Poster Session
E-Commerce and
Country-of-Origin Effects
Francis M.
Ulgado, Ph.D. (contact author)
Associate Professor of
International Marketing
Georgia Institute of
Technology
DuPree College of Management
Atlanta, GA 30332-0520
U.S.A.
Phone: 404-894-4360
Fax: 404-894-6030
E-mail: francis.ulgado@scheller.gatech.edu
John R.
McIntyre, Ph.D.
Professor of International
Management
Georgia Institute of
Technology
DuPree College of Management
Atlanta, GA 30332-0520
U.S.A.
Phone: 404-894-1463
Fax: 404-894-6030
E-mail: john.mcintyre@scheller.gatech.edu
Work in
Progress Draft
Please do not
quote or reproduce without the consent of the authors
Submitted
to the Annual Meeting of the Academy of International Business
March 2000
E-Commerce and
Country-of-Origin Effects
Abstract
This
paper examines the Country-of-Origin effects in an e-commerce environment.� In addition to Country-of-Brand and
Country-of-Manufacture effects, the paper investigates the presence and
significance of Country-of-E-commerce Infrastructure.� It develops hypotheses regarding such effects amidst varying
customer and market environments, such as business vs. consumer buyers, levels
of economic development and product type, and proposes a methodological
framework to test the hypotheses.
E-Commerce and
Country-of-Origin Effects
Introduction
Recent years have witnessed
a rapid increase in the range of multimedia technologies available
internationally.� Among them, the
Internet technology has dramatically changed the shopping environment for
individual consumers and businesses throughout the globe.� The number of consumers worldwide purchasing
through business-to-business as well as business-to-consumer e-commerce media
("e-commerce hereafter) has been skyrocketing these days.� However, preliminary statistics indicate
that the level of growth and development of internet and e-commerce
infrastructure varies across countries and has generally lagged behind the
United States.� Meanwhile, current
research has also indicated the continued prevalence of country-of-origin
effects on consumer perception on products or services that they purchase.� This study investigates the presence and
significance of country-of-origin effects on buyer perception in the e-commerce
environment.� While, country-of-brand
and country-of-manufacture dimensions have been investigated in the past, this
paper adds country-of-e-commerce infrastructure effects.� These three variables are selected to be
examined under different business-to-business, business-to-consumer, and level
of development environments.
The E-Commerce Environment
����������� The
size of the worldwide market for e-commerce was about 66 billion dollars in
1999 and is expected to grow to about 1 trillion dollars this year.� In the U.S. alone, this is expected to reach
$33 billion by the end of this year (Nielsen//Net
Ratings Holiday, E-Commerce Index, 1999).�
While this significant global growth is widely expected and documented,
it has also been observed that the rest of the world lags behind the United
States.� In contrast to the U.S. for
example, regions such as Asia, Latin America, and Eastern Europe are behind in
development and growth of e-commerce in terms of infrastructure, buyer
acceptance, and use.��� Moreover,
different countries themselves also exhibit varying degrees of growth and
development relative to their neighbors in the same region� (see Figures 1, 2, and Table 1).�
(Figure 1 about here)
(Figure 2 about here)
(Table 1 about here)
Even amongst developed countries such as Canada,
Japan, and Western European nations, the U.S. remains far ahead of the game.
(see Figure 3).
(Figure 3 about here)
It is therefore not surprising that according to
recent studies, U.S. web sites such as Yahoo!
or Amazon dominate the international
market.� Similar studies also indicate
that in general, business-to-business e-commerce so far exceeds
business-to-consumer transactions on the internet.
