. These other external cues include store image (e.g.Obermiller and Bitner, 1984), store prestige and reputation (e.g. Davis et al., 1990;Lin and Sternquist, 1994; Sternquist and Davis, 1986), brand name effects (Ahmedet al., 2004; Chao et al., 2005; Ettenson, 1993; Nebenzahl and Jaffe, 1996; Tse and Lee,1993), brand name and ownership type in a retail service context (e.g. Pecotich et al.,1996) and consumers’ level of product expertise (e.g. Eroglu and Machleit, 1989).

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Thorelli et al. (1989) found a significant three-way interaction of warranty, storereputation and COO on perceived quality and overall attitude. However, their studydid not find a significant three-way interaction of the three extrinsic cues on purchaseintention.

Studies utilizing multiple cues have found the COO effect to be relatively weak orinsignificant in explaining product evaluations when these other extrinsic cues areavailable (e.g. Ahmed et al., 2004; Hui and Zhou, 2002). In this paper, we introducetrusting beliefs about a store as alternative extrinsic cues that may moderate thenegative effects of COO on consumer evaluations and intentions. Specifically, we arguethat strongly negative COO effects may not impact product evaluations andsales depending on the level and type of trust that consumers have in the stores sellingthe product or brand in question.

Although numerous dependent variables have been investigated in COO studies,two appear more popular: product quality evaluations and purchase intentions(Peterson and Jolibert, 1995; Usunier, 2006). These two variables capture the majorityof dependent variables included in COO studies. Verleigh and Steenkamp (1999)distinguish between measures of perceived quality and purchase intentions and statethat judgments regarding perceived product quality and purchase intentions can beformed independent of each other. Therefore, we investigate the moderating impact ofthree trusting beliefs on negative COO effect on both product evaluation and purchaseintention.

Trusting beliefsTrust is seen to be central to all relational exchanges (Morgan and Hunt, 1994).

It can be defined as a willingness to rely on an exchange partner in whom one hasconfidence (Moorman et al., 1992). Although some researchers have treated trust as aunitary concept, most now agree that trust is multidimensional with two inter-relatedcomponents: trusting beliefs, comprising perceptions of the trustworthiness of thevendor; and trusting behavior, a willingness to depend or make oneself vulnerable tothe vendor (Mayer et al., 1995; McKnight et al., 2002; Rousseau et al., 1998).

Trusting beliefs are the trusting party’s perception that the trustee possessescharacteristics that would benefit the trusting party (e.g. McKnight and Chervany,2001). They represent a “sentiment or expectation about an exchange partner’strustworthiness” (Moorman et al., 1992, p. 315). In other words, they collectively reflectthe perceptions of the trustworthiness of the object of trust (Smith and Barclay, 1997).Mayer et al. (1995, p. 717) note that these factors are “not trust per se,” but they “helpbuild the foundation for development of trust.” Morgan and Hunt (1994) argue thattrusting beliefs are important as they precede and determine trusting intentions. Forexample, Schlosser et al. (2006) show that consumers’ trusting beliefs about a websiteinfluence their online purchase intentions. They have also been identified as significantmediators that influence purchase behavior (e.g. McKnight et al., 2002).

Prior studies have considered a plethora of trusting beliefs, the majority of whichcan be conceptually clustered into three categories: ability, benevolence and integrity(e.g. McKnight et al., 2002; Schlosser et al., 2006).

“Benevolence beliefs” refer to the consumer’s confidence that a store has a positiveorientation toward its customers beyond an egocentric profit motive and that itwill consider their well-being, and act in their interests (Mayer et al., 1995). This set ofbeliefs captures the extent to which individuals believe that a store wants to do goodrather than just maximize profit. A benevolent store would not be expected to act

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opportunistically by taking advantage of its customers (McKnight and Chervany,2001). These beliefs provide the most reassurance against the store’s future actions anddecrease risk related to the store’s business (e.g. McKnight et al., 2002).

“Integrity beliefs” reflect the confidence that a store adheres to a set of moralprinciples or professional standards that guide its interactions with its customers(McKnight et al., 2002). They include the expectation that a store acts in accordancewith socially accepted standards of honesty or a set of principles that the customersaccept such as not telling a lie, keeping a promise or providing valid information(Mayer et al., 1995).

“Ability beliefs” reflect the consumers’ confidence that a firm or a store has theskills and competencies necessary to perform the job (Mayer et al., 1995). These beliefsconcern a store’s ability to perform its stated functions (Schlosser et al., 2006).Individuals have ability beliefs about a store if they believe that the store has a group ofskills, competencies and characteristics that enable that store to perform its statedfunctions (Mayer et al., 1995).

These three trusting beliefs are related, yet distinct. Each belief captures someunique elements of trustworthiness. Therefore, as a set, ability, benevolence andintegrity appear to explain a major portion of trustworthiness while maintainingparsimony (Mayer et al., 1995). For example, in a retail setting, a customer may believethat a store cares about its customers and intends to deliver a particular quality ofservice (i.e. the store is benevolent), but that the store lacks the skills and ability to doso (Mayer et al., 1995; Schlosser et al., 2006). Similarly, despite beliefs that the storefollows a professional code of conduct (i.e. it has integrity), consumers may questionthe store’s genuine concern for its customers (i.e. its benevolence). Therefore, it ispossible for a store to be perceived positively on some belief dimensions and negativelyon others. For this reason, trustworthiness should not be thought of as a dichotomywhere the store is perceived as either trustworthy or not trustworthy, but rather as acontinuum (Schlosser et al., 2006). If all three beliefs were perceived to be high, a storewould be deemed quite trustworthy, and would be considered a very desirableexchange partner because of the perception that it will behave ethically, kindly andskillfully (Mayer et al., 1995).

HypothesesNegative COO effects and benevolence beliefsBenevolent beliefs assure consumers that a store would not do anything that mightaffect them negatively. The store pursues not only its own profit but also thewell-being of its customers. This belief translates into a perception that the storecares about its customers and intends to deliver good quality products to them. Thus,this benevolent belief should assure consumers that even if products come froma country with a negative COO image, they will not be risky, harmful or low inquality. Customers would trust that the store would not carry poor qualityproducts just to maximize its own profits. They would also believe that in caseof a problem, the store would go out of its way to help its customers and act intheir best interests. Therefore, this benevolent belief about a store should help tocounteract the negative COO image of the product. Consistent with this argument, wehypothesize:

H1a. The negative COO effect on product evaluation will become weaker withincreasing consumer benevolence beliefs about a store.

