Theme: Domestic & Global

TRACING THE EVOLUTION OF COUNTRY

OF ORIGIN RESEARCH
IN SEARCH OF NEW FRONTIERS

Ian Phau
Gerard Prendergast Ph.D.

Address for all correspondence:

Ian Phau
DBA Candidate, (Paper Presenter)
Henley Management College (UK)

109 Jurong East St 13,

#20-330, Singapore 600109

Phone: 65-5676889
Fax: 65-5610289

Email: ianp@pacific.net.sg

Gerard Prendergast PhD

Associate Professor

Hong Kong Baptist University,

School of Business,
Kowloon Tong, Hong Kong.

Phone: 852-23397570
Fax: 852-23395586

Email: gerard@hkbu.edu.hk

1977
TRACING THE EVOLUTION OF COUNTRY
OF ORIGIN RESEARCH
IN SEARCH OF NEW FRONTIERS

ABSTRACT

This review traces country of origin research for the past three decades whilst
integrating innovative directions for the extension of the construct. Moving into the
21st century, there are some unresolved issues as reflected in the inconclusive
findings presented in the review. Methodological shortcomings are still a major
concern due to the transformation of world markets and consumers changing taste
and habits. These comprise the calls for more rigorous sampling methods and cross-
national validity. Theoretically, the brand and involvement concepts need to be
explored. Licensing activities and the phenomenal rise of counterfeits present new
problems and influences to country of origin. From a strategic standpoint, services
and retailers' views of country of origin are conspicuously deficient. We will present
all these issues under methodological, conceptual and strategic streams of research.

1978
INTRODUCTION

The sheer volume of research is an indication of the importance of country of origin

images in international marketing strategy. Extensive reviews are published
periodically, the last two being Roth and Romeo (1992) and Samiee (1994). With the
looming arrival of the new millennium, we have come to a time where we have to
reflect on the relevance of prior studies in a world crowded by global business
activities. The controversy of the relevance of country of origin continues to cloud the
ambiguous tags on products with multi-country affiliation. Sheth (1998) reinstates
Levitt (1984) and Ohmae (1992)'s contention that there is the emergence of a
homogeneous culture thus rendering country of origin an irrelevant construct. This is
not unfamiliar to us noting the number of recent studies into hybrid products (Chao
1993; Ettensen and Gaeth, 1991; Iyer and Kalita, 1997; Schweiger et al, 1997).
However, the side effects of globalisation manifest itself through fragmentation of
markets and destabilisation of world economy (Phau and Prendergast, 1998a {in-
press}). The current economic crisis has claimed many casualties. This phenomenon
seems to dispel the convergence of culture (Hoecklin 1992) while accentuating
country affiliation. Witkowski and Kellner (1998) for instance found that attitudes
towards advertising are largely convergent but cultural differences do remain, as there
are two noteworthy country specific segments. These events lead us to question the
current and future status of "country of origin" as a construct for consumer behaviour
evaluation.

In the light of this, the paper will first present the relevant theoretical background by
first tracing the evolution of country of origin research. Next it will present
integrative directions for research in three streams. They represent both deficient and
elusive areas, which we have classified under methodological, conceptual and
strategic themes. These concerns will contribute significantly to our understanding of
the markets in the 21st century.

Theoretical background

Till date there is no consensual definition for country of origin (Sauer et al, 1991). It
has been referred to “buyers’ opinions regarding the relative qualities of goods and
service produced in various countries (Bilkey 1992, Pg xix). Zhang (1996) defines in
as the information pertaining to where a product is made. Perhaps, Lampert and Jaffe
(1998) offer the most embracing definition. They define it as "the impact which
generalisations and perceptions about a country have on a person's evaluations of the
country's products and brands". Either way, country of origin manifests itself as an
extrinsic cue to provide consumers with a basis for purchase decisions (Bilkey and
Nes, 1982; Cordell, 1992; Erickson et al; 1984; Han 1989). It is a potentially

1979
powerful image variable, which may be used to influence competitive positioning and
success in the global market place.