����������� In
addition, while the internet may be seen as a marketing medium or tool that
would globalize business, the literature suggests that the varying
cross-cultural environments across countries in terms of the legal, political
and cultural variables have resulted in different purchase behaviors and attitudes
towards e-commerce.� In countries such
as China, government regulation and intervention in e-commerce has been more
significant, resulting in a relatively more politically influenced and legally
constrained commercial environment.� The
uncertainty and risk resulting from such a situation has hampered the
development of the infrastructure and the attitudes of consumers. Finally, even
in "wired" cosmopolitan Hong Kong, cultural traditions and
preferences have hampered U.S.-proven e-commerce formats such as online grocery
shopping.� The lack of supporting
financial infrastructure in other countries has also hampered the development
of e-commerce.� For example an
Asian-based online toyseller has resorted to processing online orders through
U.S. banks since no local banks are willing to do so.���
In more economically
developed areas of the world, most consumers in European countries are legally
required to pay by the minute while online, significantly influencing their
ability to participate in e-commerce.�� Even
in communications technology-savvy countries such as Sweden, Denmark and
Finland most households use the internet primarily for activities such as
e-mail, information, and working at home, and significantly less for
e-commerce.�� In other countries that do
exhibit e-commerce activity research has found varying consumer behavior.� For example, web-site preferences have been
shown to vary across e-consumers of the United Kingdom, France and Germany.
Given such varied and
complex cultural, legal and political influences on the e-commerce experience
in other countries, it is not surprising that internet-based companies have had
difficulty expanding their markets internationally.� For example, London-based Boo.com, a sports and urban fashion
"e-tailer", has had its European expansion of its multicultural
brands to a sophisticated clientele stymied by different software, supply
chains, currencies, EU regulations, and tax and customs laws.
Country-of-Origin Literature
One issue that such
international e-marketers face is the possible influence of country image on
their potential buyers.� The influence
of the perception of a country by a consumer can significantly affect their
perception of a product or service associated with that country and the
resulting buyer behavior.� Such
influence has been termed "Country-of-Origin" effects on consumer
perception.� Various research have
offered a range of definitions explaining COO (e.g., Bilkey and Nes 1982; Han
and Terpstra 1988; Johansson, Douglas, and Nonaka 1985; Thorelli, Lim and Ye
1989; Wang and Lamb 1983).� However, as
we have increasingly found the separation of manufacturing or assembly location
from the country with which the firm or brand is associated with, the term "origin"
has become vague.� This can be clarified
by differentiating between country-of-brand (COB), the country with which the
brand or firm is associated, and country-of-manufacture (COM), the country in
which the product is made.� Thus,
uni-national products can be defined as those whose COB and COM are the same,
whereas bi-national products are those whose COB differs from the COM.� We can also extend this further to define
multi-national products in which COB differs from not only a� COM, but multiple COMs given by multiple
countries of assembly and sources of component parts.� The effects of bi-national products have been observed by Ulgado
and Lee (1993) and Hauble and Elrod (1999).��
Others have further decomposed the COM effect into Country-of-Design,
Country-of-Assembly, and Country-of-Parts (Inch and McBride 1996).
There has been a substantial
amount of studies supporting�
significant effect of COO on consumers' product evaluations (see Bilkey
and Nes 1982, Johansson, Douglas and Nonaka 1985, and Ozsomer and Cavusgil 1991
for a review).� Consumers prefer
products from some countries over others (Tongberg 1972; Yaprak 1978).� Such preference bias for products generally
exists across levels of economic development of countries, indicating their
hierarchical nature (Schooler 1971; Tongberg 1972; Wang and Lamb 1983).� Studies have shown that country
identification generally has a positive effect on product evaluations for some,
relatively more developed countries (Darling and Wood 1989; Gaedeke 1973; Han and
Terpstra 1988; Papadopoulous, Heslop and Beracs 1990), while it has a negative
impact for other, lesser developed countries (Khanna 1986; Krishnakumar
1974).� The significant COO effect has
also been found in industrial purchasing or business-to-business� situations (Nagashima 1977; White 1979;
White and Cundiff 1978).
While arguments have been
made doubting the prevalence of the COO effect (Samiee 1994), recent empirical
evidence shows that the effects still presist (Johansson 1997; Papadopoulis,
Heslop, Szamosi and Ettenson 1997; Saghafi and Puig 1997; Nebenzahl and Jaffe
1997).� However, the universality of the
significant COO effect is seriously questionable as many studies have found
variables that moderate the effect.� For
example, studies have found the COO effect to be consuming country-specific
(Cattin, Jolibert, and Lohnes 1982; Nagashima 1970), product-specific
(Bannister and Saunders 1978; Kaynak and Cavusgil 1983; Lumpkin, Crawford and
Kim 1985) or consumer-specific (Anderson and Cunningham 1972; Eroglu and
Machleit 1988; Wall and Heslop 1986; Wall, Heslop, and Hofstra 1988; Shimp and
Sharma 1987).� Therefore, it is believed
that the emphasis in future COO studies should move towards specifying the
conditions under which consumers show different COO effects, instead of
documenting the general effect.�
Following this logic, one interesting question is: Do consumers rely
heavily on country information in the internet environment?� This paper attempts to� investigate the answer to this question and
related issues.