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Similarly, consumers believe that a benevolent store would avoid harming itscustomers. They believe that in the event of a problem, the store would do everythingpossible to help its customers. For example, in case of a product recall, consumersknow that they can depend on the store to do its best to protect their interests, eventhough it may hurt store’s profits. Therefore, knowing that the store would take care ofthe problem, consumers should be less concerned about the negative COO image of theproducts that they consider purchasing. Thus, we hypothesize that:

H1b. The negative COO effect on purchase intention will become weaker withincreasing consumer benevolence beliefs about a store.

COO effects and integrity beliefsIf consumers believe that a store follows socially accepted principles like not telling alie or deceiving its customers, this integrity belief should assure them that the storeprovides correct information about the origin of its products. Similarly, they shouldbelieve that the store would not hide the truth or lie about product quality even whenproducts come from a country under scrutiny for poor production. They should believethat if there were anything wrong with a product coming from a country with abad reputation, the store would honestly and openly share information with them.Consistent with this argument, it should be the case that when judging product quality,consumers use both the product’s COO and their integrity beliefs about the store intheir evaluations. Therefore, we hypothesize that:

H2a. The negative COO effect on product evaluation will become weaker withincreasing consumer integrity beliefs about a store.

Consumers with a positive integrity belief believe that a store that is honest with itscustomers will fulfill its agreements and promises with its customers. If a storepromises good quality and safe products, an integrity belief assures consumers that itwill keep that promise and conduct its business in a professional and morallyacceptable way. Consumers believe that the store would not let them purchase unsafeor defective products. In this way, any negative image stemming from product COOshould become less important to consumers. We hypothesize:

H2b. The negative COO effect on purchase intention will become weaker withincreasing consumer integrity beliefs about a store.

COO effects and ability beliefsConsumers develop ability beliefs about a store’s performance as a business. Theybelieve that the store has the skills and competence to perform its job-related functions.However, this ability belief does not speak to the quality of products that a store carries.A competent store would do a good job filling customer needs but it does not guaranteethat it will do so by carrying only good quality products. A store can still perform itsfunctions and make more profit by selling products made in countries known for badquality. Therefore, consumers’ ability beliefs about a store should not interfere withtheir quality evaluations of the products sold at that store. Thus, we hypothesize that:

H3a. The negative COO effect on product evaluation will not change withincreasing consumer ability beliefs about a store.

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Whereas benevolent and integrity beliefs concern credibility of a store, ability beliefsare more performance-related. Consumers believe that a store has the necessary skillsand resources to fulfill its obligations to its customers. When considering whether tomake a purchase decision, consumers will focus on the trusting belief that is mostrelevant to performance: ability (Mayer et al., 1995; Schlosser et al., 2006). To the degreethat consumers consider if a store can successfully complete its transactions, abilitybeliefs become important drivers of their purchase intentions. Thus, we hypothesizethat:

H3b. The negative COO effect on purchase intention will become weaker withincreasing consumer ability beliefs about a store.

The moderating role of manufacturer risk on trusting beliefs – negative COO effectsrelationshipEarlier research suggests that consumers’ perception of perceived risk is one of thefactors affecting product choice. In this respect, COO may be perceived as a riskproperty (Cordell, 1993). Consumers may perceive more risk in purchasing productsfrom some countries versus others. A high versus low risk COO seems likely to resultin lower perceptions of quality and less favorable attitude toward products (Bilkey andNes, 1982). Thorelli et al. (1989) found that product evaluation and willingness topurchase are inversely related to the amount of perceived risk. Various studies haveshowed that various country-specific factors such as culture, degree of economicdevelopment and political climate can profoundly influence individuals’ COOperceptions (c.f. Bilkey and Nes, 1982). Countries with a poor image on thesedimensions are perceived as high risk. For example, recalls for specific products madein China, for example, may imply an increased risk for products coming from thatcountry in general, regardless of manufacturer. However, when manufacturer risk ishighlighted, i.e. a manufacturer is specifically named as the source of faulty products,the consumers’ perception of risk related to a product increases beyond perceptions ofrisk related to the country itself (Alden, 1993). In this high-risk situation, consumers’benevolence beliefs about a store, the beliefs that provide the most assurance againstrisk, should play an important role in determining product evaluations and purchaseintentions. Specifically, believing that the store has good intentions and would go out ofits way to help them in case of a problem, consumers should feel less threatened by therisk. Thus, high benevolence beliefs should reduce the risk related to both COO andmanufacturer, and thus lessen the COO effect on product evaluations and purchaseintentions.

H4. For both product evaluation and purchase intention, increasing benevolencebeliefs weakens the negative COO effect when manufacturer risk is high.

Study 1

MethodologyParticipants. Two hundred and twenty-four graduate business students at anortheastern US university participated in the study in exchange for coursecredit. The sample was 48 percent female. The average age of the participants was35 years. Seventy-five percent of participants held a full-time job, 21 percent held a

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part-time job and 4 percent were unemployed. In total, 70 percent of participants hadpurchased toys within last six months.

Since prior COO studies suggest that country of birth may impact evaluations, weasked participants if they were born in the USA or in a foreign country. A total of 64percent of the participants were born in the USA. Those foreign-born participants(36 percent) have been living in the USA for 10.1 years on average. The t-test resultsshowed no statistically significant differences between the responses of US-born andforeign country-born respondents. Furthermore, 63 percent of the respondents weremarried, and 59 percent identified themselves as parents.

Stimuli. Given our initial interest and research domain, we chose toys as the productcategory in our study and selected a teddy bear as the stimulus. In order to ensure thattoys are an appropriate category for a study about COO, we conducted short interviewswith 16 shoppers in two different toy stores in a large city in the northeastern section ofthe USA. From 16 individuals, 14 indicated that place of manufacture for toys isimportant and that they look for such information. In addition, 12 individuals said thatsuch information is critical in their final purchase decision. We then conducted a seriesof pretests with graduate students at a northeastern US business school to determinethe stimuli for our studies. In the first pretest, (n¼ 80, average age was 34.6 years),91 percent of respondents indicated that they check made-in label before buying toysthereby confirming the importance of COO information within the decision-makingprocess.

