Made in China

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IMR
28,1
Made in China but sold at FAO

Schwarz: country-of-origin effect
and trusting beliefs
102
Received March 2010
Revised August 2010
Accepted November 2010
International Marketing Review

Vol. 28 No. 1, 2011
pp. 102-126
r Emerald Group Publishing Limited
0265-1335
DOI 10.1108/02651331111107125
Sertan 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 a
store 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 on
product evaluation and purchase intention. However, under high manufacturer risk conditions, only
benevolence beliefs moderate the negative COO effects.
Design/methodology/approach The toy industry is chosen as the study context. The first three
hypotheses are tested with survey data collected from 224 participants. The last hypothesis is tested
with data collected from 338 participants. Hierarchical moderated regression was used in the testing of
the hypotheses.
Findings The results show that while only benevolence and integrity beliefs about a store
weaken the negative effect of COO on product evaluations, all three trusting beliefs lessen the negative
impact of COO on consumers purchase intentions. However, when manufacturer risk is high, only
benevolence beliefs have a significant moderating effect.
Practical implications The findings show that manufacturers can reverse the negative cycle, or at
least minimize their losses, if they choose those retailers that consumers have high trusting beliefs
about as their channel members. Similarly, if they can signal that they are benevolent and honest
stores, retailers can balance their customers negative evaluations of products made in certain
countries with negative image.
Research limitations/implications Given the recent product recalls and concerns, the toy
industry presents an ideal case to study the effect of trusting beliefs on COO effects. Nonetheless, the
focus on a single industry does limit the generalizability of the findings. The authors recommend that
future 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 the
impact 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. Amidst
massive 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 variety
of products distributed all over the world (Blecken, 2007). Almost 40 percent of UK
consumers are less likely to buy Chinese-manufactured products because of the 2007
toy recall crisis, while 38 percent of Hong Kong consumers reduced their purchases of
China-made products with the toy and food sectors the worst affected (Blecken, 2007).
Like their counterparts worldwide, US consumers have become very hesitant to put
Chinese products in their shopping carts (Blecken, 2007). Given that China is one of the
largest sources of US imports, this hesitancy has dramatically affected industry both at
the 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
started asking whether toys are made in China (Smith, 2007). Mattel, the worlds
biggest toymaker, reported that the recall of more than 21 million Chinese-made toys as
a result of design flaws and dangerous lead levels in paint adversely affected both sales
and 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 also
boomed at upscale toy retailer FAO Schwarz, despite the fact that most of its toys are
made 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 would
be helpful for retailers to understand those factors that motivate consumers to buy
products with a negative made in claim.
In this paper, we investigate the moderating effect of trusting beliefs on negative
COO effects. While early studies documented the influence of COO information on
consumer response, more recent research suggests that COO has a relatively weak or
even insignificant effect when other extrinsic cues such as store image or brand name
are available (Pharr, 2005). We introduce trusting beliefs about a store as extrinsic cues
that have yet to be examined in this context. Specifically, we examine consumers
trusting beliefs about a store as moderators of COOs negative effect on product
evaluations and purchase intentions. We hypothesize that the ability, benevolence and
integrity beliefs that consumers hold about a store moderate the negative COO effects
on evaluations of and intention to buy products with a specific made-in label. We also
examine the role of consumer perception of manufacturer risk on the trusting
beliefs-COO effect relationship. We suggest that the specific trusting belief driving
this effect depends on whether consumers perceive the product manufacturer as high
or low risk.
While prior research has tested the effect of constructs such as store reputation or
prestige, to the best of our knowledge this is the first study that examines the impact of
trusting beliefs about a store on COO effects. In our study, we show that trusting beliefs
weaken the effect of negative COO on consumers product evaluations and purchase
intentions. Also, our research offers further support for the notion that COO effects
weaken when used with other external cues. Specifically, we propose that while COO
remains important, it has less of a negative effect on a product evaluations and
intentions as consumers trusting beliefs about a store strengthen.
Manufacturers know all too well that they must take steps to counteract the
negative attitudes and intentions caused by the COO of their products. The same rule
can be applied to retailers who may need to find a way to manage the COO effects of the
products they carry in their stores. In sending signals that facilitate trust (c.f. Schlosser
et al., 2006), retailers can counteract negative COO effects. That is, while customers
may have negative perceptions about a country and its manufacturing capabilities
within a certain category, their evaluations of products coming from that country may
be mitigated by their trusting beliefs related to the store where those products are sold.
COO effects
Definition
For the past four decades, the effect of a products COO on buyer perception,
evaluations and intentions has been one of the most widely studied phenomena in
the international business, marketing and consumer behavior literatures[1]. While
the effects of COO on consumer evaluations and behavior appear quite robust, the
Country-oforigin effect
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definitions and conceptualizations of COO effects are diverse. Samiee (1994), for
example, defines the COO effect as any influence or bias that consumers may hold
resulting from the COO of a product. Yet, Nagashima (1970) defines it as the picture, the
reputation and the stereotype that businessmen and consumers attach to products of a
specific country. In this paper, we follow Gurhan-Canli and Maheswaran (2000) in
defining COO effects simply as the extent to which the place of manufacture influences
consumer evaluations and related decisions.
Recently, researchers have started to argue that consumers attach little importance
to the country where a product is manufactured. Moreover, they argue the effect
of COO is no longer a major issue for international marketing operations in light of
multinational production, global branding and the decline of origin labeling in World
Trade Organization (WTO) rules (Hugstad and Durr, 1986; Usunier, 2006). However,
there exists little consensus on the matter. Winter (2004), for example, found that 93
percent of study participants do indeed deem it important to know the origin of
a product. In fact, Papadopoulos (1992) argues that higher levels of globalization make
product country image that much more important. Heslop et al. (2010) found that
country image is important not only in individuals evaluations of products, but also of
events like the Olympics. We tend to agree with Josiassen et al. (2008) that there is
insufficient evidence that consumers are indifferent to COO. Rather, we would argue
that recent product recalls have brought made-in labels and COO to the forefront of
consumers attention. As a result, COO research remains highly relevant for marketing
practice.
The vast COO literature has inspired a number of review articles, all of which
emphasize the influence that COO has on consumer perceptions, evaluations and
intentions (e.g. Bilkey and Nes, 1982; Demirbag et al., 2010; Usunier, 2006) Statistically
significant COO effects have been documented for general products (e.g. Darling and
Wood, 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 information
processing perspective, that is, as a cognitive cue used by consumers when forming
attitudes and beliefs about a product, which subsequently affects their behaviors with
respect to that product (Bilkey and Nes, 1982). Since COO can be manipulated without
changing the physical product and is typically operationalized or communicated
through the phrase made in it constitutes an extrinsic cue (Thorelli et al., 1989). As
such, it serves as a surrogate for product characteristics that cannot be evaluated
directly (Huber and McCann, 1982; Han, 1989), and can be used as a signal for overall
product 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 a
significant predictor of individuals product evaluation (Bilkey and Nes, 1982).
However, more recent studies investigate how the availability and consistency of
other extrinsic cues and their interaction with the COO cue affect consumers product
evaluations 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 (Ahmed
et 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).
Thorelli et al. (1989) found a significant three-way interaction of warranty, store

