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.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Price excludes VAT (USA)
Tax calculation will be finalised during checkout.
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).
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.
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).
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).
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).
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.
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).
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).
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.
Aquino, K., McFarran, B., & Laven, M. (2011). Moral identity and the experience of moral elevation in response to acts of uncommon goodness. Journal of Personality and Social Psychology, 100(4), 703–718.
Bagozzi, R. P. (2011). Measurement and meaning in information systems and organizational research: methodological and philosophical foundations. MIS Quarterly, 35(2), 261–292.
Bagozzi, R. P., & Dholakia, U. M. (2006). Antecedents and purchase consequences of customer participation in small group brand communities. International Journal of Research in Marketing, 23, 45–61.
Bagozzi, R. P., Gopinath, M., & Nyer, P. U. (1999). The role of emotions in marketing. Journal of the Academy of Marketing Science, 27(2), 184–206.
Bauer, R. A. (1960). Consumer behavior as risk taking. In R. S. Hancock (Ed.), Dynamic marketing for a changing world (pp. 389–398). Chicago: American Marketing Association.
Bierly, P., Damanpour, F., & Santoro, M. D. (2009). The application of external knowledge: organizational conditions for exploration and exploitation. Journal of Management Studies, 46(3), 481–509.
Boedeker, R. R. (2007). A journey overseas. Strategic Finance, 88(9), 23–29.
Bunyaratavej, K., Doh, J., Hahn, E. D., Lewin, A. Y., & Massini, S. (2011). Conceptual issues in services offshoring research: a multidisciplinary review. Group & Organization Management, 36(1), 70–102.
Chatterjee, S., & Price, B. (1991). Regression diagnostics. New York: John Wiley & Sons.
Contractor, F. J., Kumar, V., Kundu, S. K., & Pedersen, T. (2010). Reconceptualizing the firm in a world of outsourcing and offshoring: the organizational and geographical relocation of high-value company functions. Journal of Management Studies, 47(8), 1417–1433.
Cronin, T., Reysen, S., & Branscombe, N. R. (2012). Wal-Mart’s conscientious objectors: perceived illegitimacy, moral anger, and retaliatory consumer behavior. Basic and Applied Social Psychology, 34, 322–335.
Doh, J., Bunyaratavej, K., & Hahn, E. (2009). Separable but not equal: the location determinants of discrete services offshoring activities. Journal of International Business Studies, 40, 926–943.
Durvasula, S., & Lysonski, S. (2009). How offshore outsourcing is perceived: why do some consumers feel more threatened? Journal of International Consumer Marketing, 21(1), 17–33.
Edwards, L. (2004). Overseas call centers can cost firms goodwill. Marketing News, 38(7), April 15, 21.
Everitt, B. S. (1996). Making sense of statistics in psychology. Oxford: Oxford University Press.
Farrell, D. (2006). Smarter offshoring. Harvard Business Review, 84, 84–92.
Fazio, R. H. (1995). Attitudes as object-evaluation associations: Determinants, consequences, and correlates of attitude accessibility. In R. E. Petty & J. A. Krosnik (Eds.), Attitude strength: Antecedents and consequences (pp. 247–282). Mahwah: Erlbaum.
Funk, C. A., Arthurs, J. D., Treviño, L. J., & Joireman, J. (2010). Consumer animosity in the global value chain: the effect of international production shifts on willingness to purchase hybrid products. Journal of International Business Studies, 41(4), 639–651.
Gilligan, C. (1982). In a different voice: Psychological theory and women’s development. Cambridge: Harvard University Press.
Goldsmith, R. E., Lafferty, B. A., & Newell, S. J. (2001). The impact of corporate credibility and celebrity credibility on consumer reaction to advertisements and brands. Journal of Advertising, 29(3), 30–54.
Graham, J., Haidt, J., & Nosek, B. A. (2009). Liberals and conservatives rely on different sets of moral foundations. Journal of Personality and Social Psychology, 96(5), 1029–1046.
Graham, J., Nosek, B. A., Haidt, J., Iyer, R., Koleva, S., & Ditto, P. H. (2011). Mapping the moral domain. Journal of Personality and Social Psychology, 101(2), 366–385.
Grappi, S., Romani, S., Bagozzi, R. P. (2013). Consumer response to corporate irresponsible behavior: moral emotions and virtues. Journal of Business Research. http://dx.doi.org/10.1016/j.jbusres.2013.02.002.
Haidt, J. (2000). “The positive emotion of elevation”. Prevention and Treatment, Vol. 3, Article 0003, posted March 7, 2000.
Haidt, J. (2001). The emotional dog and its rational tail: a social intuitionist approach to moral judgment. Psychological Review, 108(4), 814–834.