COO in this study was operationalized as “made in” (e.g. Michaelis et al., 2008;Peterson and Jolibert, 1995) and manipulated using two countries. In order to identifyappropriate test countries for the main study, we obtained the list of countries thatmanufacture toys sold in the US market and pretested those countries for use in thestudy. Specifically, participants were given a list of 11 toy manufacturing countries andasked to choose three countries they believe to have good quality toys, and threecountries they believe to manufacture poor quality toys. This procedure generated sixcountry names: Taiwan, India, China, Germany, Britain and Denmark. In a secondpretest, 48 participants (average age was 33.9 years) evaluated products manufacturedin each of these six countries using three five-point semantic differential scales (good/bad quality, dependable/not dependable, safe/unsafe). On the basis of results, we choseChina (mean¼ 2.76) and Germany (mean¼ 4.45) to represent countries with negativeand positive COO images, respectively. These country choices are consistent withFetscherin’s (2010) classification of China as a weak country brand and Germany as astrong country brand. In the main study, the COO information was provided on thecover page of the questionnaire. Participants learned that the toy was manufacturedeither in China (n¼ 116) or in Germany (n¼ 108).

In a separate pretest, we asked 32 participants (average age was 34.1 years) to list thenames of two toy stores that they consider highly prestigious and trustworthy, and twotoy stores that they consider less prestigious and trustworthy. Then, we gave 48 differentparticipants (average age was 35.2 years) the list of four toy store names, the two thatappeared most frequently on the highly prestigious/trustworthy list and the twothat appeared most frequently on the less prestigious/trustworthy list. We then asked theparticipants to evaluate the four stores using two five-point semantic differential scales(very/not very prestigious, very/not very trustworthy). On the basis of results, we choseFAO Schwarz (mean¼ 4.02) and KB Toys (mean¼ 2.61) to use in our study.

Bilkey and Nes (1982) listed two major methodological limitations in COO studiesthat might confound the results of a study. First, they cautioned against using a single

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“made in” label as the only product information, as that might lead to inflation of theeffect size of COO. Second, simply using an intangible verbal description of productsmight result in a varying frame of reference for the subjects and thus result inincreased effect size. On the basis of these concerns, we provided participants withinformation that included not only the “made in” cue but also dimensions of theproduct along with its price. Also, Lee et al. (2005) warn against treating the COO cueas just any other product attribute as it may not be noticed by all study participants.For this reason and to facilitate processing, we made the COO cue in the cover slightlymore prominent than other product information.

Measures. COO image was measured using the four dimensions of Roth andRomeo’s (1992) scale: innovativeness (using new technology and engineeringdevelopment level), design (appearance and style), prestige (status and reputation)and workmanship (reliability, durability, craftsmanship and quality). Thesedimensions have been used extensively in previous COO studies and have beenshown to be relevant to respondents, to work together well in different settings, and tobe able to capture the COO construct domain comprehensively (e.g. Laroche et al., 2005;Nebenzahl and Jaffe, 1996). Existing scales were also adapted to measure the threetrusting beliefs of interest, product evaluations and purchase intentions. All variableswere measured on a five-point Likert-type scale anchored by “strongly disagree” and“strongly agree.” The specific scale items appear in Table I along with their sources,reliabilities and item loadings.

Dependent measures. The hypotheses required measurement of product evaluationand purchase intention to be used as dependent variables in the analysis. FollowingGurhan-Canli and Maheswaran (2000), product evaluation was measured by threeitems scored on a five-point semantic differential scale: high/low quality, safe/unsafeand reliable/unreliable (Cronbach’s alpha¼ 0.88, composite reliability¼ 0.90). Purchaseintention was measured using a three-item five-point Likert scale (Cronbach’salpha¼ 0.90, composite reliability¼ 0.92).

Control variables. Usunier (2006) criticizes researchers for distributingquestionnaires without checking respondent familiarity with the products andcountries under study. Similarly, Ahmed and d’Astous (2008) suggest that familiaritywith the country where the products come from affect country perceptions andCOO evaluations. Josiassen et al. (2008) show that product familiarity even affectsthe importance that individuals place on COO. For these reasons, we measured theparticipants’ familiarity with toys, the two countries of interest and the two stores ascontrol variables.

One of the most researched variables moderating the COO effect is a consumer’slevel of ethnocentrism (Shimp and Sharma, 1987). Orth and Firbasova (2003) andBalabanis and Diamantopoulos (2004) found consumer ethnocentrism – the belief thatone’s own culture is superior to other cultures – to be a significant predictor of COOevaluations. Lee et al. (2010) found that ethnocentrism is important in determiningpreference for national brands. Hence, we included a well-used four-item scale tomeasure ethnocentrism as a control variable in our study (e.g. Chan et al., 2010; Kleinet al., 2006; Michaelis et al., 2008).

Finally, we included participants’ perception of the product’s price as a controlvariable. We provided price information ($19.99, average price for similar teddy bearsacross various stores) on the cover of the questionnaire. We measured price perceptionusing a two-item scale (I believe $19.99 is a fair price for teddy bear; I don’t think $19.99is too expensive for teddy bear).

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Scales Factor loadings

Trusting beliefsa

Integrity (a¼ 0.88, 87; CR¼ 0.89, 88)1. This store seems to have a strong sense of justice 0.89, 0.852. This store appears to be fair in dealing with its customers 0.85, 0.883. Sound principles seem to guide this store’s behavior 0.83, 0,784. I would characterize this store as honest 0.91, 0.895. This store seems to keep its commitments 0.88, 0.85

Ability (a¼ 0.90, 0.88; CR¼ 0.91, 0.90)1. This store seems very capable of serving its customers 0.90, 0.892. This store seems to have necessary knowledge and resources to fulfill its

customers’ needs 0.89, 0.863. I feel very confident about this store’s skills to serve its customers 0.90, 0.914. This store seems to be competent and effective in selling toys 0.87, 0.845. This store performs its role of selling toys very well 0.88, 0.85

Benevolence (a¼ 0.91, 0.89; CR¼ 0.92, 0.90)1. This store seems concerned about its customers’ welfare 0.91, 0.872. It doesn’t seem that this store would knowingly do anything to hurt its

customers 0.90, 0.883. This store appears to go out of its way to help its customers 0.88, 0.924. I believe that this store would act in its customers’ interests 0.89, 0.885. This store is interested in its customers’ well-being, not just its own 0.92, 0.90

Country of origin (a¼ 0.92, 0.90; CR¼ 0.91, 0.91)b

1. This country always uses new technology in its manufacturing 0.91, 0.902. The level of engineering used in this country is quite advanced 0.88, 0.893. The products made in this country have attractive look 0.90, 0.894. The products made in this country have appealing style 0.92, 0.905. The products made in this country provide status to its owners 0.82, 0.836. The products made in this country have good reputation 0.93, 0.917. The products made in this country are reliable 0.92, 0.908. The products made in this country are durable 0.91, 0.909. The products made in this country have good craftsmanship 0.89, 0.91

10. The products made in this country have superior quality 0.92, 0.90

Product evaluation (a¼ 0.88, 0.90; CR¼ 0.90, 0.91)c

This teddy bear made in (China/Germany) isLow quality 1 2 3 4 5 High quality 0.87, 0.89Unsafe 1 2 3 4 5 Safe 0.89, 0.92Unreliable 1 2 3 4 5 Reliable 0.89, 0.90

Purchase intention (a¼ 0.90, 0.88; CR¼ 0.92, 0.90)c

1. I would purchase this teddy bear at this store 0.90, 0.872. I would not mind buying this teddy bear at this store 0.90, 0.883. The likelihood that I would consider buying this teddy bear at this store

(very unlikely/very likely)0.92, 0.88

Ethnocentrism (a¼ 0.84, 0.85; CR¼ 86, 0.85)d

1. It is not right to purchase foreign-made products 0.86, 0.842. American people should always buy American-made products instead of imports 0.88, 0.88

(continued)

Table I.Scale items, sources,reliabilities and item

loadings (Studies 1 and 2)

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Measure validation. We assessed the measurement properties of the constructs in aconfirmatory factor analyses using LISREL 8.71. The model fit was evaluated byusing a series of indices suggested by Gerbing and Anderson (1992) and Hu andBentler (1999), including a goodness of fit index (GFI), a comparative fit index (CFI) andthe root mean square error of approximation (RMSEA). The model fitted the datasatisfactorily (model: w2(172)¼ 323.47, p¼ 0.00; GFI¼ 0.91; CFI¼ 0.90;RMSEA¼ 0.05). All the factor loadings were highly significant (po0.001), indicatingunidimensionality of the measures (Gerbing and Anderson, 1992). We assessed theconvergent validity of the measures by examining the path coefficients (loadings) foreach latent factor to their manifest indicators. The analysis indicated that all itemsloaded significantly on their corresponding latent factors (see Table II). We assesseddiscriminant validity of the dependent and independent variables by examining theshared variance between all possible pairs of constructs in relation to the averagevariance extracted for each individual construct (Anderson and Gerbing, 1982; Bagozziand Yi, 1988). As expected, the former was much lower than the latter (see Table II). Areliability test was performed for each construct to see if all the measuresdemonstrated satisfactory coefficient reliability. All Cronbach’s alphas of theconstructs were above 0.70, and composite reliability scores were above 0.60. Thus,the measures demonstrated adequate convergent validity and reliability.

Scales Factor loadings

3. Foreign-made product should be taxed heavily to reduce their entry to US 0.85, 0.824. It is always best to purchase products made in US 0.87, 0.83

Familiarity with store (a¼ 0.88, 0.89; CR¼ 0.90, 0.91)e

1. I am familiar with this store 0.87, 0.872. I have been to this store at least once 0.88, 0.90

Familiarity with toys (a¼ 0.89, 86; CR¼ 0.88, 0.87)e

1. I am familiar with teddy bear toys 0.87, 0.842. In the past, I have owned/purchased a teddy bear 0.92, 0.88

Familiarity with products made in country (a¼ 0.84, 88; CR¼ 0.85, 0.90)f

1. I am knowledgeable about products made in China/Germany 0.85, 0.882. I am familiar with products made in China/Germany 0.82, 0.863. In the past, I have owned or used products made in China/Germany 0.85, 0.88

Price perception (a¼ 0.85, 0.86; CR¼ 0.87, 0.86)f

1. I believe $19.99 is a fair price for this teddy bear 0.85, 0.882. I don’t think $19.99 is too expensive for this teddy bear 0.83, 0.84

Manufacturer risk (a¼ 0.91; CR¼ 0.92) (used only in Study 2)g

1. I believe something would go wrong with the toys made by this manufacturer 0.932. I believe purchasing toys made by this manufacturer is risky 0.90

Note: aCR refers to composite reliability. The first value denotes Study 1, the second number denotesStudy 2Sources: aMayer and Davis (1999); bRoth and Romeo (1992); cGurhan-Canli and Maheswaran (2000);dShimp and Sharma (1987); eThorelli et al. (1989); f Lee et al. (2005); gAlden (1993)Table I.

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Analysis and results. We conducted separate hierarchical moderated regressionanalyses to test our hypotheses. Following the advice of Aiken and West (1991), wemean centered all the variables to minimize the threat of multicollinearity between theinteraction terms and their components in equations where we included the interactionterms. We tested for multicollinearity among the variables by calculating the varianceinflation factor (VIF) for each of the regression coefficients. The VIF values(lowest¼ 1.38; highest¼ 3.96) were well below the cut-off of 10.

We compared the COO scores between respondents who responded to thequestionnaire about the Chinese-made versus German-made teddy bear. The resultsshowed that the average COO score for China was significantly lower (Mch¼ 1.98) thanthe COO score for Germany (Mger¼ 4.26) (F¼ 5.86, po0.001). (Not only the overallCOO score but also the score on each and every item of the COO measure wassignificantly lower for China than Germany.) On the basis of these findings, we usedresponses for the China group (n¼ 116) for negative COO effects and responses forGermany for positive COO effects in hierarchical moderated regression analyses to testour hypotheses.

Then, we ran separate analyses to test the moderating effect of trusting beliefs onnegative (China, n¼ 116) and positive COO (Germany, n¼ 108) effects. The resultsof the hierarchical moderated regression analysis with product evaluation as thedependent variable appear in Table III. In Step 1, only five control variables wereentered. In Step 2, the main effects of COO, ability, benevolence and integrity beliefswere entered along with the control variables. And finally, in Step 3, the two-wayinteraction effects between three trusting beliefs and COO were entered along with thecontrol variables and the main effects of COO, ability, benevolence and integrity beliefs.Evidence of the two-way interactions would be supported if the interaction termsaccounted for significant incremental variance in explaining dependent variables,either individually, as manifested by negative beta values, or collectively, as revealedby the values of the incremental F-statistic.

As shown in Step 1 (Table IIIA), for negative COO effect – China group, none of thecontrol variables were significantly related to product evaluation. Next, Step 2 revealeda significant increase in the variance explained over Step 1 (DR2¼ 0.17, po0.001).

1 2 3 4 5 6

1. Ability beliefs 1.002. Benevolence beliefs 0.33* 1.003. Integrity beliefs 0.36* 0.39* 1.004. COO image 0.04 0.09 0.08 1.005. Product evaluation 0.11 0.10 0.07 0.38* 1.006. Purchase intention 0.08 0.09 0.11 0.36* 0.38* 1.00

Mean 3.29 3.27 3.12 3.08 3.37 3.24Standard deviation 0.64 0.70 0.61 0.89 0.85 1.03Composite reliability 0.91 0.92 0.89 0.91 0.90 0.92Average variance extracted 0.63 0.58 0.52 0.55 0.58 0.56Highest shared variance 0.13 0.10 0.06 0.09 0.11 0.08

Note: *po0.001

Table II.Study 1 – correlations and

descriptive statistics

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Specifically, the results showed that COO had a significantly positive relationship onproduct evaluation (b¼ 0.34, t¼ 4.87, po0.001). However, there were no significantmain effects of trusting beliefs on product evaluation, (benevolence beliefs, b¼ 0.10,t¼ 1.14; integrity beliefs b¼ 0.07, t¼ 0.73; and ability beliefs b¼ 0.09, t¼ 0.92).

The two-way interaction relationships were tested by observing the incrementalvariance explained by Step 3 over Step 2. As shown in Table IIIA, the addition of thetwo-way interactions between ability, integrity, benevolence beliefs and COO increasedR2 by 28 percent in Step 3 over Step 2 ( po0.001). More specifically, the interactionbetween benevolence belief and COO (H1a: b¼�0.35, t¼�4.61, po0.001) and theinteraction between integrity belief and COO (H2a: b¼�0.29, t¼�3.81, po0.001)were each negatively and significantly related to product evaluation. However, theinteraction between ability belief and COO was negatively but insignificantly related toproduct evaluation (H3a: b¼�0.09, t¼�0.92).

We ran the same analyses for the Germany-positive COO group (n¼ 108). As shownin Table IIIB, although the two-way interactions were all positive, they were notstatistically significant (benevolence–COO: b¼ 0.12, t¼ 1.31, ns; integrity–COO:b¼ 0.11, t¼ 1.17, ns; ability–COO: b¼ 0.10, t¼ 1.08, ns).

To better interpret the interaction effects and gain further support for the directionof the hypothesized interaction relationships, we conducted a simple slope analysis assuggested by Aiken and West (1991). For the negative COO (China) effect group, lowlevels of trusting beliefs were calculated by subtracting one standard deviation from

A. Negative COO – China group (n¼ 116) B. Positive COO – Germany group (n¼ 108)

Step 1 Step 2 Step 3 Step 1 Step 2 Step 3

Variables ba (t-value) ba (t-value) ba (t-value) ba (t-value) ba (t-value) ba (t-value)

Controls

Familiarity with toys 0.09 (0.96) 0.08 (0.88) 0.07 (0.71) 0.11 (1.08) 0.05 (0.51) 0.06 (0.62)

Familiarity with

country’s products 0.07 (0.72) 0.09 (0.89) 0.06 (0.61) 0.05 (0.57) 0.07 (0.73) 0.08 (0.81)

Familiarity with store 0.09 (0.97) 0.06 (0.60) 0.08 (0.83) 0.04 (0.43) 0.08 (0.79) 0.05 (0.52)

Ethnocentrism 0.03 (0.32) 0.05 (0.51) 0.04 (0.42) 0.06 (0.57) 0.08 (0.88) 0.07 (0.79)

Price perception 0.05 (0.57) 0.06 (0.63) 0.03 (0.41) 0.09 (0.92) 0.05 (0.54) 0.06 (0.58)

Main effects

Benevolence (1) 0.10 (1.14) 0.05 (0.55) 0.09 (0.87) 0.11 (1.10)

Integrity (2) 0.07 (0.73) 0.08 (0.89) 0.06 (0.69) 0.09 (0.97)

Ability (3) 0.09 (0.92) 0.10 (1.12) 0.09 (0.91) (0.08) (0.82)

COO (4) 0.34 (4.87)* 0.31 (4.23)* 0.24 (3.19)* 0.21 (3.08)*

Interaction effects

1� 4 �0.35 (�4.61)* 0.12 (1.24)

2� 4 �0.29 (�3.81)* 0.11 (1.17)

3� 4 �0.09 (�0.92) (0.10) (1.08)

R2 0.05 0.22 0.50 0.08 0.25 0.28

F 0.68 4.79* 15.14* 0.89 6.47* 7.89*

DR2 0.17 0.28 0.17 0.06

Notes: *po0.001; astandardized coefficients

Table III.Study 1 – hierarchicalmoderated regressionanalysis results –dependent variable:product evaluation

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the mean; high levels of trusting beliefs were calculated by adding one standarddeviation to the mean value. Figures 1a and 1b indicate that the relationship betweenCOO and product evaluation is rather weak when benevolence (b¼ 0.17, po0.05) andintegrity (b¼ 0.21, po0.05) beliefs are high, but is much stronger when benevolence(b¼ 0.50, po0.001) and integrity (b¼ 0.48, po0.001) beliefs are low. However,Figure 1c does not show such a significant interaction effect of ability beliefs onCOO–product evaluation relationship (b¼ 0.24, po0.05 when ability beliefs are high,b¼ 0.29, po0.05 when ability beliefs are low). These results suggest that increases inbenevolence and integrity beliefs weaken the negative effects of COO on productevaluation while an increase in ability beliefs has no such effect. Thus, the results of theslope analysis combined with the hierarchical moderated regression analysis resultsprovide support for hypotheses H1a, H2a and H3a.

We repeated the same two analyses described above using purchase intention as thedependent variable. The results of China-negative COO group analysis showed thatnone of the control variables had significant relationships with product evaluation inStep 1 (Table IVA). Step 2 provided a significant increase in variance explained overStep 1 (DR2¼ 0.18, po0.001). In this step, while COO was significantly related toproduct evaluation (b¼ 0.29, t¼ 3.51, po0.001), none of the trusting beliefs had asignificant relationship with purchase intention.

