UNIVERSITY OF EASTERN FINLAND Faculty of Social Sciences and Business Studies Department of Business
HOW CONSUMER ETHNOCENTRISM AFFECTS THE CONSUMER BEHAVIOR OF FINNISH AND CHINESE STUDENTS IN THE MOBILE GAMING MARKET
Conducted in University of Eastern Finland and Fudan University
Master's Thesis, Service Management Jaakko Jokinen (234934) Supervisor: Tommi Laukkanen
Abstract
UNIVERSITY OF EASTERN FINLAND
Faculty
Faculty of Social Sciences and Business Studies Department
Department of Business Author
Jaakko Ilmari Jokinen Title
How Consumer Ethnocentrism affects the Consumer Behavior of Finnish and Chinese stu- dents in the Mobile Game Industry
Main Subject Service Management
Level
Master’s Thesis
Date 14.9.2017
Number of pages 84+2
Abstract
In a globalized market place, the need for cross-cultural market research is ever more requi- red. Different cultures rate different aspects in a product and are bound to perceive products through the lens of their native culture.
Consumer ethnocentrism is a characteristic which can vastly alter an individual’s product quality perception. This creates new challenges for marketing experts in how to effectively expand to new markets. Different cultures present different obstacles for expansion, and companies might even face animosity and hostility in cultures the companies struggle to understand.
Mobile game industry is a modern market, and consumer ethnocentrism’s effect on it has not been widely researched. To properly research it, Finnish and Chinese students were ques- tioned on their ethnocentric tendencies, how do they perceive foreign and domestic mobile games and which one do they prefer to purchase.
A covariance-based structural equation model was utilized to measure the collected data against the proposed theory. With certain adjustments regarding the original scale, the model exhibited good validity and reliability.
With the Chinese, affection played a bigger role in rating domestic and foreign mobile ga- mes, whereas the Finns exhibited behavioral preference toward domestic mobile games. Af- fective reaction being more significant for the Chinese, and due to the gigantic size of their market, companies would do well to cater to their desire for a certain level of Chineseness in their mobile games, while the Finns are rather content with any mobile game even though they have a preference for Finnish ones.
Key Words
Consumer Ethnocentrism, Cultural Dimensions, Purchase Intention, Product Quality Percep- tion, Cross-Cultural Research
TABLE OF CONTENTS
1. INTRODUCTION ... 5
1.1. Research Background ... 5
1.2. Research Objective and Research Questions... 10
1.3. Scope and Limitations ... 11
1.4. Existing Literature ... 12
1.4.1. Mobile Gaming Industry ... 12
1.4.2. Chinese Mobile Gaming Industry ... 13
1.4.3. Finnish Mobile Gaming Industry ... 14
1.4.4. Millennial Generation’s Mobile Usage ... 14
1.5. Research Structure ... 16
2. CONSUMER ETHNOCENTRISM ... 18
2.1. Background of ethnocentrism ... 18
2.2. Ethnocentrism in consumer behavior ... 22
2.2.1. Antecedents of Consumer Ethnocentrism ... 24
2.2.2. Consumer ethnocentrism in different countries ... 28
2.3. Consumer ethnocentrism in transitional economies ... 29
2.4. Country-of-Origin ... 30
2.5. Consumer Animosity ... 34
2.6. Consumer Xenophobia ... 36
2.7. Causes and Effects of Consumer Ethnocentrism ... 37
3. CROSS-CULTURAL RESEARCH ... 39
3.1. Background of cross-cultural research ... 39
3.2. Interaction of culture and consumer behavior ... 40
3.3. Hofstede's theory of cultural dimensions ... 43
3.3.1. Individualism/collectivism ... 44
3.3.2. Hierarchy, status and power distance ... 45
3.3.3. Uncertainty avoidance ... 46
3.3.4. Masculinity/Feminity ... 47
3.3.5. Long- versus short-term orientation ... 48
3.3.6. Perceptions and Critique of Hofstede’s theory ... 50
3.4. Edward Hall’s Theory of High- and Low Context Cultures ... 51
4. DATA AND METHODS ... 58
4.1. Data Collection ... 58
4.2. Structure of Questionnaire ... 59
4.2.1. CETSCALE and CES ... 60
4.2.2. Garvin’s Eight Dimensions of Quality ... 63
4.2.3. Measuring Purchase Intention ... 64
4.3. Structural Equation Modeling (SEM) ... 65
4.4. CB-SEM and PLS-SEM ... 67
5. ANALYSIS ... 69
5.1. Testing Validity and Reliability ... 69
5.2. Testing SEM for population samples ... 70
6. CONCLUSIONS ... 84
7. REFERENCES ... 89
8. APPENDIX ... 94
1. INTRODUCTION
Modern day economies face daily the constant challenges caused by the globalization of the world. The old theses of marketing are under new scrutiny as the global markets break down old paradigms and mold new ways of thinking. Cultures interact with each other at an increasing pace, and on a whole new level, as people are more connected today than ever before. The advent of internet and smart phones has connected people from around the world, and intercontinental interaction has been made possible in a blink of an eye. There is an ever- increasing demand for cross-cultural research, and as mobile markets have been and are booming around the world, cross-cultural research on the mobile markets is marketing research at its most contemporary.
