The Effect of the Perception of Process Technology and Country-Of-Manufacture (Com) Favorableness on Consumers' Overall Brand Evaluation

ABSTRACT - The objective of this paper is to examine the effect of the perception of process technology (hand-made vs. machine-made) and country-of-manufacture (COM) favorableness on consumers' evaluation of brands. Drawing from foreign direct investment (FDI) theory and country-of-origin literature, it is hypothesized that the effect of the perception of process technology would be greater in favorable COMs than in unfavorable COMs. This is due to the possibility that the derogation of brand evaluation would be greater for the hand-made brands than the machine-made brands as COM favorableness decreases. It was also hypothesized that the predictability of purchase intention from overall brand evaluation would be higher in the within-subjects design than in the between-subjects design because the addition of alternative attitudes in the within-subjects design can increase behavior predictions.

Citation:

Dong-Jin Lee and David Brinberg (1995) ,"The Effect of the Perception of Process Technology and Country-Of-Manufacture (Com) Favorableness on Consumers' Overall Brand Evaluation", in NA - Advances in Consumer Research Volume 22, eds. Frank R. Kardes and Mita Sujan, Provo, UT : Association for Consumer Research, Pages: 286-291.

Advances in Consumer Research Volume 22, 1995      Pages 286-291

THE EFFECT OF THE PERCEPTION OF PROCESS TECHNOLOGY AND COUNTRY-OF-MANUFACTURE (COM) FAVORABLENESS ON CONSUMERS' OVERALL BRAND EVALUATION

Dong-Jin Lee, Virginia Polytechnic Institute and State University

David Brinberg, Virginia Polytechnic Institute and State University

ABSTRACT -

The objective of this paper is to examine the effect of the perception of process technology (hand-made vs. machine-made) and country-of-manufacture (COM) favorableness on consumers' evaluation of brands. Drawing from foreign direct investment (FDI) theory and country-of-origin literature, it is hypothesized that the effect of the perception of process technology would be greater in favorable COMs than in unfavorable COMs. This is due to the possibility that the derogation of brand evaluation would be greater for the hand-made brands than the machine-made brands as COM favorableness decreases. It was also hypothesized that the predictability of purchase intention from overall brand evaluation would be higher in the within-subjects design than in the between-subjects design because the addition of alternative attitudes in the within-subjects design can increase behavior predictions.

Results show that brand evaluation is a direct function of the perception of process technology and COM favorableness. Also, results show that, in the within-subjects design, the effect of perception of process technology on brand evaluation is significant under favorable COMs, but insignificant under unfavorable COMs. However, this result is not supported in the between-subjects design. In addition, the predictability of purchase intention from overall brand evaluation was higher in the within-subjects design than in the between-subjects design.

INTRODUCTION

The globalization of the marketplace has allowed the intertwining of international operations. Reflecting this trend, many of the products available in the market place have dual citizenship (Business Week 1991). Those products that are manufactured in one country and branded by a firm from another country are referred as "bi-national products" (Ettenson and Gaeth 1991; Chao 1993). Bi-national products are therefore associated with two countries: the Country-of-Origin (CO) and the Country-of-Manufacture (COM). The Country-of-Origin (CO) reflects the home country for a company, whereas the country-of-manufacture (COM) reflects the country where the actual manufacturing of the product takes place (Ozsomer and Cavusgil 1991; Chao 1993). The CO reflects the country that consumers infer from brand name, whereas the COM constitutes factual information regarding the final point of assembly, manifested in the made-in label.

Several studies have examined brand-COM interaction effects in relation to consumers' evaluation of bi-national brands (e.g., Johansson and Nebenzahl 1986; Han and Terpstra 1988; Wall, Liefeld, and Heslop 1991; Cordell 1992). Johansson and Nebenzahl (1986) argued that COM effects differ depending on brand image (e.g., brands with strong images are subject to less COM effect). The COM effect was found to be greater for brands with unfamiliar names than brands with familiar names (Wall, Liefeld, and Heslop 1991; Cordell 1992). This effect may occur because familiar brands have higher source credibility due to the maker's implied warranty. Therefore, when a product carries a known brand name, the impact of the COM cue on brand evaluation is diminished (Cordell 1992). Han and Terpstra (1988) have found that COM has a greater effect on brand evaluation than brand name and that COM effects are product dimension specific. For example, products dimensions such as serviceability and workmanship are found to be more sensitive to COM than brand name stimuli.

Brands also can be classified in terms of their main process technology: hand-made brands and machine made brands (Abernathy and Utterback 1978). Many labor-intensive products (e.g., textile, shoe) still rely on the traditional hand-made skills of workers in their manufacturing process as well as the machine-made technology. These hand-made products are frequently considered for foreign manufacturing in order to utilize low labor cost in less-developed countries (Toyne and Walters 1989). If brands can be further classified in terms of their process technology (hand-made brands vs. machine-made brands), then the question remains: Is there an interaction between the perception of process technology and COM favorableness on consumers' evaluations of brands? This study posits that the effect of perception of process technology on brand evaluation is likely to be greater for brands with favorable COMs than brands with unfavorable COMs. This effect is posited to occur because the derogation of brand evaluation is likely to be greater for hand-made brands than for machine-made brands as COM favorableness decreases. If this interaction occurs, then manufacturers of hand-made products may need to consider more carefully foreign manufacturing decisions than manufacturers of machine-made products.

Another important aspect of a country of origin study that may effect the empirical results is the experimental design; i.e., between-subjects vs. within-subjects design (cf. Han and Terpstra 1988). In a within-subjects design, each subject is exposed to all treatments (e.g., several COMs), whereas, in a between-subjects design, each subject is exposed to one treatment only (e.g., one COM). Various factors need to be considered in choosing between the two designs (cf. Greenwald 1976; Pany and Reckers 1980; Adair, Spinner, Carlopio, and Lindsay 1983; Weber and Cook 1972; Kruglanski 1975; Shimp, Hyatt, and Snyder 1991). In a within-subjects design, respondents are aware of the range of alternatives when judging their purchase intention, whereas in a between-subjects design, purchase intention has no formal comparison of alternatives. This study posits that predictability of purchase intention from overall brand evaluation would be higher in a within-subjects design than in a between-subjects design because awareness of alternatives can increase behavior predictability (Wicker 1969; Triandis 1980; Davidson and Morrison 1983). By examining the design effect on the predictability of purchase intention, this study will provide researchers with a guideline in selecting an experimental design in country of origin studies.

Therefore, the purpose of this study is twofold: (1) to examine the perception of process technology and COM favorableness interaction effect in the evaluation of bi-national brands, and (2) to examine the experimental design effect (within vs. between) on predictability of purchase intention from brand evaluation.

CONCEPTUAL DEVELOPMENT

The Effect of the Perception of Process Technology on Overall Brand Evaluation

Technology refers to a set of principles and techniques useful for bringing about change toward desired ends (Taylor 1971). Technology involves operations, material and equipment, and knowledge (Hunt 1970). Technology can be classified into two categories: product technology and process technology (Abernathy and Utterback 1978). Product technology refers to the ability to formulate and develop new products, whereas process technology deals with production methods. Since process technology deals with the production methods, one simple classification is hand-made process and machine-made process technology. Brands with hand-made process technology refer to those brands produced by using the workmanship or skill of workers, whereas brands with machine-made process technology refer to the brands are produced mainly using automatic assembly lines (Abernathy and Utterback 1978) .

Hand-made brands are likely to be evaluated higher than machine-made brands, ceteris paribus, since hand-made brands might imply great efforts, limited production, and exclusivity (Li and Monroe 1992). Therefore, it can be hypothesized that:

H1: Consumers' overall evaluation of a brand will be higher for hand-made brands than machine-made brands.

The Effect of COM Favorableness on Brand Evaluation

COM typically affects brand evaluation (Bilkey and Nes 1982; Morello 1984). In general, consumers' evaluation of a bi-national brand will increase as the favorableness of the COM increases (Bilkey and Nes 1982; Han 1989; Cordell 1992; Chao 1989). COM favorableness refers to consumers' beliefs about the degree to which the COM has a favorable or unfavorable image pertaining to a product it produces. COM favorableness may be related to the economic and technological development level of the country (Nagashima 1970). Therefore, we can hypothesize that:

H2: Consumers' overall evaluation of a brand will decrease as COM favorableness decreases.

The Interaction Effect of Process Technology Perception and COM Favorableness on Brand Evaluation

In an integrated approach to foreign direct investment (FDI) theory, Dunning (1980, 1981) discussed firm-specific advantages and country-specific advantages. Firm-specific advantages are mostly intangible in nature and involve technology, design, knowledge, management know-how, trademark, etc. Firm-specific advantages can be easily transferable to various locations of manufacture, usually at a minimum transfer cost. Country-specific advantages refer to the attractiveness of the country, including the market, labor (e.g., productivity and skill level of workers, workmanship), and raw materials. These country-specific attributes are inherently difficult to transfer to foreign manufacturing countries (COM).

Hand-made brands are more likely to rely on country-specific attributes (e.g. workmanship of the country's workers) which are relatively hard to transfer to foreign countries. On the other hand, machine-made brands rely on firm-specific attributes (e.g., the automatic assembly technology of the firm) that can easily be transferred to foreign manufacturing countries (Dunning 1980; Dunning 1981). Han and Terpstra (1988) also found that workmanship is a factor that is sensitive to changes in COMs. Therefore, as COM favorableness decreases, the derogation of brand evaluation is likely to be greater for hand-made brands than for machine-made brands. Thus, it can be postulated that the brand evaluation of hand-made brands are significantly higher than machine-made brands for the favorable COMs. The evaluation of hand-made brands is not likely to be significantly different from machine-made brands for unfavorable COMs. Therefore, we hypothesize that:

H3: COM favorableness moderates the perception of process technology - brand evaluation relationship. Specifically, for favorable COMs, the evaluation of a hand-made brand is significantly more positive than that of a machine-made brand. For unfavorable COMs, the evaluation of a hand-made brand is not significantly different from that of a machine-made brand.

Between-Subjects vs. Within-Subjects Experimental Design: Prediction of Purchase Intention from Brand Evaluation

In this section, we will discuss the two experimental designs in terms of their limitations and advantages, and will then compare behavioral predictability of each design.

Within-Subjects Design: The within-subject design may be susceptible to demand artifacts (Greenwald 1976; Pany and Reckers 1980; Adair, Spinner, Carlopio, and Lindsay 1983). For instance, the use of a within-subjects design is more likely to encourage subjects to form a hypothesis about the objective of the experiment and to bias their response than a between-subjects design.

Many studies, however, have challenged this notion and have concluded that demand artifacts are infrequent (Weber and Cook 1972; Kruglanski 1975; Shimp, Hyatt, and Snyder 1991), thus concern for the presence of demand artifacts should not be a reason to prefer a between-subjects design over a within-subjects design (Schepanski, Tubbs, Grimlund 1992).

Another concern in the use of a within-subjects design is related to cue salience, which can threaten the external validity of study findings (Schepanski et al 1992). Using a within-subjects design, however, can be justified if consumers are expected to evaluate multiple cues simultaneously in a real world setting (Han and Terpstra 1988; Monroe and Krishnan 1985). In other words, if the tasks and skills of everyday life are analogous to the within-subjects design, then the within-subjects design seems to be more appropriate (Anderson 1982). The within-subjects design also can improve the precision of the estimate of the treatment effects (Schepanski et al 1992).

Between-Subjects Design: The single stimulus in between-subjects design is likely to bring similar cases from the subjects' past experience to mind. This confounding of the stimulus with the context in which it is judged can weaken the power of the experiment (Schepanski et al 1992). The between-subjects design, however, can reduce the practice, sensitization, and carry-over effects for which the within-subjects design is often criticized (Greenwald 1976; Anderson 1982; Schepanski et al 1992).

Predictability of Behavioral Intention: Various factors need to be considered in choosing the between vs. within-subjects design. One important factor to be considered is the study purpose (Anderson 1982; Han and Terpstra 1988). If the purpose of the study is to predict behavior from the attitude, then the presentation of alternatives in addition to the attitude of interest can play an important role in behavior predictions (Wicker 1969; Triandis 1980; Davidson and Morrison 1983). For example, the within-subjects design provided more accurate predictions of contraceptive usage behaviors from attitudes (Davidson and Morrison 1983), since the between-subjects design may ignore important comparisons among alternatives.

This study posits that predictability of purchase intention from overall brand evaluation would be higher in the within-subjects design than in the between-subjects design because the addition of alternatives in the within-subjects design can increase the behavioral predictability (Wicker 1969; Triandis 1980; Davidson and Morrison 1983). Therefore,

H4: The predictability of purchase intention from overall brand evaluation would be higher in the within-subjects design than in the between-subjects design.

TABLE 1

SELECTION OF BRANDS AND COUNTRIES

METHOD

Research Design

Both a within-subjects design and a mixed mode design were employed for this study. For the mixed mode design, three COMs (Italy, U.S, Philippines) were between-subjects factors, and products (sweaters and men's shoes) and process technology (hand-made vs. machine made) were within-subjects factors. For the within-subjects design, COMs, products, and process technology were the within-subjects factors.

For each condition, subjects were presented a booklet containing descriptions of sweater and shoe brands and were asked to evaluate the assigned brands.

Subjects

Students enrolled in undergraduate marketing courses participated in this study as a partial requirement of the course. Out of the 138 students who participated in this study, 132 provided usable data (33, 33, 32 for each country condition in the between-subjects design; 34 in the within-subjects design).

Procedure

Subjects were first asked to evaluate the assigned brand after reading descriptions (intrinsic features as well as the COM information) of the assigned brand. Subjects then responded to measures of country favorableness, perception of the process technology of the brands, and demographics.

Selection of Products, Brands, and Countries

Two hypothetical brands were selected from each of two product categories: sweaters and men's shoes. The names for the sweater brands were Alpha (hand-made) and Beta (machine-made). The names for men's shoe brands were Kappa (hand-made) and Zeta (machine-made). The selection of sweater and shoe products was based on the following considerations: (1) both hand-made and machine-made process technologies are likely in the same product category (2) college students are likely to be familiar with both products, (3) the products are important enough to college students for them to notice the COM information, (4) hypothetical brand names were used because this study focuses on brands with unfamiliar brand names, and (5) the same hypothetical Italian brands (CO) were used for all brands in order to hold the CO effect constant.

For each brand, three COMs were selected. The selected COMs were Italy (favorable), U.S. (moderate), and Philippines (unfavorable). COM favorableness for each country was measured as a manipulation check.

Reliability Analysis For Constructs

COM Favorableness: COM favorableness reflects subjects' beliefs about the degree to which each country has a favorable or unfavorable image as a manufacturing country. A 3-item 7-point semantic differential-like scales was used: unfavorable/favorable, bad/good, not developed/developed. The results of factor analysis indicated that the measure was unidimensional, and reliability analysis yielded high alpha coefficients of .95 (Italy/sweater), .95 (Italy/shoes), .93 (U.S./sweater), .96 (U.S./shoes), .95 (Philippines/sweater), and .95 (Philippines/shoes).

Perceptions of Process Technology: Perceptions of process technology reflects consumers' perceptions about the technology in the manufacturing process of the brands. A 3-item 7-point semantic differential-like scales was used: tailor-made/mass produced, hand-made/machine made, workmanship/automation. Based on the results of reliability and factor analyses, items yielded a unidimensional measure with reliability coefficients of .80 (hand-made/sweater), .88 (machine-made/sweater), .84 (hand-made/shoes), and .93 (machine-made/shoes).

Dependent Variables

Overall Brand Evaluation: A 3-item 7-point semantic differential scale was adapted from Mackenzie and Spreng (1992). The items included were bad/good, unfavorable/favorable, and poor/excellent. The measure was unidimensional with alpha coefficients of .91 (hand-made sweater), .92 (machine-made sweater), .94 (hand-made shoes), and .94 (machine-made shoes).

Purchase Intention: A 3-item 7-point semantic differential scales was used. The items included were: strongly not inclined to buy/strongly inclined to buy, most unlikely to buy/most likely to buy, and strongly not motivated to buy/strongly motivated to buy. The measure resulted in one factor solution with alpha coefficients of .91 (hand-made sweater), .92 (machine-made sweater), .94 (hand-made shoes), and .94 (machine-made shoes).

TABLE 2

COMPARISONS OF HAND-MADE VS. MACHINE-MADE BRAND EVALUATION

RESULTS

Manipulation Checks

Manipulation checks were conducted for country favorableness and perception of process technology. Country favorableness was tested using ANOVA with repeated measures (country as a between-subjects factor and product as a within-subjects factor). There was a significant interaction between COM and product type (F=8.18, p=.001). This interaction can be attributed to the evaluation of Italy as a COM of sweaters (i.e., respondents evaluated Italy less favorably as a COM for sweaters than for shoes). For shoes, there was a significant difference between all three countries: Italy (6.27), U.S. (5.38), and Philippines (4.16). For sweaters, Italy (5.26) and U.S. (5.47) were significantly different than the Philippines (4.15), but Italy and U.S. were not significantly different.

Perception of process technology was tested using paired t-tests. Results show that Alpha was perceived as hand-made than Beta (t=23.93 p=.000). Also, Kappa was perceived as hand-made than Zeta (t=21.0, p=.000).

Hypothesis Testing

Process Technology Main Effect: Hypothesis one dealt with the main effect of process technology. We predicted that consumers' overall brand evaluation would be higher for hand-made brands than for machine-made brands, and in this study, consumers' overall evaluations of hand-made brands were significantly higher than those of machine-made brands. (See Table 2).

COM Favorableness Main Effect: In H2, we predicted that consumers' overall evaluation decreases as COM favorableness decreases. Analysis of variance (ANOVA) results provided support for the hypotheses for both sweaters and shoes. That is, sweater and shoes brands manufactured in Italy received significantly higher evaluations than those manufactured in U.S., and brands with U.S. COMs received significantly higher evaluations than those with Philippines COMs (F=3.92 p=.02).

Brand Prestige and Perceived Process Technology Interaction Effects: We predicted that the evaluations of hand-made brands would be higher than machine-made brands for favorable COMs, but not for unfavorable COMs (H3). Table 2 shows that, in the between- subjects design, the evaluations of hand-made brands are significantly higher than those of machine-made brands across COM favorableness conditions, thereby failing to support H3. However, in the within-subjects design, the evaluations of hand-made brands are significantly higher than those of machine-made brands only in favorable COMs. Under unfavorable COMs, the evaluations of hand-made brands do not significantly differ from those of machine-made brands, thereby supporting H3.

Within vs. Between-Subjects Design and Purchase Intention Prediction

We hypothesized that the within-subjects design would provide more accurate predictions of purchase intention from overall brand evaluation than the between-subjects design (H4). Results show that correlations between brand evaluation and purchase intention were higher for the within subject-designs in 9 predictions out of 12, generally supporting H4 (see Table 3).

TABLE 3

PREDICTIONS OF PURCHASE INTENTION FROM BRAND EVALUATION AND EXPERIMENTAL DESIGN

DISCUSSION

This study focused on finding the effects of COM favorableness and the perception of process technology on consumers' evaluation of brands. We found that consumers' brand evaluation increases as a function of COM favorableness and the perception of process technology. The interaction effect of COM favorableness and perception of process technology was supported for the within-subjects design, but this result is not supported in the between-subjects design. In addition, the predictability of purchase intention for overall evaluation was higher in the within-subjects design than in the between-subjects design.

Because only one COM was given to subjects in the between-subjects design, subjects might think that the Philippines is a less-developed country, but still good at hand-made skills for textile products. That might lead to a difference in brand evaluation between hand-made vs. machine-made brands in the Philippines (no interaction effect). However, in the within-subjects design, subjects are aware of the entire range of countries, and Italy and US might be used as reference points in evaluating brands from the Philippines. Since there is a significant difference in COM favorableness between Italy/US and the Philippines, brands with Philippines COM might be perceived unfavorably regardless of the perception of process technology (interaction effect).

In the real world, people are expected to evaluate multiple cues simultaneously (Han and Terpstra 1988; Monroe and Krishnan 1985), therefore the interaction effect is more likely to happen in the real world. Though manufacturing of hand-made brands in less-developed countries may provide many benefits (e.g., low labor cost, accessibility to market), the benefits might have a trade-off with the greater derogation of the brand evaluation.

The study also examined the predictability of the two experimental designs. The within-subjects design was found to be more accurate than the between-subjects design in predicting purchase intention from brand evaluation. Many country of origin studies are conducted to predict the purchase intention for brands manufactured in foreign countries. Thus, this study provides another justification for using a within-subjects design in country of origin studies.

There are some limitations to this study. This study investigated only two product categories with student samples (cf. Albaum and Peterson 1984; Wall and Heslop 1986). Many country of origin studies found that country of origin effects are product specific (e.g., Etzel and Walker 1974; Cordell 1991), therefore the application of this study in more extended product contexts (e.g., real brands, different product category) and representative samples would be needed to assess the generalizability of our findings.

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