High benevolence

Low benevolenceProduct

evaluation

Productevaluation

LowCOO

HighCOO

(a)

Notes: (a) Benevolence beliefs; (b) integrity beliefs; (c) ability beliefs

(b)

(c)

LowCOO

HighCOO

Productevaluation

LowCOO

HighCOO

High integrity

Low integrity

High ability

Low ability

Figure 1.Trusting beliefs

interaction effect onCOO – product evaluation

relationship (negativeCOO – China group)

115


In Step 3, the addition of the two-way interactions between ability, integrity,benevolence beliefs and COO increased R2 by 26 percent (po0.001). All interactions werenegatively and significantly related to purchase intention (benevolence-COO: b¼�0.33,t¼�4.27, po0.001; integrity-COO: b¼�0.26, t¼�3.54, po0.001; ability-COO:b¼�0.24, t¼�3.20, po0.001). On the other hand, similar to the analyses forproduct evaluation, the analyses for the Germany-positive COO group revealed positivetwo-way interactions that were statistically insignificant (benevolence-COO: b¼ 0.11,t¼ 1.22, ns; integrity-COO: b¼ 0.10, t¼ 1.08, ns; ability-COO: b¼ 0.08, t¼ 0.83, ns) (seeTable IVB).

We then repeated the same slope analysis for the COO-purchase intentionrelationship using China-negative COO group data. As Figure 2 shows, therelationship between COO and purchase intention was rather weak whenbenevolence (b¼ 0.18, po0.05), integrity (b¼ 0.20, po0.05) and ability (b¼ 0.21,po0.05) beliefs were high, but was much stronger when those beliefs were low(benevolence: b¼ 0.45, po0.001; integrity: b¼ 0.50, po0.001; ability: b¼ 0.49,po0.001). These results combined with the results of the regression analysisconducted for the COO-purchase intention relationship support the notion that trustingbeliefs weaken the strength of negative COO effects on evaluations and purchaseintentions but have no effect COO image is positive. This supports hypotheses H1b,H2b and H3b.




Controls


Familiarity with



Ethnocentrism 0.05 (0.52) 0.08 (0.92) 0.07 (0.77) 0.04 (0.47) 0.06 (0.61) 0.08 (0.82)


Main effects

Benevolence (1) 0.10 (1.06) 0.08 (0.83) 0.07 (0.66) 0.08 (0.81)

Integrity (2) 0.11 (1.10) 0.09 (0.92) 0.09 (0.93) 0.06 (0.64)

Ability (3) 0.07 (0.73) (0.08) (0.84) 0.05 (0.54) (0.07) (0.70)

COO (4) 0.29 (3.51)* 0.25 (3.37)* 0.23 (2.96)* 0.20 (2.67)*

Interaction effects

1� 4 �0.33 (�0.4.27)* 0.11 (1.22)

2� 4 �0.26 (�3.54)* 0.10 (1.08)

3� 4 �0.24 (3.20)* 0.08 (0.83)

R2 0.08 0.26 0.52 0.06 0.22 0.27

F 0.81 8.29* 15.37* 0.67 6.17* 7.41*

DR2 0.18 0.26 0.16 0.05


Table IV.Study 1 – hierarchicalmoderated regressionanalysis results –dependent variable:purchase intention

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Overall, these findings confirm that trusting beliefs weaken the negative effects ofCOO on product evaluations and purchase intentions. Specifically, when consumers’benevolence and integrity, but not ability, beliefs about a store increase, the negativeimpact of COO on their product evaluations weakens. Increases in all three beliefslessen the negative effect of COO on purchase intentions.

Our findings support earlier research suggesting that retailer risk perception caninfluence the degree to which COO affects product evaluations and purchase intentions(e.g. Hampton, 1977). COO evaluations of the two countries under study were likelyformed by respondents’ overall perceptions of those countries. Various studies haveshowed that different country-specific factors such as culture, degree of economicdevelopment and political climate can profoundly influence individuals’ COOperceptions (c.f. Bilkey and Nes, 1982). Presumably, the risk-perception associatedwith manufacturers in those countries was part of our respondents’ overall countryevaluations. However, we cannot be sure of the impact of manufacturer risk as suchrisk was not explicitly stated. For this reason, we designed a second study to investigatehow information about manufacturer risk impacts the relationships uncovered inStudy 1. More specifically, we sought to compare the results across high and lowmanufacturer risk situations. Given the increasing number of product recalls inrecent years, we expect the findings of Study 2 to be relevant for manufacturers andretailers alike.

High benevolence

Low benevolence

LowCOO

HighCOO

LowCOO

HighCOO

Purchaseintention

Productevaluation

Productevaluation

LowCOO

HighCOO

High integrity

Low integrity

High ability

Low ability

(a)

(b)

(c)

Notes: (a) Benevolence beliefs; (b) integrity beliefs; (c) ability beliefs

Figure 2.Trusting beliefs

interaction effect onCOO – purchase intention

relationship (negativeCOO – China group)

117


Study 2Participants and procedureIn total, 338 graduate business students at a large northeastern US universityparticipated in the study in exchange for course credit. The sample consisted of 46percent female participants. The average age of the participants was 35 years. A totalof 76 percent of participants held a full-time job, 20 percent held a part-time job and4 percent were unemployed. Of the participants, 65 percent were born in the USA. Theforeign-born respondents (35 percent) had been living in the USA for an average of10.6 years. The t-test results showed no statistically significant differences between theresponses of US-born and foreign-born respondents. In total, 63 percent of respondentswere married, and 59 percent had children. Finally, 70 percent of the respondents hadpurchased toys within the last six months.

We used the same stimuli as in the first study with one modification. In order toaccess the impact of explicit manufacturer risk perceptions, we manipulatedmanufacturer risk with a short statement on the cover page. One group (n¼ 172) wasinformed that there had been three safety recalls recently for toys made by themanufacturer, whereas the other group (n¼ 166) was told that there had not been anyrecent safety recalls for toys made by the manufacturer. In order to assess the successof this manipulation, we measured participants’ perceptions of manufacturerrisk using two items. As expected, participants in the first group had a significantlyhigher risk perception about the manufacturer (mean¼ 4.05) than the second group(mean¼ 2.01).

Analysis and resultsThe measures used in second study demonstrated adequate convergent validity andreliability (see Table V).

As in Study 1, we conducted two hierarchical moderated regression analysesfor high and low manufacturer risk groups using product evaluation andpurchase intention as dependent variables. The results for the low manufacturerrisk group replicate those of Study 1. That is, COO was found to be significantlyrelated to both product evaluation and purchase intention. With respect to theinteraction, benevolence and integrity beliefs lessen the impact of COO on productevaluation, whereas all three trusting beliefs significantly moderate the COO–purchaseintention relationship.

For the high manufacturer risk group, the analyses reveal quite a different set offindings. First, within high manufacturer risk group, we grouped the respondentsinto two groups based on negative versus positive COO effect. Similar to Study 1, theCOO score for China was significantly lower (Mch¼ 1.89) than COO score forGermany (Mger¼ 4.35) (F¼ 7.14, po0.001); thus, we used China group for negativeCOO effects (n¼ 88) and Germany for positive COO effects (n¼ 84). The results forthe negative COO group in the high manufacturer risk condition can be seen inTable VI and VII. These findings show that only the benevolence–COO interactionwas significant for both product evaluation (b¼�0.34, t¼�4.27, po0.001)(see Table VIA), and purchase intention (b¼�0.32, t¼�4.19, po0.001) (seeTable VIIA). However, the same analysis for the positive COO effect group indicatedpositive but non-significant interactions (product evaluation: b¼ 0.12, t¼ 1.23, ns(see Table VIB), and purchase intention b¼ 0.09, t¼ 0.93, ns (see Table VIIB). Theresults of the slope analysis yield the same results. Therefore, these findings providesupport for hypothesis H4.

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Discussion and implicationsThe major thrust of this research lies in understanding the factors that motivateconsumers to buy products with a negative “made in” claim when sold at specific

1 2 3 4 5 6 7

1. Ability beliefs 1.002. Benevolence beliefs 0.31* 1.003. Integrity beliefs 0.39* 0.34* 1.004. COO image 0.08 0.10 0.06 1.005. Product evaluation 0.09 0.08 0.04 0.33* 1.006. Purchase intention 0.04 0.05 0.08 0.38* 0.41* 1.007. Manufacturer risk perception �0.06 �0.04 �0.07 �0.08 �0.18** �0.19** 1.00

Mean 3.18 3.24 3.14 3.15 3.29 3.31 3.09Standard deviation 0.58 0.63 0.66 0.82 0.88 1.00 0.85Composite reliability 0.93 0.92 0.90 0.88 0.91 0.90 0.91Average variance extracted 0.61 0.59 0.54 0.56 0.55 0.57 0.59Highest shared variance 0.10 0.11 0.07 0.08 0.10 0.07 0.10

Note: *po0.001; **po0.01

Table V.Study 2 – correlations and

descriptive statistics




Controls


Familiarity with



Ethnocentrism 0.09 (0.93) 0.08 (0.84) 0.10 (1.03) 0.09 (0.91) 0.08 (0.82) 0.05 (0.51)

Price perception �0.07 (�0.88) �0.08 (�0.91) �0.09 (�0.95) 0.05 (0.54) 0.06 (0.62) 0.06 (0.68)

Main effects

Benevolence (1) 0.07 (0.76) 0.08 (0.88) 0.11 (1.12) 0.09 (0.98)

Integrity (2) 0.06 (0.61) 0.10 (1.01) 0.08 (0.81) 0.07 (0.79)

Ability (3) 0.08 (0.79) 0.05 (0.54) 0.07 (0.71) 0.05 (0.58)

COO (4) 0.27 (3.27)* 0.24 (3.08)* 0.21 (2.84)* 0.19 (2.23)*

Interaction effects

1� 4 �0.34 (�4.27)* 0.12 (1.23)

2� 4 �0.10 (�1.15) 0.09 (0.98)

3� 4 �0.09 (�0.98) 0.10 (1.01)

R2 0.05 0.27 0.54 0.07 0.21 0.26

F 1.24 4.14* 15.28* 0.73 2.73* 3.37*

DR2 0.22 0.27 0.14 0.05


Table VI.Study 2 – high

manufacturer riskperception group,

dependent variable:product evaluation

119


stores. We suggest that consumers’ trusting beliefs, i.e. benevolence, integrityand ability beliefs, about a store can moderate the relationships between negativeCOO effects and product evaluations and purchase intentions. More specifically, ourresults indicate that when consumers trust a store, the impact of negative COO onproduct evaluations and purchase intentions weakens. This investigation of individualtrusting beliefs suggests that as consumers’ benevolence and integrity, but notability, beliefs about a store increase, negative COO has less of an impact on productevaluations. Further, the results show that increases in all three beliefs lessenthe negative COO on consumers’ purchase intentions. Taken overall, our researchsuggests that if consumers believe a store to be benevolent, honest and competent,they may give less weight to product COO in the decision-making process than theywould otherwise.

While Study 1 suggests that consumers may give less weight to negative COO in thepresence of strongly positive trusting beliefs, the results of our second study show thatthe effects of specific beliefs depend on the level of perceived manufacturer risk.Whereas high integrity beliefs, for example, will weaken the effect of COO on productevaluations under scenarios of low manufacturer risk, they appear to have noeffect under high manufacturer risk. Only high benevolence beliefs have this potential.For the retailer, this suggests that while high manufacturer risk may be difficult toovercome, it can be countered through building positive beliefs about store’sbenevolence.




Controls


Familiarity with



Ethnocentrism 0.10 (1.02) 0.09 (0.94) 0.10 (1.08) 0.09 (0.92) 0.07 (0.73) 0.10 (1.02)


Main effects

Benevolence (1) 0.10 (1.04) 0.08 (0.86) 0.09 (0.94) 0.07 (0.72)

Integrity (2) 0.09 (0.89) 0.08 (0.81) 0.07 (0.73) 0.05 (0.57)

Ability (3) 0.05 (0.59) 0.07 (0.74) 0.06 (0.62) 0.06 (0.63)

COO (4) 0.23 (2.97)* 0.19 (2.59)* 0.22 (2.49)* 0.21 (2.32)*

Interaction effects

1� 4 �0.32 (�4.19)* 0.09 (0.93)

2� 4 �0.09 (�0.98) 0.08 (0.88)

3� 4 �0.07 (�0.77) 0.07 (0.73)

R2 0.04 0.20 0.46 0.04 0.19 0.25

F 0.98 3.08* 14.96* 0.47 2.43* 3.18*

DR2 0.16 0.26 0.15 0.06


Table VII.Study 2 – highmanufacturer riskperception group,dependent variable:purchase intention

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This paper offers a variety of theoretical contributions. Our findings suggest thatrecent questioning about the relevant of COO effects (e.g. Usunier, 2006; Pharr, 2005)may be misplaced. While COO may lose some of its importance in a truly globalbusiness world where it is difficult to trace back the true origins of some products, ourstudy suggests that COO information still affects consumer product evaluations andpurchase intentions. Our findings add to the growing body of literature suggesting thatCOO effects weaken when used in combination with other external cues. Previousstudies document that consumers use multiple cues rather than a single cue in theirevaluations and decisions, and list such factors as store image or brand name as otherexternal cues. In this study, we suggest that three trusting beliefs about a store shouldbe included on the list of potential external cues. Furthermore, our results show thatthe type of trusting beliefs that mitigate negative COO effects depends on the level ofmanufacturer risk as perceived by consumers. Therefore, the level of risk associatedwith individual manufacturers is still an important factor that consumers take intoconsideration in their decision making.

