Does COO Still Matter? An Examination of Country of Origin Effects on Purchase Intentions Under Recall Circumstances: An Abstract
The National Highway Traffic Safety Administration (NHTSA, 2015) reported that automobiles were 84% of the first quarter’s total recalled units (which include automobiles, drugs, toys, and food). Indeed, the average number of annual automotive recalls rose 76% (from 339 to 599) in a two-decade period (1994–2013). Product recalls have not only accelerated in pace, but they have also become more widespread. Three decades ago, a product recall attributed to errors in the product design or production process only affected a local area. Today one single product failure can cause great damage on a global scale (Marucheck, 1987; Marucheck et al., 2011). For instance, Toyota’s 2009–2010 acceleration and General Motors’ 2014 ignition switch recalls not only created huge litigation fees but also resulted in billions of dollars lost sales, reduced manufacturing, harmed reputation, a lower stock price, and higher expenses. Moreover, the effects of these recalls not only impact the auto companies but also can be a nightmare for their suppliers, as a defective auto part from a supplier could also be the cause of an auto recall.
Further complicating the impact of a recall is the use of foreign suppliers. The country of origin (COO) effect can intensify the damage incurred during a recall. Nagashima (1970) defined COO as: “the picture, the reputation, or stereotype that businessmen and consumers attach to products of a specific country.” Hong and Wyer (1990) indicate that concepts related to COO can affect the interpretation of information about specific product attributes. Thus, COO can serve as a cue that triggers a global evaluation of quality and performance. Moreover, it has been suggested that COO has a negative effect on the global supply chain. For example, some products such as kitchenwares that are “made in China” are perceived to be inferior. However, Kabadayi and Lerman’s (2011) study found that students asking to purchase a teddy bear in an American store do not necessarily prefer a teddy bear made in the USA to one made in China. This result suggests that a negative COO effect can be offset when consumers trust the store selling the product.
This study continues work on product recalls by extending it into the domain of supplier country of origin (COO). The authors propose that the impact of a product recall on evaluations of affected brands depends on the severity of the recall as well as the origin of the supplier of parts that resulted in the recall. Results from an experimental study indicate that when a supplier is of foreign origin, brands of moderate quality are disproportionately harmed if the offending supplier is foreign (vs. domestic). However, brands of high quality are insulated from this COO effect. Further, recall severity harms brands with a foreign supplier in the wake of a severe recall only; supplier COO does not matter after a minor recall. Taken together, these results suggest that COO does indeed still matter. Moderate brands should be particularly careful with supplier selection, as both COO and recall severity can have an effect. However, strong brands have the ability to be less selective, as COO is less impactful on recall outcomes.