reputation and COO on perceived quality and overall attitude. However, their study
did not find a significant three-way interaction of the three extrinsic cues on purchase
intention.
Studies utilizing multiple cues have found the COO effect to be relatively weak or
insignificant in explaining product evaluations when these other extrinsic cues are
available (e.g. Ahmed et al., 2004; Hui and Zhou, 2002). In this paper, we introduce
trusting beliefs about a store as alternative extrinsic cues that may moderate the
negative effects of COO on consumer evaluations and intentions. Specifically, we argue
that strongly negative COO effects may not impact product evaluations and
sales depending on the level and type of trust that consumers have in the stores selling
the 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 majority
of dependent variables included in COO studies. Verleigh and Steenkamp (1999)
distinguish between measures of perceived quality and purchase intentions and state
that judgments regarding perceived product quality and purchase intentions can be
formed independent of each other. Therefore, we investigate the moderating impact of
three trusting beliefs on negative COO effect on both product evaluation and purchase
intention.
Trusting beliefs
Trust 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 has
confidence (Moorman et al., 1992). Although some researchers have treated trust as a
unitary concept, most now agree that trust is multidimensional with two inter-related
components: trusting beliefs, comprising perceptions of the trustworthiness of the
vendor; and trusting behavior, a willingness to depend or make oneself vulnerable to
the vendor (Mayer et al., 1995; McKnight et al., 2002; Rousseau et al., 1998).
Trusting beliefs are the trusting partys perception that the trustee possesses
characteristics that would benefit the trusting party (e.g. McKnight and Chervany,
2001). They represent a sentiment or expectation about an exchange partners
trustworthiness (Moorman et al., 1992, p. 315). In other words, they collectively reflect
the 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 help
build the foundation for development of trust. Morgan and Hunt (1994) argue that
trusting beliefs are important as they precede and determine trusting intentions. For
example, Schlosser et al. (2006) show that consumers trusting beliefs about a website
influence their online purchase intentions. They have also been identified as significant
mediators that influence purchase behavior (e.g. McKnight et al., 2002).
Prior studies have considered a plethora of trusting beliefs, the majority of which
can 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 consumers confidence that a store has a positive
orientation toward its customers beyond an egocentric profit motive and that it
will consider their well-being, and act in their interests (Mayer et al., 1995). This set of
beliefs captures the extent to which individuals believe that a store wants to do good
rather 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 stores future actions and
decrease risk related to the stores business (e.g. McKnight et al., 2002).
Integrity beliefs reflect the confidence that a store adheres to a set of moral
principles or professional standards that guide its interactions with its customers
(McKnight et al., 2002). They include the expectation that a store acts in accordance
with socially accepted standards of honesty or a set of principles that the customers
accept 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 the
skills and competencies necessary to perform the job (Mayer et al., 1995). These beliefs
concern a stores 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 of
skills, competencies and characteristics that enable that store to perform its stated
functions (Mayer et al., 1995).
These three trusting beliefs are related, yet distinct. Each belief captures some
unique elements of trustworthiness. Therefore, as a set, ability, benevolence and
integrity appear to explain a major portion of trustworthiness while maintaining
parsimony (Mayer et al., 1995). For example, in a retail setting, a customer may believe
that a store cares about its customers and intends to deliver a particular quality of
service (i.e. the store is benevolent), but that the store lacks the skills and ability to do
so (Mayer et al., 1995; Schlosser et al., 2006). Similarly, despite beliefs that the store
follows a professional code of conduct (i.e. it has integrity), consumers may question
the stores genuine concern for its customers (i.e. its benevolence). Therefore, it is
possible for a store to be perceived positively on some belief dimensions and negatively
on others. For this reason, trustworthiness should not be thought of as a dichotomy
where the store is perceived as either trustworthy or not trustworthy, but rather as a
continuum (Schlosser et al., 2006). If all three beliefs were perceived to be high, a store
would be deemed quite trustworthy, and would be considered a very desirable
exchange partner because of the perception that it will behave ethically, kindly and
skillfully (Mayer et al., 1995).
Hypotheses
Negative COO effects and benevolence beliefs
Benevolent beliefs assure consumers that a store would not do anything that might
affect them negatively. The store pursues not only its own profit but also the
well-being of its customers. This belief translates into a perception that the store
cares about its customers and intends to deliver good quality products to them. Thus,
this benevolent belief should assure consumers that even if products come from
a country with a negative COO image, they will not be risky, harmful or low in
quality. Customers would trust that the store would not carry poor quality
products just to maximize its own profits. They would also believe that in case
of a problem, the store would go out of its way to help its customers and act in
their best interests. Therefore, this benevolent belief about a store should help to
counteract the negative COO image of the product. Consistent with this argument, we
hypothesize:
H1a. The negative COO effect on product evaluation will become weaker with
increasing consumer benevolence beliefs about a store.
Similarly, consumers believe that a benevolent store would avoid harming its
customers. They believe that in the event of a problem, the store would do everything
possible to help its customers. For example, in case of a product recall, consumers
know that they can depend on the store to do its best to protect their interests, even
though it may hurt stores profits. Therefore, knowing that the store would take care of
the problem, consumers should be less concerned about the negative COO image of the
products that they consider purchasing. Thus, we hypothesize that:
H1b. The negative COO effect on purchase intention will become weaker with
increasing consumer benevolence beliefs about a store.
COO effects and integrity beliefs
If consumers believe that a store follows socially accepted principles like not telling a
lie or deceiving its customers, this integrity belief should assure them that the store
provides correct information about the origin of its products. Similarly, they should
believe that the store would not hide the truth or lie about product quality even when
products come from a country under scrutiny for poor production. They should believe
that if there were anything wrong with a product coming from a country with a
bad 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 products COO and their integrity beliefs about the store in
their evaluations. Therefore, we hypothesize that:
H2a. The negative COO effect on product evaluation will become weaker with
increasing consumer integrity beliefs about a store.
Consumers with a positive integrity belief believe that a store that is honest with its
customers will fulfill its agreements and promises with its customers. If a store
promises good quality and safe products, an integrity belief assures consumers that it
will keep that promise and conduct its business in a professional and morally
acceptable way. Consumers believe that the store would not let them purchase unsafe
or defective products. In this way, any negative image stemming from product COO
should become less important to consumers. We hypothesize:
increasing consumer integrity beliefs about a store.
COO effects and ability beliefs
Consumers develop ability beliefs about a stores performance as a business. They
believe 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 guarantee
that it will do so by carrying only good quality products. A store can still perform its
functions and make more profit by selling products made in countries known for bad
quality. Therefore, consumers ability beliefs about a store should not interfere with
their quality evaluations of the products sold at that store. Thus, we hypothesize that:
H3a. The negative COO effect on product evaluation will not change with
increasing consumer ability beliefs about a store.
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Whereas benevolent and integrity beliefs concern credibility of a store, ability beliefs
are more performance-related. Consumers believe that a store has the necessary skills
and resources to fulfill its obligations to its customers. When considering whether to
make a purchase decision, consumers will focus on the trusting belief that is most
relevant to performance: ability (Mayer et al., 1995; Schlosser et al., 2006). To the degree
that consumers consider if a store can successfully complete its transactions, ability
beliefs become important drivers of their purchase intentions. Thus, we hypothesize
that:
increasing consumer ability beliefs about a store.
The moderating role of manufacturer risk on trusting beliefs negative COO effects
relationship
Earlier research suggests that consumers perception of perceived risk is one of the
factors affecting product choice. In this respect, COO may be perceived as a risk
property (Cordell, 1993). Consumers may perceive more risk in purchasing products
from some countries versus others. A high versus low risk COO seems likely to result
in lower perceptions of quality and less favorable attitude toward products (Bilkey and
Nes, 1982). Thorelli et al. (1989) found that product evaluation and willingness to
purchase are inversely related to the amount of perceived risk. Various studies have
showed that various country-specific factors such as culture, degree of economic
development and political climate can profoundly influence individuals COO
perceptions (c.f. Bilkey and Nes, 1982). Countries with a poor image on these
dimensions are perceived as high risk. For example, recalls for specific products made
in China, for example, may imply an increased risk for products coming from that
country in general, regardless of manufacturer. However, when manufacturer risk is
highlighted, 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 of
risk 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 against
risk, should play an important role in determining product evaluations and purchase
intentions. Specifically, believing that the store has good intentions and would go out of
its way to help them in case of a problem, consumers should feel less threatened by the
risk. Thus, high benevolence beliefs should reduce the risk related to both COO and
manufacturer, and thus lessen the COO effect on product evaluations and purchase
intentions.
H4. For both product evaluation and purchase intention, increasing benevolence
beliefs weakens the negative COO effect when manufacturer risk is high.
Study 1
Methodology
Participants. Two hundred and twenty-four graduate business students at a
northeastern US university participated in the study in exchange for course
credit. The sample was 48 percent female. The average age of the participants was
35 years. Seventy-five percent of participants held a full-time job, 21 percent held a
part-time job and 4 percent were unemployed. In total, 70 percent of participants had
purchased toys within last six months.
Since prior COO studies suggest that country of birth may impact evaluations, we
asked participants if they were born in the USA or in a foreign country. A total of 64
percent 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 results
showed no statistically significant differences between the responses of US-born and
foreign country-born respondents. Furthermore, 63 percent of the respondents were
married, and 59 percent identified themselves as parents.
Stimuli. Given our initial interest and research domain, we chose toys as the product
category in our study and selected a teddy bear as the stimulus. In order to ensure that
toys are an appropriate category for a study about COO, we conducted short interviews
with 16 shoppers in two different toy stores in a large city in the northeastern section of
the USA. From 16 individuals, 14 indicated that place of manufacture for toys is
important and that they look for such information. In addition, 12 individuals said that
such information is critical in their final purchase decision. We then conducted a series
of pretests with graduate students at a northeastern US business school to determine
the stimuli for our studies. In the first pretest, (n 80, average age was 34.6 years),
91 percent of respondents indicated that they check made-in label before buying toys
thereby confirming the importance of COO information within the decision-making
process.
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 identify
appropriate test countries for the main study, we obtained the list of countries that
manufacture toys sold in the US market and pretested those countries for use in the
study. Specifically, participants were given a list of 11 toy manufacturing countries and
asked to choose three countries they believe to have good quality toys, and three
countries they believe to manufacture poor quality toys. This procedure generated six
country names: Taiwan, India, China, Germany, Britain and Denmark. In a second
pretest, 48 participants (average age was 33.9 years) evaluated products manufactured
in 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 chose
China (mean 2.76) and Germany (mean 4.45) to represent countries with negative
and positive COO images, respectively. These country choices are consistent with
Fetscherins (2010) classification of China as a weak country brand and Germany as a
strong country brand. In the main study, the COO information was provided on the
cover page of the questionnaire. Participants learned that the toy was manufactured
either in China (n 116) or in Germany (n 108).
In a separate pretest, we asked 32 participants (average age was 34.1 years) to list the
names of two toy stores that they consider highly prestigious and trustworthy, and two
toy stores that they consider less prestigious and trustworthy. Then, we gave 48 different
participants (average age was 35.2 years) the list of four toy store names, the two that
appeared most frequently on the highly prestigious/trustworthy list and the two
that appeared most frequently on the less prestigious/trustworthy list. We then asked the
participants 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 chose
FAO Schwarz (mean 4.02) and KB Toys (mean 2.61) to use in our study.
Bilkey and Nes (1982) listed two major methodological limitations in COO studies
that 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 the
effect size of COO. Second, simply using an intangible verbal description of products
might result in a varying frame of reference for the subjects and thus result in
increased effect size. On the basis of these concerns, we provided participants with
information that included not only the made in cue but also dimensions of the
product along with its price. Also, Lee et al. (2005) warn against treating the COO cue
as 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 slightly
more prominent than other product information.
Measures. COO image was measured using the four dimensions of Roth and
Romeos (1992) scale: innovativeness (using new technology and engineering
development level), design (appearance and style), prestige (status and reputation)
and workmanship (reliability, durability, craftsmanship and quality). These
dimensions have been used extensively in previous COO studies and have been
shown to be relevant to respondents, to work together well in different settings, and to
be 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 three
trusting beliefs of interest, product evaluations and purchase intentions. All variables
were 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 evaluation
and purchase intention to be used as dependent variables in the analysis. Following
Gurhan-Canli and Maheswaran (2000), product evaluation was measured by three
items scored on a five-point semantic differential scale: high/low quality, safe/unsafe
and reliable/unreliable (Cronbachs alpha 0.88, composite reliability 0.90). Purchase
intention was measured using a three-item five-point Likert scale (Cronbachs
alpha 0.90, composite reliability 0.92).
Control variables. Usunier (2006) criticizes researchers for distributing
questionnaires without checking respondent familiarity with the products and
countries under study. Similarly, Ahmed and dAstous (2008) suggest that familiarity
with the country where the products come from affect country perceptions and
COO evaluations. Josiassen et al. (2008) show that product familiarity even affects
the importance that individuals place on COO. For these reasons, we measured the
participants familiarity with toys, the two countries of interest and the two stores as
control variables.
One of the most researched variables moderating the COO effect is a consumers
level of ethnocentrism (Shimp and Sharma, 1987). Orth and Firbasova (2003) and
Balabanis and Diamantopoulos (2004) found consumer ethnocentrism the belief that
ones own culture is superior to other cultures to be a significant predictor of COO
evaluations. Lee et al. (2010) found that ethnocentrism is important in determining
preference for national brands. Hence, we included a well-used four-item scale to
measure ethnocentrism as a control variable in our study (e.g. Chan et al., 2010; Klein
et al., 2006; Michaelis et al., 2008).
Finally, we included participants perception of the products price as a control
variable. We provided price information ($19.99, average price for similar teddy bears
across various stores) on the cover of the questionnaire. We measured price perception
using a two-item scale (I believe $19.99 is a fair price for teddy bear; I dont think $19.99
is too expensive for teddy bear).
Scales
Factor loadings
Trusting beliefsa
Integrity (a 0.88, 87; CR 0.89, 88)
1. This store seems to have a strong sense of justice
2. This store appears to be fair in dealing with its customers
3. Sound principles seem to guide this stores behavior
4. I would characterize this store as honest
5. This store seems to keep its commitments
Ability (a 0.90, 0.88; CR 0.91, 0.90)
1. This store seems very capable of serving its customers
2. This store seems to have necessary knowledge and resources to fulfill its
customers needs
3. I feel very confident about this stores skills to serve its customers
4. This store seems to be competent and effective in selling toys
5. This store performs its role of selling toys very well
0.89,
0.85,
0.83,
0.91,
0.88,
0.85
0.88
0,78
0.89
0.85
0.89, 0.86
0.90, 0.91
0.87, 0.84
0.88, 0.85
0.90, 0.88
0.88, 0.92
0.89, 0.88
0.92, 0.90
Country of origin (a 0.92, 0.90; CR 0.91, 0.91)b

1. This country always uses new technology in its manufacturing
2. The level of engineering used in this country is quite advanced
3. The products made in this country have attractive look
4. The products made in this country have appealing style
5. The products made in this country provide status to its owners
6. The products made in this country have good reputation
7. The products made in this country are reliable
8. The products made in this country are durable
9. The products made in this country have good craftsmanship
10. The products made in this country have superior quality
0.91,
0.88,
0.90,
0.92,
0.82,
0.93,
0.92,
0.91,
0.89,
0.92,
Product evaluation (a 0.88, 0.90; CR 0.90, 0.91)c

This teddy bear made in (China/Germany) is
Low quality
1 2 3 4 5
Unsafe
1 2 3 4 5
Unreliable
1 2 3 4 5
0.87, 0.89
0.89, 0.92
0.89, 0.90
Purchase intention (a 0.90, 0.88; CR 0.92, 0.90)c

1. I would purchase this teddy bear at this store
2. I would not mind buying this teddy bear at this store
3. The likelihood that I would consider buying this teddy bear at this store
(very unlikely/very likely)
Ethnocentrism (a 0.84, 0.85; CR 86, 0.85)d
1. It is not right to purchase foreign-made products
2. American people should always buy American-made products instead of imports
111
0.90, 0.89
Benevolence (a 0.91, 0.89; CR 0.92, 0.90)

1. This store seems concerned about its customers welfare
2. It doesnt seem that this store would knowingly do anything to hurt its
customers
3. This store appears to go out of its way to help its customers
4. I believe that this store would act in its customers interests
5. This store is interested in its customers well-being, not just its own
High quality
Safe
Reliable
0.91, 0.87
0.90
0.89
0.89
0.90
0.83
0.91
0.90
0.90
0.91
0.90
0.90, 0.87
0.90, 0.88
0.92, 0.88
Table I.
Scale items, sources,
reliabilities and item
(continued) loadings (Studies 1 and 2)
0.86, 0.84
0.88, 0.88
IMR
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112
Table I.
Scales
Factor loadings
3. Foreign-made product should be taxed heavily to reduce their entry to US

4. It is always best to purchase products made in US
0.85, 0.82
0.87, 0.83
Familiarity with store (a 0.88, 0.89; CR 0.90, 0.91)e

1. I am familiar with this store
2. I have been to this store at least once
0.87, 0.87
0.88, 0.90
Familiarity with toys (a 0.89, 86; CR 0.88, 0.87)e

1. I am familiar with teddy bear toys
2. In the past, I have owned/purchased a teddy bear
0.87, 0.84
0.92, 0.88
Familiarity with products made in country (a 0.84, 88; CR 0.85, 0.90)f

1. I am knowledgeable about products made in China/Germany
2. I am familiar with products made in China/Germany
3. In the past, I have owned or used products made in China/Germany
0.85, 0.88
0.82, 0.86
0.85, 0.88
Price perception (a 0.85, 0.86; CR 0.87, 0.86)f

1. I believe $19.99 is a fair price for this teddy bear
2. I dont think $19.99 is too expensive for this teddy bear
0.85, 0.88
0.83, 0.84
Manufacturer risk (a 0.91; CR 0.92) (used only in Study 2)g

1. I believe something would go wrong with the toys made by this manufacturer
2. I believe purchasing toys made by this manufacturer is risky
0.93
0.90
Note: aCR refers to composite reliability. The first value denotes Study 1, the second number denotes
Study 2
Sources: aMayer and Davis (1999); bRoth and Romeo (1992); cGurhan-Canli and Maheswaran (2000);
d
Shimp and Sharma (1987); eThorelli et al. (1989); f Lee et al. (2005); gAlden (1993)
Measure validation. We assessed the measurement properties of the constructs in a

confirmatory factor analyses using LISREL 8.71. The model fit was evaluated by
using a series of indices suggested by Gerbing and Anderson (1992) and Hu and
Bentler (1999), including a goodness of fit index (GFI), a comparative fit index (CFI) and
the root mean square error of approximation (RMSEA). The model fitted the data
satisfactorily (model: w2 (172) 323.47, p 0.00; GFI 0.91; CFI 0.90;
RMSEA 0.05). All the factor loadings were highly significant (po0.001), indicating
unidimensionality of the measures (Gerbing and Anderson, 1992). We assessed the
convergent validity of the measures by examining the path coefficients (loadings) for
each latent factor to their manifest indicators. The analysis indicated that all items
loaded significantly on their corresponding latent factors (see Table II). We assessed
discriminant validity of the dependent and independent variables by examining the
shared variance between all possible pairs of constructs in relation to the average
variance extracted for each individual construct (Anderson and Gerbing, 1982; Bagozzi
and Yi, 1988). As expected, the former was much lower than the latter (see Table II). A
reliability test was performed for each construct to see if all the measures
demonstrated satisfactory coefficient reliability. All Cronbachs alphas of the
constructs were above 0.70, and composite reliability scores were above 0.60. Thus,
the measures demonstrated adequate convergent validity and reliability.
1.
2.
3.
4.
5.
6.
Ability beliefs
Benevolence beliefs
Integrity beliefs
COO image
Product evaluation
Purchase intention
Mean
Standard deviation
Composite reliability
Average variance extracted
Highest shared variance
1.00
0.33*
0.36*
0.04
0.11
0.08
1.00
0.39*
0.09
0.10
0.09
1.00
0.08
0.07
0.11
1.00
0.38*
0.36*
1.00
0.38*
1.00
3.29
0.64
0.91
0.63
0.13
3.27
0.70
0.92
0.58
0.10
3.12
0.61
0.89
0.52
0.06
3.08
0.89
0.91
0.55
0.09
3.37
0.85
0.90
0.58
0.11
3.24
1.03
0.92
0.56
0.08
Note: *po0.001
Analysis and results. We conducted separate hierarchical moderated regression