�
Hypotheses
����������� The central idea of this research is that In addition to
COB and COM effects, the country in which the e-commerce infrastructure is
based (COE), also has an effect on consumer perception and behavior.� Statistics have shown for example, that in
Latin American countries, there is a greater preference for U.S.-based web
sites than for local-based counterparts.�
As Table 2 indicates, with the exception of Brazil, Latin American
e-commerce users exhibit a positive perception of American web sites, relative
to local sites.� It should be noted that
relative to its South American neighbors, Brazil maintains the most developed
internet infrastructure and e-commerce environment.�
(Table
2 about here)
Moreover, the Table also
shows that as time goes by and local web sites grow and develop, the preference
for U.S. sites diminishes while preference for local sites increases.� Given these trends and the evidence given by
past COO research, we hypothesize:
H1:������ COE effects exist and are positively
related to the level of development of e-commerce infrastructure.
However, other studies have
indicated that the strength of brand equity, which includes COB effects, and
other intrinsic cues such as product attributes can diminish the impact of COM
(for instance, Ulgado and Lee 1993).�
����������� H2:������ COE effects would be relatively be less
salient than COB effects.
Since significant COO effects
have also been found in industrial purchasing or business-to-business� situations (Nagashima 1977; White 1979;
White and Cundiff 1978), we expect to find the same behavior in an e-commerce
environment.� In this case however, the
business-to-business experience and familiarity with e-commerce significantly
surpasses that of the business-to-consumer community.� Therefore, we expect the impact of COE effects to be less for the
industrial buying situation:
H3:������ COE effects exist in business-to-business
environments and are relatively less significant than in business-consumer
situations.
Past research has also
demonstrated that COO effects vary by product category (Roth and Romero 1992;
Kaynak and Cavusgil 1983; Han and Terpstra 1988; and Bannister and Saunders
1978).� ��This study �seeks to determine whether �product category influences the strength of
the COE cue:
H4:������ The magnitude of COE effects varies
according to product cateogry
�����������
Research Method
Data
Collection
Sampling.
Data are collected from a sample through written questionnaires
supplemented by personal interviews of industrial and consumer buyers of online
products in multi-country large metropolitan ares. Countries selected are the
U.S., France, South Korea and the Philippines.�
These countries vary in terms of level of economic and e-commerce
infrastructure development, internet consumer behavior, and cultural environment.� The survey sample is developed from local
information sources of individuals engaged in online business-to-business or
business-to-consumer purchasing activity.
Design.
The study uses a 3 products x 3 countries x 3 COO construct
design and specifically manipulates the COB, COM and COE components.� The three product categories selected are
printed matter (books, magazines, newspapers), computer-related products, and
travel services.� These categories were
selected for product familiarity across industrial and consumer buyers, and
variability in terms of involvement (high vs. low) and product type (product
vs. service).�� Multiple product
categories are tested in order to determine whether product type impacted the
salience of the COO dimensions. The three countries selected are the U.S., the
U.K., and Hong Kong.� These countries
were selected in terms of their relative contrast in levels of economic and
internet infrastructure development, and e-commerce experience.
����������� Questionnaire.
Questionnaire booklets are constructed and translated and back translated as needed.� Twenty seven different survey questionnaires
are developed, each involving print advertising in the same order (printed
matter, computer related product and travel services).� The varying information among the
questionnaires is the addition of the country-of-brand cue, the
country-of-manufacture information, and the country-of-e-commerce
infrastructure cue.� To control for
price, none of the products have a sales price included in the ad.� Items using a 7-point likert scale are
developed to measure the resulting respondent product perception and purchase
intent upon exposure to the advertisement.�
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Table 2: