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The effects of company offshoring strategies on consumer responses

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Abstract

This paper develops a unique theoretical framework for explaining consumer reactions to corporate offshoring by testing the impact of the decision to offshore or to maintain domestic activities on two dependent variables: consumer attitudes toward the company and word-of-mouth communication. We conduct two controlled experiments administered in the field with adult consumers. Study 1 analyzes the processes underlying consumer reactions to corporate offshoring from the perspective of the perceived moral harm and good that offshoring produces. Results verify the mediating role of positive and negative moral emotions (i.e., gratitude and righteous anger) felt by consumers. Study 2 demonstrates the moderating role of consumer perceived risk of offshoring on the linkage between company offshoring and the same moral emotions and through these moral emotions on consumer attitudes toward the company and word-of-mouth communication. An unexpected finding is the mediation of the positive moral emotion of elevation on consumer attitudes.

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Notes

  1. The other relevant group of moral emotions includes those normally referred to as “self-conscious” emotions (i.e., shame, embarrassment, and guilt with negative valence; and moral pride with positive valence) (Tangney et al. 2007).

  2. In order to investigate the consequences of offshoring as fully as possible, in Study 1 we considered offshoring through combinations of design and production phases. In our case, the choice of company offshoring can be broken down into gradients, ranging from non-offshoring, partially offshoring (moving only one of the two phases of design and production beyond national borders), up to the total offshoring decision. These distinctions, which we believe provide a rich contextualization of offshoring, have no obvious counterpart in the case of services (Study 2). In fact, services production cannot be split easily and be perceived by consumers as a gradient of outcomes. For this reason, in Study 2 we apply only a distinction between no-offshoring and offshoring. Despite this difference in Study 1 and Study 2, we believe that the additional distinctions provided by Study 1 can further enrich tests of hypotheses and their interpretation.

  3. In the period of the data collection, none of the three cities was affected by specific problems due to companies’ offshoring decisions (e.g., plants relocated abroad).

  4. Consumer ethnocentrism was measured using four items selected from the CETscale (Shimp and Sharma 1987): “A good citizen does not buy foreign products,” “It is not right to purchase foreign products because it puts us out of jobs,” “We should purchase products manufactured in our country instead of letting other countries get rich off us,” and “We should buy from foreign countries only those products that we cannot obtain within our own country” (α = .92). Consumer animosity was measured using three items selected from Durvasula and Lysonski (2009): “Outsourced countries are trading unfairly with our country because they take advantage of lower labor costs,” “Outsourced countries are unfairly taking advantage of their low labor costs, selling their products and services at low prices and putting our country out of the market,” and “Our country is more fair in its trade dealing with the outsourced countries than those countries are with ours” (α = .90). Based on research by Schwartz (1992), we used four value measures to operationalize altruistic values: “Equality: equal opportunity for all,” “Social justice: correcting injustice, care for the weak,” “Helping: working for the welfare of others,” and “Cooperation: increasing positive returns for the community.” Six self-enhancement value items were used as fillers to disguise the intent of our control variable. The instructions to respondents read: “Below is a list of values; for each value a brief explanation is given. Please indicate how important each value is for you as a guiding principle in your life” (α = .89).

  5. Responses of participants to the scenario wherein both the manufacture and design of the product were domestically located gave average ratings of 2.14, compared with a much lower mean value of .60 for the scenario where the manufacture of the product was offshored in a foreign country and the design remained in the home country, .37 for the scenario where the design of the product was offshored and manufacture remained in the home country, and −.60 for the scenario where both manufacture and design were offshored in a foreign country. The t-test statistics showed significant differences between groups, except between the two scenarios where only one of the two activities was domestically located while the other was offshored in a foreign country (p = .38).

  6. The towns involved in this study, one in the north, one in the center, and one in the south of Italy, were different from the ones considered in Study 1. In the period of the data collection, none of these three cities was affected by specific problems due to companies’ offshoring decisions.

  7. We performed the likelihood ratio test comparing the variable perceived risk of offshoring and a general variable measuring valence, that is, attitude toward offshoring (Durvasula and Lysonski 2009), to confirm the discriminant validity of measures of the two scales. The following items were used to measure attitude toward offshoring: harmful/beneficial, unnecessary/necessary, bad/good, unfavorable/favorable, negative/positive (factor loadings ranging from a minimum of .66 to a maximum of .91; Mean = 3.49; α = .89; AVE = .62). The likelihood ratio test suggests that the model without constriction is significantly better than models that hypothesize equality between the attitude toward offshoring and perceived risk of offshoring (Δχ2 (1) = 45.25; p < .01).

  8. Consumer ethnocentrism, animosity, and altruistic value orientation were measured using the same items presented in Study 1. The job loss variable was measured with a dichotomous item: whether respondents or their relatives had lost jobs or not due to offshoring. Consumer expertise with offshoring—the degree of knowledge and experience a person reports having with regard to offshoring—was measured with three items (know very little about/know very much about; inexperienced/experienced; uninformed/informed) (alpha = .88).

  9. The control variables used had no effects on gratitude, elevation, and sadness. For righteous anger, ethnocentrism was the only individual characteristic affecting this emotion. Ethnocentrism and animosity were found to affect disgust and contempt, and this last emotion was also affected by job loss.

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Acknowledgments

The authors thank the editor and the three anonymous reviewers for their useful comments and suggestions.

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Authors and Affiliations

  1. Department of Economics, University of Modena and Reggio Emilia, viale Berengario 51, 41121, Modena, Italy

    Silvia Grappi

  2. Department of Business and Management, LUISS Guido Carli, Viale Romania, 32, 00197, Roma, Italy

    Simona Romani

  3. Stephen M. Ross School of Business, The University of Michigan, 701 Tappan Street, Ann Arbor, MI, USA

    Richard P. Bagozzi

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  1. Silvia Grappi
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Correspondence to Silvia Grappi.

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Appendix 1

Appendix 1

Measurement items and validity assessment

Using structural equation modeling (LISREL 8.80), we ran a confirmatory factor analysis (CFA) on mediators and dependent variables to assess the convergent and discriminant validity of our measures (see Table 3). The fit of the model was good (χ 2(df) = 242.07 (107); CFI = .99; NNFI = .99; RMSEA = .07; SRMR = .04). All the average variances extracted were above the recommended threshold of .50, and the likelihood ratio tests further confirmed that the measures of all variables exhibited discriminant validity. As regards the multicollinearity diagnostics, given the fact that each VIF is less than the recommended threshold (Chatterjee and Price 1991; Everitt 1996; Miles and Shevlin 2001) (see Table 4), then the collinearity among the variables can be considered small enough to be ignored. Table 5 shows the descriptives (means and standard deviations) for all variables for the five groups of Study 1.

Table 3 Results of confirmatory factor analysis: construct indicators, factor loadings, means, and reliability
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Table 4 Collinearity diagnostics
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Table 5 Descriptive statistics
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Grappi, S., Romani, S. & Bagozzi, R.P. The effects of company offshoring strategies on consumer responses. J. of the Acad. Mark. Sci. 41, 683–704 (2013). https://doi.org/10.1007/s11747-013-0340-y

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