Haidt, J. (2003). The moral emotions. In R. J. Davidson, K. R. Sherer, & H. H. Goldsmith (Eds.), Handbook of affective sciences (pp. 852–870). Oxford: Oxford University Press.
Haidt, J. (2007). The new synthesis in moral psychology. Science, 316, 998–1002.
Haidt, J., & Graham, J. (2007). When morality opposes justice: conservatives have moral intuitions that liberals may not recognize. Social Justice Research, 20, 98–116.
Haidt, J., & Joseph, C. (2004). Intuitive ethics: how innately prepared intuitions generate culturally variable virtues. Dædalus, 133(4), 55–66.
Haidt, J., Koller, S. H., & Dias, M. G. (1993). Affect, culture and morality, or is it wrong to eat your dog? Journal of Personality and Social Psychology, 65(4), 613–628.
Hayes, A. F. (2013). PROCESS: An introduction to mediation, moderation, and conditional process analysis: A regression-based approach. New York: Guilford. (http://www.afhayes.com/public/process2012.pdf).
Hayes, A. F., & Preacher, K. J. (2012). Statistical mediation analysis with a multicategorical independent variable. Manuscript currently undergoing peer review. (http://www.afhayes.com/public/hp2012.pdf).
Herbst, M. (2009). IBM cuts jobs as it seeks stimulus money. BusinessWeek Online, 3/26/2009.
Izard, C. E., & Ackerman, B. P. (2000). Motivational, organizational, and regulatory functions of discrete emotions. In M. Lewis & J. M. Haviland-Jones (Eds.), Handbook of emotions (pp. 253–264). New York: The Guilford Press.
Johnson, J., & Holub, M. J. (2003). Questioning organizational legitimacy: the case of U.S. expatriates. Journal of Business Ethics, 47, 269–293.
Kohlberg, L. (1969). Stage and sequence: The cognitive-developmental approach to socialization. In D. A. Goslin (Ed.), Handbook of socialization theory and research (pp. 347–480). Chicago: Rand McNally.
Kroll, J., & Egan, E. (2004). Psychiatry, moral worry, and moral emotions. Journal of Psychiatric Practice, 10(6), 352–360.
Lazarus, R. S. (1991). Emotion and adaptation. New York: Oxford University Press.
Lei, D., & Hitt, M. (1995). Strategic restructuring and outsourcing: the effect of mergers and acquisitions and LBOs on building firm skills and capabilities. Journal of Management, 21(5), 835–859.
Lindell, M. K., & Whitney, D. J. (2001). Accounting for common method variance in cross-sectional research designs. Journal of Applied Psychology, 86(1), 114–121.
Mandel, M. (2007). The real cost of offshoring. Business Week, June 18, 29–34.
Maxham, J. G., III, & Netemeyer, R. G. (2002). A longitudinal study of complaining customers’ evaluations of multiple service failures and recovery efforts. Journal of Marketing, 66, 57–71.
Mead, R. (2010). The prince of Solomeo. The New Yorker, March 29, 72.
Metters, R. (2008). A typology of offshoring and outsourcing in electronically transmitted services. Journal of Operations Management, 26(2), 198–211.
Miles, J. N. V., & Shevlin, M. E. (2001). Applying regression and correlation: a guide for students and researchers. London: Sage Publications.
Morales, A. C. (2005). Giving firm an “E” for effort: consumer responses to high-effort firms. Journal of Consumer Research, 31(4), 806–812.
Oberecker, E. M., & Diamantopoulos, A. (2011). Consumers’ emotional bonds with foreign countries: does consumer affinity affect behavioral intentions? Journal of International Marketing, 19(2), 45–72.
Ortony, A., Clore, G. L., & Collins, A. (1988). The cognitive structure of emotions. New York: Cambridge University Press.
Ostrom, A., & Iacobucci, D. (1995). Consumer trade-offs and the evaluation of services. Journal of Marketing, 59(1), 17–28.
Palmatier, R. W., Burke, J. C., Bechkoff, J. R., & Kardes, F. R. (2009). The role of customer gratitude in relationship marketing. Journal of Marketing, 73(5), 1–18.
Podsakoff, P. M., MacKenzie, S. B., Lee, J., & Podsakoff, N. P. (2003). Common method biases in behavioral research: a critical review of the literature and recommended remedies. Journal of Applied Psychology, 88, 879–903.
Raney, A. A. (2011). The role of morality in emotional reactions to and enjoyment of media entertainment. Journal of Media Psychology, 23(1), 18–23.