1.1. Research Background
With an increasingly globalized world economy, international trade has become an integral part of the global enomy. Due to such newly-transpired globalization, a greater necessity to analyze and estimate consumers' attitudes toward both domestic and foreign products has been recognized (Watson & Wright 2000, 1149). Some of the strongest forces in the contemporary marketplace, are indeed ethnicity and nationalism, despite the growing homogeneity of world markets (Vida, Dmitrovic & Obadia 2008, 327). Indeed, it should not be assumed that consumers are globalizing at the same rate as companies, as neo-nationalism can be noticed to be increasing in buying behavior, resisting globalization (Suh & Kwon 2002, 663), and such outlooks can be one of the major obstacles for international trade (Chaudhuri & Deb 2014, 646).
It is of consideration, whether consumers with nationalistc tendencies judge products based on their country-of-origin, the country-of-manufacturing or what country is associated with the brand/product.
A key influence on a consumer's attitude can be the national culture, which has been recognized as having an immense effect in shaping an individual's perceptions, behavior and dispositions (Steenkamp 2001, 30). A country's culture is identified as a key environmental element
underlying systematic behavioral differences (Fernandez-Ferrin, Bande-Vilela, Klein & del Rio-Araujo 2015, 79). Vida et al. (2008, 327) brings up the point that consumer behavior is influenced by the intertwined mix and overlap of globalization and fragmentation forces, where the globalization fuels the fragmentation. There are also arguments, that globalization will not annihilate cultural differences and thus standardize global consumer behavior (Suh & Kwon 2002, 663).
If such aforementioned differences are overlooked, it can and has lead, to many business failures. Many marketing theories have only been validated in the Western World and in a Western context, without giving a thought that such theories might not be universally applicable to all the cultures of the world (Steenkamp 2001, 30). Steenkamp (2001, 30) further notes that oft-used theories such as cognitive dissonance, attribution theory, and individual choice modeling, may not apply to collectivistic societies and cultures without slight or drastic modifications. This gives a clear indication, that when conducting marketing research or business in a cross-cultural setting, some precautions and thought should be put in to the context.
International marketers have long acknowledged the existence of differences between cultures, and thus there has been a vast amount of cross-cultural research focused on ”national characteristics” of different markets (Vida et al. 2008, 328). Vida et al. (2008) add that recent research highlights that in addition to the ”national culture”, consumers are also affected by two other cultures: mainly, the emerging global culture and whatever specific subculture they are part of within their national culture. This is of note, due to the constant blurring of the local, global and national, and thus the convergence of consumer segments creating a variety of micro- cultures – making way for a new type of segments called the cosmopolitans (Vida et al. 2008, 328; Cleveland, Papadopoulos & Laroche 2011, 247). This progressive globalization of markets has highlighted the increasing need for cross-cultural research (Clarke III 2001, 301). Sub- cultures may have very strong sub-cultural influences on their consumer behavior, for example, a culture of any sort, will lead to huge influence on consumer behavior which can also manifest in preferences for certain national products (collectibles, football jerseys, Japanese gaming cards etc.).
Such research has shown that as many societies become ethnically more dynamic, differences in cultural and ethnic identities increasingly visible, there is an increasing need for marketers
to understand how ethnicity and consumption interplay and affect each other (Vida et al. 2008, 328). Such preference for domestic products or for international alternatives, and the phenomenon measured is called consumer ethnocentrism (Thomas & Hill 1999, 376-377). This ethnocentrism can hinder an organization's effectiveness and ability to achieve customer recognition and attachment when operating in an overseas market (Tong & Li 2013, 494).