analyses to test our hypotheses. Following the advice of Aiken and West (1991), we
mean centered all the variables to minimize the threat of multicollinearity between the
interaction terms and their components in equations where we included the interaction
terms. We tested for multicollinearity among the variables by calculating the variance
inflation factor (VIF) for each of the regression coefficients. The VIF values
(lowest 1.38; highest 3.96) were well below the cut-off of 10.
We compared the COO scores between respondents who responded to the
questionnaire about the Chinese-made versus German-made teddy bear. The results
showed that the average COO score for China was significantly lower (Mch 1.98) than
the COO score for Germany (Mger 4.26) (F 5.86, po0.001). (Not only the overall
COO score but also the score on each and every item of the COO measure was
significantly lower for China than Germany.) On the basis of these findings, we used
responses for the China group (n 116) for negative COO effects and responses for
Germany for positive COO effects in hierarchical moderated regression analyses to test
our hypotheses.
Then, we ran separate analyses to test the moderating effect of trusting beliefs on
negative (China, n 116) and positive COO (Germany, n 108) effects. The results
of the hierarchical moderated regression analysis with product evaluation as the
dependent variable appear in Table III. In Step 1, only five control variables were
entered. In Step 2, the main effects of COO, ability, benevolence and integrity beliefs
were entered along with the control variables. And finally, in Step 3, the two-way
interaction effects between three trusting beliefs and COO were entered along with the
control variables and the main effects of COO, ability, benevolence and integrity beliefs.
Evidence of the two-way interactions would be supported if the interaction terms
accounted for significant incremental variance in explaining dependent variables,
either individually, as manifested by negative beta values, or collectively, as revealed
by the values of the incremental F-statistic.
As shown in Step 1 (Table IIIA), for negative COO effect China group, none of the
control variables were significantly related to product evaluation. Next, Step 2 revealed
a significant increase in the variance explained over Step 1 (DR2 0.17, po0.001).
113
Table II.
Study 1 correlations and
descriptive statistics
IMR
28,1
114
Variables
Controls
Familiarity with toys
Familiarity with
countrys products
Familiarity with store
Ethnocentrism
Price perception
A. Negative COO China group (n 116)

Step 1
Step 2
Step 3
b (t-value)
ba (t-value)
ba (t-value)
B. Positive COO Germany group (n 108)

Step 1
Step 2
Step 3
ba (t-value)
ba (t-value)
ba (t-value)
0.09 (0.96)
0.08 (0.88)
0.07 (0.71)
0.11 (1.08)
0.05 (0.51)
0.06 (0.62)
0.07 (0.72)
0.09 (0.97)
0.03 (0.32)
0.05 (0.57)
0.09 (0.89)
0.06 (0.60)
0.05 (0.51)
0.06 (0.63)
0.06 (0.61)
0.08 (0.83)
0.04 (0.42)
0.03 (0.41)
0.05 (0.57)
0.04 (0.43)
0.06 (0.57)
0.09 (0.92)
0.07 (0.73)
0.08 (0.79)
0.08 (0.88)
0.05 (0.54)
0.08 (0.81)
0.05 (0.52)
0.07 (0.79)
0.06 (0.58)
0.10
0.07
0.09
0.34
0.05
0.08
0.10
0.31
0.09 (0.87)
0.06 (0.69)
0.09 (0.91)
0.24 (3.19)*
0.11 (1.10)
0.09 (0.97)
(0.08) (0.82)
0.21 (3.08)*
Main effects
Benevolence (1)
Integrity (2)
Ability (3)
COO (4)
(1.14)
(0.73)
(0.92)
(4.87)*
Interaction effects
14
24
34
Table III.
Study 1 hierarchical
moderated regression
analysis results
dependent variable:
product evaluation
R2
F
DR2
(0.55)
(0.89)
(1.12)
(4.23)*
0.35 (4.61)*
0.29 (3.81)*
0.09 (0.92)
0.05
0.68
0.22
4.79*
0.17
0.50
15.14*
0.28
0.12 (1.24)
0.11 (1.17)
(0.10) (1.08)
0.08
0.89
0.25
6.47*
0.17
0.28
7.89*
0.06
Notes: *po0.001; astandardized coefficients
Specifically, the results showed that COO had a significantly positive relationship on
product evaluation (b 0.34, t 4.87, po0.001). However, there were no significant
main effects of trusting beliefs on product evaluation, (benevolence beliefs, b 0.10,
t 1.14; integrity beliefs b 0.07, t 0.73; and ability beliefs b 0.09, t 0.92).
The two-way interaction relationships were tested by observing the incremental
variance explained by Step 3 over Step 2. As shown in Table IIIA, the addition of the
two-way interactions between ability, integrity, benevolence beliefs and COO increased
R2 by 28 percent in Step 3 over Step 2 ( po0.001). More specifically, the interaction
between benevolence belief and COO (H1a: b 0.35, t 4.61, po0.001) and the
interaction between integrity belief and COO (H2a: b 0.29, t 3.81, po0.001)
were each negatively and significantly related to product evaluation. However, the
interaction between ability belief and COO was negatively but insignificantly related to
product evaluation (H3a: b 0.09, t 0.92).
We ran the same analyses for the Germany-positive COO group (n 108). As shown
in Table IIIB, although the two-way interactions were all positive, they were not
statistically significant (benevolenceCOO: b 0.12, t 1.31, ns; integrityCOO:
b 0.11, t 1.17, ns; abilityCOO: b 0.10, t 1.08, ns).
To better interpret the interaction effects and gain further support for the direction
of the hypothesized interaction relationships, we conducted a simple slope analysis as
suggested by Aiken and West (1991). For the negative COO (China) effect group, low
levels of trusting beliefs were calculated by subtracting one standard deviation from
the mean; high levels of trusting beliefs were calculated by adding one standard
deviation to the mean value. Figures 1a and 1b indicate that the relationship between
COO and product evaluation is rather weak when benevolence (b 0.17, po0.05) and
integrity (b 0.21, po0.05) beliefs are high, but is much stronger when benevolence
(b 0.50, po0.001) and integrity (b 0.48, po0.001) beliefs are low. However,
Figure 1c does not show such a significant interaction effect of ability beliefs on
COOproduct evaluation relationship (b 0.24, po0.05 when ability beliefs are high,
b 0.29, po0.05 when ability beliefs are low). These results suggest that increases in
benevolence and integrity beliefs weaken the negative effects of COO on product
evaluation while an increase in ability beliefs has no such effect. Thus, the results of the
slope analysis combined with the hierarchical moderated regression analysis results
provide support for hypotheses H1a, H2a and H3a.
We repeated the same two analyses described above using purchase intention as the
dependent variable. The results of China-negative COO group analysis showed that
none of the control variables had significant relationships with product evaluation in
Step 1 (Table IVA). Step 2 provided a significant increase in variance explained over
Step 1 (DR2 0.18, po0.001). In this step, while COO was significantly related to
product evaluation (b 0.29, t 3.51, po0.001), none of the trusting beliefs had a
significant relationship with purchase intention.
115
(a)
High benevolence
Product
evaluation
Low benevolence
Low
COO
High
COO
(b)
High integrity
Product
evaluation
Low integrity
Low
COO
High
COO
(c)
High ability
Product
evaluation
Low ability
Low
COO
High
COO
Notes: (a) Benevolence beliefs; (b) integrity beliefs; (c) ability beliefs
Figure 1.
Trusting beliefs
interaction effect on
COO product evaluation
relationship (negative
COO China group)
IMR
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116
Variables
Controls
Familiarity with
countrys products
Ethnocentrism
Price perception