Early country of origin studies were plagued by mostly single cue models which can
be expected to produce substantially larger country of origin effects than those
employing multiple cues (Lim et al, 1994; Johansson et al, 1985). In truth, the latter
produced either no significant or only minor country of origin effect (Ettenson et al,
1988; Johannson et al, 1985). More recently, studies seem to show otherwise. For
example, Liefeld's (1993) demonstrated that there is little difference between single
and multiple cues. Lim and Darley (1997) found no difference between the two
while the multiple cue shows differential effect in the likelihood of demand
characteristics. These inconclusive findings prompted Lim and Darley (1997) to
suggest that the manager give more credence to studies that employ multi cue ad
format because the magnitude and the significance of country of origin effects in the
single and multi list format studies may be inflated.

Generally, findings indicate that consumers hold stereotyped images of certain

countries and that these images affect the way the country’s products are perceived
(Cordell 1992; Lim and Darley, 1997; Maronick, 1995; Papadopoulas et al 1990; Tse
and Gorn 1993). Stereotypes also vary depending which country they are being
measured (Jolibert and Lohnes 1982; Darling and Kraft 1977). However, while
country stereotypes are often deeply entrenched and tend to be enduring over time,
negative country images may be improved through advertising or national export
promotion campaigns (Nagashima 1970,1977; Nebenzahl and Jaffe, 1991; Morello,
1984; Wall and Heslop 1986). But, studies have still failed to provide a theoretical
explanation for the changes observed (Lampert and Jaffe, 1998).

Negative biases towards products made in foreign countries are found in a number of
studies (Bruning, 1997; Nagashima 1970; Bannister and Saunters 1978; Morello
1984). The preference for domestic goods tends to be stronger in countries: (1) where
they are developed, (2) where the domestic economy is threatened by foreign goods
(Heslop and Papadopoulas 1993), or (3) where consumers have a strong sense of
patriotism or national pride (Bruning, 1997; Han, 1988, Hadjumarcou et al, 1993;
Lantz and Loeb, 1996). Generally the phenomenon of consumer ethnocentrism is a
reflection of more highly developed countries (Kaynak and Kara, 1998; Kim, 1996;
Tse and Gorn 1993).

On the contrary, in the case of developing countries, national products tend to be

evaluated less favourably than imported goods from developed countries (Lumpkin
and Crawford, 1985; Tan and Farley, 1987), or when it has a market that is relatively
open to development from other countries (Papadopoulas et al, 1990). The studies
suggest that products sourced in developed, highly industrialised countries are
evaluated more positively than products sourced in developing countries. Lim and

1980
Darley (1997) suggest that less developed country producers should try to
compensate the negative country of origin effects by emphasising warranty and or
better price in their advertising. Further, they should also try to acquire a licensing
agreement with a well-known brand. Prior findings by Han (1988) are revisited and
supported here.

For the past decade, there is an overwhelming increase in products that are
manufactured in diverse locations around the world and marketed under a single
brand name. Under such circumstances, country of origin is often viewed as a
multidimensional construct involving a hybrid of factors that makes the distinction
between the country of manufacture or assembly and the country of the company’s
home office (Ozsomer and Cavusgil 1991, Johansson and Obermiller 1989). Han and
Tersptra (1988) first introduced the hybrid configurations of “domestically
manufactured, foreign owned; domestically manufactured, foreign parts". Other
hybrid configurations followed such as country of design, country of assembly, parts
supplied by and a host of other perceivable derivatives (Chao 1993; Tse and Gorn,
1993; Ulgado and Lee 1993). As consumers develop more familiarity with the
products, the use of the made-in label begins to diminish. At the same time, as more
countries develop the necessary skills to manufacture the product, the country of
origin of products seems to be of little importance (Sheth 1998). The advent of hybrid
products accentuates the related importance of brand names (Phau and Prendergast,
1998a {in-press}).

Theoretically, Han (1989) posits that the country-product image interface may work
in either as a “halo construct”(country image used to evaluate products about which
people know little) or as a “summary construct” (knowledge about a country’s
products abstracted into the image of the country itself). A halo is an overriding
attitude which colours beliefs and is associated with reduced reliance on cognitive
processing and is well supported by several studies (Erickson et al, 1984; Johansson
et al, 1985). Alternatively, Han (1989) demonstrated that when consumers are not
familiar with a country’s product, a summary construct model operates in which
consumers infer product information into country image, which then influences brand
attitude.