The most important factor coming into play in consumer ethnocentrism is cultural structure as such a structure often shapes how consumers view domestic and foreign products through their cultural perpective (Altintas & Tokol 2007, 308). Consumers which show a high degree of ethnocentrism tend to be biased in their judgment of products, making unreasonable over- evaluation of domestic products at the expense of foreign products, such as overrating the capabilities and quality of domestic products over their foreign counterparts (Tong & Li 2013, 494-495; Chaudhuri & Deb 2014, 646). Not only are the virtues of the domestic product over- emphasized, but often the positives of the foreign ones are also undervalued (Luque-Martinez, Ibanez-Zapata & del Barrio-Garcia 2000, 1353; Kaynak & Kara 2002, 934; Garma, Polonsky
& Wong 2008, 455; Wei 2008, 2; Akram, Merunka & Akram 2011, 294; Sharma & Wu 2015, 95). There is even a tendency for ethnocentric consumers to view products from their own country as outright best (Wang & Chen 2004, 391). For example, individuals might have a tendency to see their national cuisine as the best in the world, and always prefer their native food.
For consumers in developed countries, there are consistent results for preference of domestic products over foreign imports (Watson & Wright 2001, 1150; Wei 2008, 2). There have been studies which show a clear preference for products which come from culturally similar countries over countries which are perceived as culturally dissimilar (Watson & Wright 2000, 1150). Watson & Wright (2000, 1150) argue that this is the case even when the consumers are highly ethnocentric in their consumer behavior. This can be identified as an appreciation toward certain cultural traits even when ethnic similarity might not be found. Finland and Sweden have for a long time enjoyed a very positive relationship sharing a lot of similar cultural traits.
Though there are cultural and ethnic differences between the countries, there is also a healthy amount of trust and affection toward the culture and products of the other country.
Globalization of economies was made possible due to the technological development and free trade of the world. Due to improved logistics and IT, what took months before takes seconds or hours nowadays. Cultural wisdom and exchange has been one key in enabling such a progress, but all the effects of the drivers are wearing off (Suh & Kwon 2002, 663). In addition, Suh &
Kwon (2002) argue that as globalization can not be taken for granted anymore in breaking down economic walls, there is an ever-growing need for cross-cultural research on consumer behavior.
With the maturation of domestic markets due to intense competition between organizations, there is a powerful need to locate, identify and penetrate new overseas markets, and as such, consumer ethnocentrism has risen to the spotlight within contemporary management thinking (Thomas & Hill 1999, 379).
After almost three decades of the fastest economic development on earth, contemporary China's large-city consumers' consumer behavior and product choices start matching those of the most developed countries (Piron 2006, 327). Yet due to this rapid development, the societal changes it has brought with it, and China's status as a developing country makes its consumer behavior a prime target for research. As Asia is growing more rapidly than the rest of the world, and China being the biggest of Asian economies, its consumer goods market is thought to be one of the most attractive in the world, with young people in particular being a top priority target market (Garma et al. 2008, 456). Garma et al. (2008, 457) continue by arguing that due to the aforementioned growth of China, China opening up for the international community and the resulting flood of foreign goods and investment into the mainland, it is important to explore how young Chinese consumers perceive domestic and imported good. Finland is considered one of the more developed countries in the world, but a vastly younger culture and a smaller country when compared to China. Thus the effects of culture and economic environment can be assumed to be widely different in Finland than in China. Hence, comparing the consumer behavior of these two vastly different countries, may be highly rewarding in marketing research.
By performing a cross-cultural research on the consumer ethnocentrism of two countries vastly dissimilar, it can increase the understanding of consumer preference for foreign versus domestic products. This in turn can lead to better product positioning, more efficient strategy development and overall knowledge and know-how about the many facets of international markets. Greater knowledge of a country's consumer behavior, and its relative similarities or dissimilarities to another one, can give a company an important edge in developing the various
aspects of its product or promotion mix, so that it can be adjusted for the specific needs of the target market. By delving deeper into the multiple aspects of consumer preferences, and the degree of ethnocentrism and its manifestation, academic scholars are able to better refine the ways to advance international, cross-cultural consumer behavior research. China and Finland are both interesting targets of research as both stayed isolated from the rest of the world for an extended period of time, thus creating a very strong and relatively homogenetic cultural identity.
What makes the mobile game market an especially interesting target of study in the current globalized business climate is its relative fluidity and accessibility. The only thing that needs to be transfered across borders is mobile data. Mobile games do not need high-level logistics and can be developed with relatively low-costs by any budding entrepreneur around the world. The products are relatively same across borders and anyone (with certain possible national limits) can download them and connect each other with them. Mobile games are a truly global and modern product thus making it apt for research when it comes to consumer ethnocentrism.
A vast amount of previous research about consumer ethnocentrism has revolved around physical products (such as household appliances, cars, clothes etc). The aim of this research is indeed to highlight the effect of consumer ethnocentrism on a field where the national origin of a product might not be as well known, neither does a physical product actually have to cross national borders. Consumers might feel a strong preference for domestic products and animosity toward foreign products due to, for example, feelings of national pride or due to some historical event. These ethnocentric feelings can manifest into a weighing factor when it comes to purchasing and evaluating products. However, with mobile games, the national origin might not be as clear and the product is a simple data package, easily downloaded from a common source shared by the whole world. A truly modern and globalized product to be simultaneously shared and enjoyed with the global online community. Thus this research aims to bring a digital and more modern aspect to the vast amount of research about consumer ethnocentrism already conducted.