Robertson, C. J., Lamin, A., & Livanis, G. (2010). Stakeholder perceptions of offshoring and outsourcing: the role of embedded issues. Journal of Business Ethics, 95(2), 167–189.
Roggeveen, A. L., Bharadwaj, N., & Hoyer, W. D. (2007). How call center location impacts expectations of service from reputable versus lesser known firms. Journal of Retailing, 83(4), 403–410.
Romani, S., Grappi, S., & Bagozzi, R. P. (2012). Explaining consumer reactions to corporate social responsibility: the role of gratitude and altruistic values. Journal of Business Ethics. doi:10.1007/s10551-012-1337-z.
Rozin, P., Lowery, L., Imada, S., & Haidt, J. (1999). The CAD triad hypothesis: a mapping between three moral emotions (contempt, anger, disgust) and three moral codes (community, autonomy, divinity). Journal of Personality and Social Psychology, 76(4), 574–586.
Schröder, M. (2012a). Should I stay or should I go? how moral arguments influence decisions about offshoring production. Economic and Industrial Democracy, advance online publication 4 April, doi:10.1177/0143831X12440465.
Schröder, M. (2012b). How moral arguments influence economic decisions and organizational legitimacy–the case of offshoring production. Organization, advance online publication 8 August, doi:10.1177/1350508412448223.
Schwartz, S. H. (1992). Universals in the content and structure of values: Theoretical advances and empirical tests in 20 countries. In M. Zanna (Ed.), Advances in experimental social psychology (pp. 1–65). New York: Academic.
Schwartz, S. H., & Bilsky, W. (1990). Toward a theory of the universal content and structure of values: extensions and cross-cultural replications. Journal of Personality and Social Psychology, 58(5), 878–891.
Sharma, S., Shimp, T. A., & Shin, J. (1995). Consumer ethnocentrism: a test of antecedents and moderators. Journal of the Academy of Marketing Science, 23(1), 26–37.
Sharma, P., Tam, J. L. M., & Kim, N. (2009). Demystifying intercultural service encounters–toward a comprehensive conceptual framework. Journal of Service Research, 12(2), 227–242.
Shaver, P., Schwartz, J., Kirson, D., & O'Connor, C. (1987). Emotion knowledge: further exploration of a prototype approach. Journal of Personality and Social Psychology, 52(6), 1061–1086.
Shimp, T. A., & Sharma, S. (1987). Consumer ethnocentrism: construction and validation of the CETSCALE. Journal of Marketing Research, 24(8), 280–289.
Shweder, R. A., Much, N. C., Mahapatra, M., & Park, L. (1997). The “big three” of morality (autonomy, community, and divinity) and the “big three” explanations of suffering’. In A. Brandt & P. Rozin (Eds.), Morality and health (pp. 119–169). New York: Routledge.
Stringfellow, A., Teagarden, M. B., & Nie, W. (2007). Invisible costs in offshoring service work. Journal of Operations Management, 26(1), 164–179.
Tangney, J. P., Stuewig, J., & Mashek, D. J. (2007). Moral emotions and moral behavior. Annual Review of Psychology, 58, 345–372.
Taylor, P., & Bain, P. (2005). India calling to the far away towns. Work, Employment & Society, 19(2), 261–282.
Thelen, S. T., & Shapiro, T. (2012). Predicting negative consumer reactions to service offshoring. Journal of Services Marketing, 26(3), 181–193.
Thelen, S. T., Yoo, B., & Magnini, V. P. (2011). An examination of consumer sentiment toward offshore services. Journal of the Academy of Marketing Science, 39(2), 270–289.
Turiel, E. (1983). The development of social knowledge: Morality and convention. Cambridge: Cambridge University Press.
Whitaker, J., Krishnan, M. S., Fornell, C. (2008). Does offshoring impact customer satisfaction? (May 28, 2008). Available at SSRN: http://ssrn.com/abstract=1010457 or http://dx.doi.org/10.2139/ssrn.1010457.
Williams, P., & Aaker, J. L. (2002). Can mixed emotions peacefully coexist? Journal of Consumer Research, 28(4), 636–649.
Zeithaml, V. A. (1981). How consumer evaluation processes differ between goods and services. In J. H. Donnelly & W. R. George (Eds.), Marketing of service (pp. 186–190). Chicago: American Marketing Association.
Zutshi, A., Creed, A., Sohal, A. S., & Wood, G. (2012). Consideration of selflessness and self-interest in outsourcing decisions. European Business Review, 24(3), 287–303.
The authors thank the editor and the three anonymous reviewers for their useful comments and suggestions.
Electronic supplementary material
Below is the link to the electronic supplementary material.
(DOCX 37 kb)
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.
About this article
Cite this article
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