But, prior empirical and experimental findings on influence of brand names on

country of origin are still inconclusive (Johansson and Nebenzahl 1986; Han and
Terspstra 1988). For instance, country of origin information does not significantly
affect opinions about the quality of branded products in general. However,
individually there may be wide variations in attitudes toward products if the
consumer knows the product’s country of origin (Gaedeke 1973). Han and Terspstra
(1988) found that sourcing country stimuli has more powerful effects than product
evaluations of bi-national products. Okechuku (1994) however found that country of

1981
origin and brand are about equally important. More recently, Schaefer (1997) did not
find brand familiarity reducing the importance of the reliance on country of origin. In
fact, the contrary is found to happen especially for respondents with objective product
country knowledge.

Interim Summary

In short, prior research into country of origin has evolved from single cue to multiple
cue studies namely hybrid products. A country of origin cue is indicators of country
image, stereotypes about their country and their products, and is simplifying cues of
information processing. However, moving into the 21st century, there are some
innovative, relevant and pressing issues that have not been resolved. It can be seen
that inconclusive findings are presented in the preceding review. This may be a
methodological shortcoming or the pressing need to relook at some basic issues due
to the transformation of world markets and consumers changing tastes and habits.
These include the calls for more rigorous sampling methods and cross-national
validity. Theoretically, the brand and involvement concept needs to be explored.
Licensing activities and the phenomenon rise of counterfeits present new problems
and influences to country of origin. From a strategic standpoint, services and retailers
view of country of origin are conspicuously deficient. We will present these issues
under methodological, conceptual and strategic streams of research.

Future Avenues of Research

Figure 1 proposes the three streams of directions for research. The main issues are
presented in the following respective sections.

Figure 1

New Directions for Research

New Directions for

Country of Origin
Research

Methodological Conceptual Strategic

Issues Issues Issues

• Sampling • Brand Origin Construct • Retailers' Views

• Cross • Involvement Construct of COO
National • Licensing Strategies • Service Products
Validity • Counterfeit Activities

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Methodological Stream of Research

(1) Sampling Procedures

The methodological issue that probably received the most attention in country of
origin research is the concerns with sampling and measurement. The external validity
of the use of atypical populations such as small samples or students selected in a non-
random, non-representative basis is often questioned (Bhuian, 1997; Papadopoulas et
al 1990). More recently, Peterson and Jolibert's (1995) meta-analysis of country of
origin effect sizes demonstrated that perceptions of quality and reliability do not
differ significantly for student as compared with non-student populations. However,
Iyer and Kalita (1997) found that when purchase intentions were the dependent
variable under study, some major differences were found. It was thus suggested that
perhaps studies involving high risk and high involvement items such as cars and
expensive electronic products, which are beyond the reach of most students, might
influence the results. Future research will have to take note of this inherent
shortcoming. The pertinence of product involvement is also highlighted, an issue
which will be discussed in a subsequent section.

(2) Cross National Research

Common criticisms of prior behavioural research include the mere examination of
consumer attitudes in developed countries without considering their cross national
validity (Peterson and Jolibert, 1995; Parameswaran and Yaprak, 1987; Steenkamp
and Baumgartner, 1998; Zhang 1997). Cross cultural research for the different facets
of country of origin can provide managers with effective competitive tools in
international marketing. As a further development of the preceding section on
sampling, Samiee (1994) questioned studies that used foreign students in American
Universities to generalise the behaviour of the respective country of interest. But we
also have to contend that cross national research is also plagued by numerous
methodological shortcomings (Aulakh and Kotabe, 1993; Malhotra et al 1996; Nasif
et al 1991; Phau and Prendergast, 1999 {in-press}). Assessing the applicability of
frameworks developed in one country to other countries is an important step in
establishing the generalisability of consumer behaviour theories (Janda and Rao,
1997; Steenkamp and Baumgartner, 1998). In order for such comparisons to be
meaningful, the instruments used to measure theoretical constructs of interest have to
exhibit adequate cross-national equivalence (Kumar et al, 1995; Mullen 1995; Phau
and Prendergast, 1999 (in-press); Samiee and Athanassiou, 1998; Steenkamp and
Baumgartner, 1998). Most of the concerns involved the inappropriate modification of
cultural issues and the lack of rigour in the comparability of different cultural,
economic and social development (Samiee and Athanassiou, 1998). These provide
valid and justified implications for the extension of country of origin studies to a
cross national approach.