Step 1
Step 2
Step 3
ba (t-value)
b (t-value) ba (t-value)

Step 1
Step 2
Step 3
ba (t-value)
ba (t-value)
ba (t-value)
0.11 (1.09)
0.09 (0.91)
0.03 (0.32)
0.10 (1.01)
0.08 (0.82)
0.04 (0.41)
0.07 (0.76)
0.05 (0.53)
0.05 (0.52)
0.08 (0.76)
0.08 (0.81)
0.07 (0.69)
0.08 (0.92)
0.04 (0.49)
0.04 (0.47)
0.09 (0.91)
0.07 (0.77)
0.05 (0.61)
0.08 (0.79)
0.06 (0.62)
0.04 (0.47)
0.09 (0.86)
0.07 (0.72)
0.04 (0.43)
0.06 (0.61)
0.06 (0.68)
0.06 (0.62)
0.05 (0.52)
0.08 (0.82)
0.07 (0.72)
0.10
0.11
0.07
0.29
0.08 (0.83)
0.09 (0.92)
(0.08) (0.84)
0.25 (3.37)*
0.07
0.09
0.05
0.23
0.08 (0.81)
0.06 (0.64)
(0.07) (0.70)
0.20 (2.67)*
Main effects
Benevolence (1)
Integrity (2)
Ability (3)
COO (4)
(1.06)
(1.10)
(0.73)
(3.51)*
Interaction effects
14
24
34
Table IV.
Study 1 hierarchical
moderated regression
analysis results
dependent variable:
purchase intention
R2
F
DR2
(0.66)
(0.93)
(0.54)
(2.96)*
0.33 (0.4.27)*
0.26 (3.54)*
0.24 (3.20)*
0.08
0.81
0.26
8.29*
0.18
0.52
15.37*
0.26
0.11 (1.22)
0.10 (1.08)
0.08 (0.83)
0.06
0.67
0.22
6.17*
0.16
0.27
7.41*
0.05
Notes: *po0.001; a standardized coefficients
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 were
negatively and significantly related to purchase intention (benevolence-COO: b 0.33,
t 4.27, po0.001; integrity-COO: b 0.26, t 3.54, po0.001; ability-COO:
b 0.24, t 3.20, po0.001). On the other hand, similar to the analyses for
product evaluation, the analyses for the Germany-positive COO group revealed positive
two-way interactions that were statistically insignificant (benevolence-COO: b 0.11,
t 1.22, ns; integrity-COO: b 0.10, t 1.08, ns; ability-COO: b 0.08, t 0.83, ns) (see
Table IVB).
We then repeated the same slope analysis for the COO-purchase intention
relationship using China-negative COO group data. As Figure 2 shows, the
relationship between COO and purchase intention was rather weak when
benevolence (b 0.18, po0.05), integrity (b 0.20, po0.05) and ability (b 0.21,
po0.05) beliefs were high, but was much stronger when those beliefs were low
(benevolence: b 0.45, po0.001; integrity: b 0.50, po0.001; ability: b 0.49,
po0.001). These results combined with the results of the regression analysis
conducted for the COO-purchase intention relationship support the notion that trusting
beliefs weaken the strength of negative COO effects on evaluations and purchase
intentions but have no effect COO image is positive. This supports hypotheses H1b,
H2b and H3b.
(a)
High benevolence
Purchase
intention
Low benevolence
Low
COO
117
High
COO
(b)
High integrity
Product
evaluation
Low integrity
Low
COO
High
COO
(c)
High ability
Product
evaluation
Low ability
Low
COO
High
COO
Notes: (a) Benevolence beliefs; (b) integrity beliefs; (c) ability beliefs
Overall, these findings confirm that trusting beliefs weaken the negative effects of
COO on product evaluations and purchase intentions. Specifically, when consumers
benevolence and integrity, but not ability, beliefs about a store increase, the negative
impact of COO on their product evaluations weakens. Increases in all three beliefs
lessen the negative effect of COO on purchase intentions.
Our findings support earlier research suggesting that retailer risk perception can
influence the degree to which COO affects product evaluations and purchase intentions
(e.g. Hampton, 1977). COO evaluations of the two countries under study were likely
formed by respondents overall perceptions of those countries. Various studies have
showed that different country-specific factors such as culture, degree of economic
development and political climate can profoundly influence individuals COO
perceptions (c.f. Bilkey and Nes, 1982). Presumably, the risk-perception associated
with manufacturers in those countries was part of our respondents overall country
evaluations. However, we cannot be sure of the impact of manufacturer risk as such
risk was not explicitly stated. For this reason, we designed a second study to investigate
how information about manufacturer risk impacts the relationships uncovered in
Study 1. More specifically, we sought to compare the results across high and low
manufacturer risk situations. Given the increasing number of product recalls in
recent years, we expect the findings of Study 2 to be relevant for manufacturers and
retailers alike.
Figure 2.
Trusting beliefs
interaction effect on
COO purchase intention
relationship (negative
COO China group)
IMR
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118
Study 2
Participants and procedure
In total, 338 graduate business students at a large northeastern US university
participated in the study in exchange for course credit. The sample consisted of 46
percent female participants. The average age of the participants was 35 years. A total
of 76 percent of participants held a full-time job, 20 percent held a part-time job and
4 percent were unemployed. Of the participants, 65 percent were born in the USA. The
foreign-born respondents (35 percent) had been living in the USA for an average of
10.6 years. The t-test results showed no statistically significant differences between the
responses of US-born and foreign-born respondents. In total, 63 percent of respondents
were married, and 59 percent had children. Finally, 70 percent of the respondents had
purchased toys within the last six months.
We used the same stimuli as in the first study with one modification. In order to
access the impact of explicit manufacturer risk perceptions, we manipulated
manufacturer risk with a short statement on the cover page. One group (n 172) was
informed that there had been three safety recalls recently for toys made by the
manufacturer, whereas the other group (n 166) was told that there had not been any
recent safety recalls for toys made by the manufacturer. In order to assess the success
of this manipulation, we measured participants perceptions of manufacturer
risk using two items. As expected, participants in the first group had a significantly
higher risk perception about the manufacturer (mean 4.05) than the second group
(mean 2.01).
Analysis and results
The measures used in second study demonstrated adequate convergent validity and
reliability (see Table V).
As in Study 1, we conducted two hierarchical moderated regression analyses
for high and low manufacturer risk groups using product evaluation and
purchase intention as dependent variables. The results for the low manufacturer
risk group replicate those of Study 1. That is, COO was found to be significantly
related to both product evaluation and purchase intention. With respect to the
interaction, benevolence and integrity beliefs lessen the impact of COO on product
evaluation, whereas all three trusting beliefs significantly moderate the COOpurchase
intention relationship.
For the high manufacturer risk group, the analyses reveal quite a different set of
findings. First, within high manufacturer risk group, we grouped the respondents
into two groups based on negative versus positive COO effect. Similar to Study 1, the
COO score for China was significantly lower (Mch 1.89) than COO score for
Germany (Mger 4.35) (F 7.14, po0.001); thus, we used China group for negative
COO effects (n 88) and Germany for positive COO effects (n 84). The results for
the negative COO group in the high manufacturer risk condition can be seen in
Table VI and VII. These findings show that only the benevolenceCOO interaction
was significant for both product evaluation (b 0.34, t 4.27, po0.001)
(see Table VIA), and purchase intention (b 0.32, t 4.19, po0.001) (see
Table VIIA). However, the same analysis for the positive COO effect group indicated
positive but non-significant interactions (product evaluation: b 0.12, t 1.23, ns
(see Table VIB), and purchase intention b 0.09, t 0.93, ns (see Table VIIB). The
results of the slope analysis yield the same results. Therefore, these findings provide
support for hypothesis H4.
1.
2.
3.
4.
5.
6.
7.
Ability beliefs
Benevolence beliefs
Integrity beliefs
COO image
Product evaluation
Purchase intention
Manufacturer risk perception
1.00
0.31*
0.39*
0.08
0.09
0.04
0.06
1.00
0.34*
0.10
0.08
0.05
0.04
1.00
0.06
0.04
0.08
0.07
1.00
0.33*
0.38*
0.08
1.00
0.41*
0.18**
1.00
0.19**
1.00
3.18
0.58
0.93
0.61
0.10
3.24
0.63
0.92
0.59
0.11
3.15
0.82
0.88
0.56
0.08
3.29
0.88
0.91
0.55
0.10
3.31
1.00
0.90
0.57
0.07
3.09
0.85
0.91
0.59
0.10
Mean
Standard deviation
Composite reliability
Average variance extracted
Highest shared variance
3.14
0.66
0.90
0.54
0.07
119
Table V.
Study 2 correlations and
descriptive statistics
Note: *po0.001; **po0.01
Variables

Step 1
Step 2
Step 3
b (t-value)
ba (t-value)
ba (t-value)
a
Controls
0.10 (1.14)
0.07 (0.72)
Familiarity with
countrys products
0.07 (0.74)
0.05 (0.58)
0.06 (0.69)
0.07 (0.81)
Ethnocentrism
0.09 (0.93)
0.08 (0.84)
Price perception
0.07 (0.88) 0.08 (0.91)
Main effects
Benevolence (1)
Integrity (2)
Ability (3)
COO (4)
0.07
0.06
0.08
0.27
(0.76)
(0.61)
(0.79)
(3.27)*
Interaction effects
14
24
34
R2
F
DR2

Step 1
Step 2
Step 3
ba (t-value)
ba (t-value)
ba (t-value)
0.11 (1.19)
0.04 (0.42)
0.06 (0.62)
0.07 (0.71)
0.09 (0.94)
0.09 (0.91)
0.10 (1.03)
0.09 (0.95)
0.08 (0.81)
0.05 (0.52)
0.09 (0.91)
0.05 (0.54)
0.09 (0.92)
0.06 (0.64)
0.08 (0.82)
0.06 (0.62)
0.08 (0.87)
0.06 (0.62)
0.05 (0.51)
0.06 (0.68)
0.11 (1.12)
0.08 (0.81)
0.07 (0.71)
0.21 (2.84)*
0.09
0.07
0.05
0.19
0.08
0.10
0.05
0.24
(0.88)
(1.01)
(0.54)
(3.08)*
0.34 (4.27)*
0.10 (1.15)
0.09 (0.98)
0.05
1.24
0.27
4.14*
0.22
0.54
15.28*
0.27
(0.98)
(0.79)
(0.58)
(2.23)*
0.12 (1.23)
0.09 (0.98)
0.10 (1.01)
0.07
0.73
0.21
2.73*
0.14
0.26
3.37*
0.05
Discussion and implications

The major thrust of this research lies in understanding the factors that motivate
consumers to buy products with a negative made in claim when sold at specific
Table VI.
Study 2 high
manufacturer risk
perception group,
dependent variable:
product evaluation
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120
Variables
Controls
Familiarity with
countrys products
Ethnocentrism
Price perception

Step 1
Step 2
Step 3
b (t-value) ba (t-value)
ba (t-value)

Step 1
Step 2
Step 3
ba (t-value)
ba (t-value)
ba (t-value)
0.08 (0.80)
0.06 (0.61)
0.09 (0.89)
0.05 (0.52)
0.06 (0.64)
0.07 (0.72)
0.06 (0.62)
0.07 (0.68)
0.10 (1.02)
0.05 (0.58)
0.10 (1.03)
0.08 (0.86)
0.09 (0.94)
0.06 (0.71)
0.08 (0.86)
0.09 (0.90)
0.10 (1.08)
0.08 (0.78)
0.07 (0.73)
0.08 (0.83)
0.09 (0.92)
0.04 (0.48)
0.09 (0.93)
0.09 (0.90)
0.07 (0.73)
0.07 (0.78)
0.08 (0.82)
0.07 (0.71)
0.10 (1.02)
0.06 (0.63)
0.10 (1.04)
0.09 (0.89)
0.05 (0.59)
0.23 (2.97)*
0.08
0.08
0.07
0.19
0.09 (0.94)
0.07 (0.73)
0.06 (0.62)
0.22 (2.49)*
0.07 (0.72)
0.05 (0.57)
0.06 (0.63)
0.21 (2.32)*
Main effects
Benevolence (1)
Integrity (2)
Ability (3)
COO (4)
Interaction effects
14
24
34
Table VII.
Study 2 high
manufacturer risk
perception group,
dependent variable:
purchase intention
R2
F
DR2
(0.86)
(0.81)
(0.74)
(2.59)*
0.32 (4.19)*
0.09 (0.98)
0.07 (0.77)
0.04
0.98
0.20
3.08*
0.16
0.46
14.96*
0.26
0.09 (0.93)
0.08 (0.88)
0.07 (0.73)
0.04
0.47
0.19
2.43*
0.15
0.25
3.18*
0.06
stores. We suggest that consumers trusting beliefs, i.e. benevolence, integrity

and ability beliefs, about a store can moderate the relationships between negative
COO effects and product evaluations and purchase intentions. More specifically, our
results indicate that when consumers trust a store, the impact of negative COO on
product evaluations and purchase intentions weakens. This investigation of individual
trusting beliefs suggests that as consumers benevolence and integrity, but not
ability, beliefs about a store increase, negative COO has less of an impact on product
evaluations. Further, the results show that increases in all three beliefs lessen
the negative COO on consumers purchase intentions. Taken overall, our research
suggests 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 they
would otherwise.
While Study 1 suggests that consumers may give less weight to negative COO in the
presence of strongly positive trusting beliefs, the results of our second study show that
the 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 product
evaluations under scenarios of low manufacturer risk, they appear to have no
effect under high manufacturer risk. Only high benevolence beliefs have this potential.
For the retailer, this suggests that while high manufacturer risk may be difficult to
overcome, it can be countered through building positive beliefs about stores
benevolence.
This paper offers a variety of theoretical contributions. Our findings suggest that
recent 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 global
business world where it is difficult to trace back the true origins of some products, our
study suggests that COO information still affects consumer product evaluations and
purchase intentions. Our findings add to the growing body of literature suggesting that
COO effects weaken when used in combination with other external cues. Previous
studies document that consumers use multiple cues rather than a single cue in their
evaluations and decisions, and list such factors as store image or brand name as other
external cues. In this study, we suggest that three trusting beliefs about a store should
be included on the list of potential external cues. Furthermore, our results show that
the type of trusting beliefs that mitigate negative COO effects depends on the level of
manufacturer risk as perceived by consumers. Therefore, the level of risk associated
with individual manufacturers is still an important factor that consumers take into
consideration 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 product
recalls and safety concerns. Consumers have become skeptical about purchasing
products coming from particular countries. Therefore, manufacturers must take
steps to counteract the negative attitudes and intentions resulting from product COO.
Our findings show that manufacturers can reverse this cycle, or at least minimize
their losses, if they choose as their channel members those retailers trusted by
consumers. With respect to product recalls and increasing manufacturer risk, our
findings suggest that retailers perceived as benevolent by consumers can help
manufacturers lessen the negative impact of those recalls on their product evaluations
and eventual sales.
Given increasing retailer power, manufacturers may not always be in a position to
limit distribution to those retailers that are strongly trusted by consumers. For this
reason, we would encourage future researchers to investigate how consumers build
trust in manufacturers. We suspect that manufacturer trust has a similar, if not the
same, effect on consumers evaluations and purchase intention. Therefore,
manufacturers may attempt to increase trust in their own firms to fight negative
COO effects in the long term.
Retailers have also felt pressure from their customers regarding product safety and
need 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 possible
in some industries like toys. In this case, retailers can counteract negative COO effects
through various in-store signals (cf. Schlosser et al., 2006). Our findings suggest that if
retailers can specifically signal their benevolence and honesty, they should be able to
counter and overcome customers reactions to a negative COO. Furthermore, by
reinforcing trusting beliefs, retailers can increase the likelihood that customers will
purchase products coming from countries like China. The literature recommends
particular tactics for retailers to create and signal those trusting beliefs, so that their
customers are assured about their benevolence, integrity and ability. For example,
consumers make inferences about retailers integrity and ability to sell quality products
based on their perceived marketing and promotion expenditures (e.g. Kirmani and
Rao, 2000). Therefore, investment in the store physical environment serves to signal
retailer abilities. Similarly, a retailer may signal its benevolence and integrity through
formal statements of its intentions. Privacy, security or return merchandise statements
121
IMR
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122
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 policy
promising that the retailer would take back recalled products whether they were
purchased at Toys R Us or not with or without a receipt. Along the same lines, toy
retailer, FAO Schwarz released a toy-buying guide to assist customers with their
purchases and assure them of the safety of the products sold at their stores. Such
statements are instrumental in building consumers trusting beliefs about retailers and
thus weakening the negative effects of COO on their sales.
Limitations
Given recent product recalls and concerns, the toy industry presents an ideal case to
study the effect of store trust and trusting beliefs on COO effects. However, we would
recommend that researchers examine these relationships in studies focusing on other
types of toys as well as other product categories such as food, toothpaste and even
some high involvement products such as computers. Similarly, while China has been at
the center of many recent product recalls and thus provided a good example for our
study, the COO effects of India, Korea, Vietnam and other countries with a large
manufacturing base should be investigated in future studies. Such studies would help
access 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 manufacturer
trust and related trusting beliefs. We would also encourage future researchers to
investigate how consumers develop trusting beliefs about a store, and to what degree,
if any, belief formation impacts the application of those beliefs when evaluating
products. Even though, our pretests and control variables support the suitability of our
sample for our studies, the test of the same relationships using different demographic
samples or samples from different countries would provide more robustness to our
findings. Finally, in their meta-analysis, Wright and MacRae (2007) recommend the
use of purchase probability scales over purchase intention scales arguing that they
perform 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 dependent
variable. Future studies based on purchase probability scales, or better yet, actual
purchase 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 the
country 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 Baruch
College, The City University of New York. He conducts research primarily in the areas of
distribution channels, interorganizational relations and website trust and loyalty. He has
presented his research at various conferences and has had his work published in a variety of
academic journals including Journal of Marketing, Journal of Business Research, Industrial
Marketing Management and Psychology & Marketing. Sertan Kabadayi is the corresponding
author and can be contacted at: Kabadayi@fordham.edu
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 interests
include 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, and
Cross-Cultural Marketing: Contexts, Concepts, and Practices. She is a member of the editorial
review boards for the Journal of Business Research and International Marketing Review.
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Made in China but sold at FAO

International Marketing Review

Sertan Kabadayi and Dawn Lerman

Thorelli et al. (1989) found a significant three-way interaction of warranty, store

opportunistically by taking advantage of its customers (McKnight and Chervany,

Country of origin (a 0.92, 0.90; CR 0.91, 0.91)b

Product evaluation (a 0.88, 0.90; CR 0.90, 0.91)c

Purchase intention (a 0.90, 0.88; CR 0.92, 0.90)c

Benevolence (a 0.91, 0.89; CR 0.92, 0.90)

3. Foreign-made product should be taxed heavily to reduce their entry to US

Familiarity with store (a 0.88, 0.89; CR 0.90, 0.91)e

Familiarity with toys (a 0.89, 86; CR 0.88, 0.87)e

Familiarity with products made in country (a 0.84, 88; CR 0.85, 0.90)f

Price perception (a 0.85, 0.86; CR 0.87, 0.86)f

Manufacturer risk (a 0.91; CR 0.92) (used only in Study 2)g

Measure validation. We assessed the measurement properties of the constructs in a

Analysis and results. We conducted separate hierarchical moderated regression

A. Negative COO China group (n 116)

B. Positive COO Germany group (n 108)

Notes: *po0.001; astandardized coefficients

A. Negative COO China group (n 116)

B. Positive COO Germany group (n 108)

Notes: *po0.001; a standardized coefficients

In Step 3, the addition of the two-way interactions between ability, integrity,

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

A. Negative COO China group (n 88)

B. Positive COO Germany group (n 84)

Notes: *po0.001; astandardized coefficients

Discussion and implications

A. Negative COO China group (n 88)

B. Positive COO Germany group (n 84)

Notes: *po0.001; astandardized coefficients

stores. We suggest that consumers trusting beliefs, i.e. benevolence, integrity

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