Managerially, our findings have implications for both manufacturers and retailers.Manufacturer sales and profits have suffered recently as a result of massive productrecalls and safety concerns. Consumers have become skeptical about purchasingproducts coming from particular countries. Therefore, manufacturers must takesteps to counteract the negative attitudes and intentions resulting from product COO.Our findings show that manufacturers can reverse this cycle, or at least minimizetheir losses, if they choose as their channel members those retailers trusted byconsumers. With respect to product recalls and increasing manufacturer risk, ourfindings suggest that retailers perceived as benevolent by consumers can helpmanufacturers lessen the negative impact of those recalls on their product evaluationsand eventual sales.

Given increasing retailer power, manufacturers may not always be in a position tolimit distribution to those retailers that are strongly trusted by consumers. For thisreason, we would encourage future researchers to investigate how consumers buildtrust in manufacturers. We suspect that manufacturer trust has a similar, if not thesame, effect on consumers’ evaluations and purchase intention. Therefore,manufacturers may attempt to increase trust in their own firms to fight negativeCOO effects in the long term.

Retailers have also felt pressure from their customers regarding product safety andneed to find a way to manage the COO effects of the products they carry in their stores.While common sense would suggest avoiding risky products, this may not be possiblein some industries like toys. In this case, retailers can counteract negative COO effectsthrough various in-store signals (cf. Schlosser et al., 2006). Our findings suggest that ifretailers can specifically signal their benevolence and honesty, they should be able tocounter and overcome customers’ reactions to a negative COO. Furthermore, byreinforcing trusting beliefs, retailers can increase the likelihood that customers willpurchase products coming from countries like China. The literature recommendsparticular tactics for retailers to create and signal those trusting beliefs, so that theircustomers are assured about their benevolence, integrity and ability. For example,consumers make inferences about retailers’ integrity and ability to sell quality productsbased on their perceived marketing and promotion expenditures (e.g. Kirmani andRao, 2000). Therefore, investment in the store physical environment serves to signalretailer abilities. Similarly, a retailer may signal its benevolence and integrity throughformal statements of its intentions. Privacy, security or return merchandise statements

121


may serve this purpose as it did for Toys “R” Us following the toy recalls. Specifically,the company released a statement from its CEO announcing a “no quibble” policypromising that the retailer would take back recalled products whether they werepurchased at Toys “R” Us or not – with or without a receipt. Along the same lines, toyretailer, FAO Schwarz released a “toy-buying guide” to assist customers with theirpurchases and assure them of the safety of the products sold at their stores. Suchstatements are instrumental in building consumers’ trusting beliefs about retailers andthus weakening the negative effects of COO on their sales.

LimitationsGiven recent product recalls and concerns, the toy industry presents an ideal case tostudy the effect of store trust and trusting beliefs on COO effects. However, we wouldrecommend that researchers examine these relationships in studies focusing on othertypes of toys as well as other product categories such as food, toothpaste and evensome high involvement products such as computers. Similarly, while China has been atthe center of many recent product recalls and thus provided a good example for ourstudy, the COO effects of India, Korea, Vietnam and other countries with a largemanufacturing base should be investigated in future studies. Such studies would helpaccess the generalizability of the findings reported here.

In our studies, we focus specifically on store trust and store-related trusting beliefs.In the future, researchers may want to examine the moderating effect of manufacturertrust and related trusting beliefs. We would also encourage future researchers toinvestigate how consumers develop trusting beliefs about a store, and to what degree,if any, belief formation impacts the application of those beliefs when evaluatingproducts. Even though, our pretests and control variables support the suitability of oursample for our studies, the test of the same relationships using different demographicsamples or samples from different countries would provide more robustness to ourfindings. Finally, in their meta-analysis, Wright and MacRae (2007) recommend theuse of purchase probability scales over purchase intention scales arguing that theyperform better. Our studies, like so many others in the marketing literature in general,and COO literature in particular, rely on purchase intention as a key dependentvariable. Future studies based on purchase probability scales, or better yet, actualpurchase behavior data, would serve to strengthen our findings.

Note

1. The authors are aware that different terms have been used in the literature to refer to thecountry where a product is produced such as country of production (e.g. Nebenzahl and Jaffe,1996), and country of manufacture (e.g. Fetscherin and Toncar, 2010; Samiee, 1994).

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About the authors

Sertan Kabadayi joined Fordham University in 2005, and has a PhD in Marketing from BaruchCollege, The City University of New York. He conducts research primarily in the areas ofdistribution channels, interorganizational relations and website trust and loyalty. He haspresented his research at various conferences and has had his work published in a variety ofacademic journals including Journal of Marketing, Journal of Business Research, Industrial

Marketing Management and Psychology & Marketing. Sertan Kabadayi is the correspondingauthor and can be contacted at: [email protected]

Dawn Lerman has a PhD in Marketing from Baruch College, City University of New York.She is Associate Professor of Marketing at Fordham University. Her main research interestsinclude psycholinguistic, sociolinguistic and cross-cultural aspects of consumer behavior,advertising and branding. Her work has appeared in journals such as the Journal of Consumer

Research, Journal of Advertising Research, Psychology & Marketing, European Journal of

Marketing and Journal of Business Research. She has co-authored chapters in Managing Tourism

Firms, Best Practices in International Marketing, European Perspectives in Marketing, andCross-Cultural Marketing: Contexts, Concepts, and Practices. She is a member of the editorialreview boards for the Journal of Business Research and International Marketing Review.

To purchase reprints of this article please e-mail: [email protected] visit our web site for further details: www.emeraldinsight.com/reprints

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