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Conceptual Stream of Research

(1)Country of Origin of Brand

As a recognition of the global manufacturing activities, consumers today are
"conditioned" by the fact that a product is unlikely to be made in the brand country.
Thus, where a product is made, is irrelevant. Instead, the consumers will channel the
evaluation cues towards the bundle of favourable attributes (such as design, style,
quality) associated with the "brand" instead of going through the complex clutter of
multi-country affiliations. Further, the design or concept of a product comes from the
headquarters or is at least approved by the country of brand origin (Johansson et al
1985). It follows that promoting a product through brand origin will maintain and
improve the long-term consistencies of the organisation’s internal and external
marketing focus across cultural and geographic boundaries.

It can be argued that the role of the country image "of made" be replaced by country
of brand origin as a tool for product evaluation. Since consumers have confidence in
the quality of that brand, the different dimensions of country of origin should not
affect their perception. Similarly, the image of the brand is also restored and will be
consistently evaluated. Also, a brand name of a premium brand elicits a “personality”
that is a marketable cue. Many products and brands send out signals that can be
traced back to their country of origin thus acting as cultural signifiers (White and
Cundiff 1978; Schooler and Sunoo 1969; Schooler and Wildt 1968). That origin cues
are already firmly imprinted within successful brand names. Thus merely
manipulating the different dimensions of the country of origin construct does not
eliminate the effects of these cues. Brand origin however will not change with a
change in manufacturing location. The perceived origin of a brand need not be the
same as the country shown on the “made-in” label. This difference is particularly
relevant in light of the growing trend towards offshore manufacturing by
multinationals. More research needs to be focussed on the usefulness of the construct
of "brand origin" in product evaluation.

(2)Involvement Construct
Among the factors influencing the impact to country of origin influence, consumer
involvement with the product may be particularly critical. Indeed, involvement has
emerged as one of the most prominent concepts in consumer research. The primary
reason for its importance is because it has been shown to be the main determinant of
how much decision effort an individual will exert when making a purchase (Phau and
Prendergast, 1998b {in-press}; Zaichkowsky 1985). In fact, the review of literature
has uncovered a series of recommendations but prior country of origin researchers.
Graeff (1996) suggests that research could examine the effects of the level of
involvement on the brand image and self image. Rogers (1994) and Schaefer (1997)
both echoed the same thoughts. Specifically, when consumers are highly involved

1984
versus when they are less involved will probably want more information about the
brand than just its image. Further. most country of origin studies has been
concentrating on high involvement products like automobiles and other high
involvement objects (Erickson et al, 1984; Peterson and Jolibert, 1995) but many
products do not elicit high level of consumer involvement. There is no one study that
explicitly compares both levels of involvement.
The involvement construct has been extensively studied outside the perimeters of the
country of origin of influence. We need to understand how involvement and country
of origin concepts influence each other.

(3) Country of Origin of Licence

Product complexity with respect to multiple country affiliations should be taken into
account for studies of country of origin influence. This truly puts the notion of the
research into hybrid product phenomenon a future trend. Other than the hybrid
dimensions uncovered in the review (e.g. “Engineered in”, “Assembled in”), the
form of “Made under license” should be explored. This is reflected by international
marketing guru, Cavusgil (International Marketing Vol. 4 No 1, 1996), who stresses
the need to research into important international practices such as licensing.

Licensing can be defined as a contractual arrangement whereby one company (the

licenser) makes an asset available to another company (the licensee) in exchange for
royalties, license fees, or some other form of compensation (Keegan and Green,
1997). It is a global market entry and expansion strategy with considerable appeal
(Jalilian 1996). However, most studies have focussed exclusively on the motives of
licensing (Jalilian 1996). We have reasons to believe that the consumers' evaluation
and ultimately acceptance of the licensed product is of strategic interest. Impact of
branded goods made outside the country of origin of the parent country may produce
several meaningful implications for the marketer. For instance, a branded product
with French originality may not be perceived as French if it is licensed for production
and sales in Thailand. Will brand equity erode in such an instance? Pricing strategies
and other factors of the marketing mix in relation to licensing and country origins
also need to be further understood. Further, it has massive implications for the next
section - Fakes.

(4)Country of Origin of Fakes

Literature has unwittingly crowned Asia as the capital of counterfeits (McDonald and
Roberts 1994). China, Vietnam, Thailand and Korea have taken turns to be bestowed
with this dubious honour. These allegations pose inherent implications for globally
branded products (Tom et al, 1998). Pirated products can be obtained easily and in
fact, specific fakes are associated with specific countries. For example, the
proliferation of pirated CDs is perceived to be from Malaysia where sophisticated
production machinery were recently seized (Straits Times, Sep 19, 1998).

1985
Progressively, the growth of hybrid products may have encouraged counterfeit
production bringing about pernicious effects for producers of branded goods (Phau
and Prendergast, 1998). A genuine pair of Reebok sports shoes when tagged with a
country of origin of “Made in Korea” will inevitably raise the suspicion of a
deceptive counterfeit. Consumers are also not educated to differentiate between a
licensed product and a deceptive fake. There are also reports that deceptive
counterfeits of Nike T shirts were purchased by unsuspecting retailers (Forbes, Aug
11, 1997). This prompts a series of uncertainties in terms of consumer’s perception
and purchase intentions of luxury brands (Tom et al, 1998). Specifically some main
issues are raised here:

• What is unknown to us is the detrimental effect to brand image and product

quality when the country of origin of made is associated with rampant counterfeit
activities.
• Will brand conscious consumers question the fact that their purchase is a potential
deceptive counterfeit?
• What perceived effects are evoked when a consumer buys a branded product
made in the capital of counterfeits?
• What is the extent of the detrimental repercussions to purchase intent of such
products?

Strategic Stream of Research

(1) Retailers' Perception of Country of Origin

With the globalisation of business and markets, one dimension of the internationalism
of retail operations - sourcing- has been largely overlooked. Since the late 1980s,
international sourcing by manufacturing firms has been a buzz word in the leading
journals of purchasing and international firms (Min and Galle 1991; Birou and
Fawcett 1993). Data that have been collected outside of the classroom environment
have generally been at the consumer rather than at the retail buyer level. Determining
whether retail buyers hold country of origin perceptions is important because like
industrial buyers (Saimee, 1994), they have a much more sophisticated view of
products and suppliers and are therefore less likely to subscribe to superficial
stereotypes (Alpert et al 1997; Liu & McGoldrick, 1997). Through the three decades
of study of country of origin influence, very few attempts have been made to gather
information about the perceptions and attitudes of retailers. Only one recent study by
Hulland, Todino, Lecraw (1996) on pricing strategies has been uncovered). While the
retail buyers are attempting with work on consumer preferences, we recommend that
this could be integrated to consumers’ perceptions, preferences and attitudes toward
country of origin . The opportunity would then exist to extent general models of
retail buyer behaviour onto the context of the international sourcing decision. An
understanding of the decision making process of sourcing, marketing and

1986
communicating “hybrid products” to consumers is of both strategic and managerial
concern.

(2) Country of Origin of Service Products

Country of origin studies have focused on consumer and industrial products but not
services. However, there is a host of business in the service sector, which has cultural
and country connotations. For example, American banks in Singapore, British
Airways in India or a Thai restaurant in Rome. There are also instances of country
icons like Mark and Spencer's in Hong Kong or Singapore. The proliferation of
distance learning programs in education services where American, Australia and UK
universities congregate in Singapore and Hong Kong makes up another fraction of
this issue. All these exemplars extend the preceding discussion of a hybrid (service)
products. McGoldrick (1998) asserts that such services may seek to emphasise their
national origins while trading internationally. At the same time, others seem content
to become identified with the adopted country. In their review, Marks and Spencer
promotes the "British" atmosphere in France by using British stereotypical figures,
Sherlock Holmes and Watson in their advertisement. In the same vein, most Japanese
shopping centres around the world still maintain the practice of having sales
personnel in lifts and front entrances to welcome guests. Staniland (1998) however
contends that certain services or products have an ir-erasable identity. For example,
the airline industry is prevented from developing into multinationalism. The country
signifier is too strong to be influenced. Therefore, there is an inherent need to address
all these concerns. Specific questions may include: Will the service on Singapore
Airlines be perceived differently if a sarong clad "Caucasian Girl" is employed
instead of an Asian? For academic institutions, do you seek partnership with local
representative or make use of the services of the embassy in the foreign country in
order to maintain country image?

CONCLUDING COMMENTS

After three decades of country of origin studies, the research has certainly grown to
cover the various aspects of this complex construct. This paper suggests several leads
that were not inherent in previous studies but are inevitably pertinent issues that will
challenge us in the next millennium. Therefore, it is highly suggested that the
preceding research areas be further explored conceptually and empirically to
contribute more in-depth understanding of our consumers.

1987
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