1.2. Research Objective and Research Questions
Based on the theory of ethnocentrism (Shimp & Sharma 1987), this paper aims to find how does consumer ethnocentrism affect the consumer behavior of Chinese and Finnish students in the mobile game market and how do they compare to each other. This study also investigates the cultural differences of the two target segments, and what kind of implications and cues may be derived from such cultural differences. Finally, this study aims to give clear managerial implications for actors in the mobile game market, and which variables to be taken into account when expanding or penetrating into the Chinese or Finnish mobile game markets.
The purpose of this study is multi-levelled. First, the purpose is to find the cultural differences between China and Finland. Second, what kind of effect can the cultural differences and the demographic attributes have on the consumer ethnocentrism of the target groups. Third, what kind of implications does the consumer ethnocentrism have on the target groups' consumer behavior in the mobile game market.
The main objective of the research is to answer its research question. To support the research question, sub-questions are derived from it to give a better rounded and supported perspective of the question in hand. The main research question is:
- How consumer ethnocentrism affects the consumer behavior of Chinese and Finnish young consumers in the mobile game market?
The sub-questions are:
- How does the consumer ethnocentrism affect the purchase intentions of Chinese and Finnish young consumers in the mobile game market?
- Does the mobile game industry follow the theoretized models of consumer ethnocentrism and what implications would it have?
The main research question is the core of the research, while the sub-questions draw in more of the context of mobile game industry and implications of consumer ethnocentrism. How does consumer ethnocentrism affect the product quality perception of domestic and foreign products, and what kind of association does that have with purchase intentions?
1.3. Scope and Limitations
A wide variety of research and case studies has been conducted about consumer ethnocentrism and its relation to consumer behavior. Different nationalities, product industries and consumer segments have been studied, and more often than not the studies conclude that more research is in need to be done (Tong & Li 2013, 504). Tong & Li (2013) also highlight that when studying ethnocentrism, there are so many variables (product industry, nationality, societal status, cultu- ral animosity, cosmopolitanism etc.) that it is usually recommended to conduct studies about how consumer ethnocentrism manifests in different consumer segments in certain product ca- tegories, as the results tend to vary. Therefore, while some conclusions can definitely be drawn from levels of ethnocentrism demonstrated by a target segment, it should be noted that it can often be very industry- and country-related.
Based on the aforementioned, this research is done strictly regarding the mobile game industry.
So, the results derived from this research are to be analyzed from the scope of the mobile game industry, and how do the Finnish and Chinese students compare to each other within this field.
In addition, when referring to Chinese in this paper and in analyzing the results, Chinese strictly refers to the people of People’s Republic of China (Hong Kong, Singapore etc. are excluded), as the warping measures implemented in China in the past century has forged a unique culture, different from those in the Chinese diaspora (Piron 2006, 328).
1.4. Existing Literature
There exists a vast amount of research conducted on consumer ethnocentrism. The phenomenon of consumer ethnocentrism is well researched, and its effects on consumer behavior are usually researched in a case study. For example, in a case study conducted by Tong and Li (2013, 501), it was found that consumer ethnocentrism had a positive effect on the quality perception of domestic sports shoe brands in the eyes of Chinese students, yet it does not have any effect on the purchase intention when it comes to foreign sports shoe brands. One research found that conservative values in Turkish people was positively associated with consumer ethnocentrism, which in turn had a positive association with negative attitudes toward foreign tourists and fo- reign direct investment (Altinta & Tokol 320, 2007).
Due to the case study nature of prior research, the effects of consumer ethnocentrism can not be universally applied across industries and segments. As such, the theory of consumer ethno- centrism can be utilized to create a hypothesis to test, but the results of prior studies should not be used to create excessive assumptions about the ethnocentric consumer behavior of the seg- ments analyzed in this paper.
While the subject of this paper is consumer ethnocentrism, the context is the mobile game mar- ket. The mobile game market is a relatively new industry, and there has not been wide research about how consumer ethnocentrism affects consumer behavior in this specific industry, so to draw any conclusions, the industry should be taken a look at.
1.4.1. Mobile Gaming Industry
According to superdataresearch.com mobile game industry is a booming industry and in a few years it has developed into the second biggest gaming industry in the world, with the PC gaming industry being the biggest. In year 2015 the industry grew to a total of close to 25 billion USD, with PC industry totaling 36,3 billion USD (superdataresearch.com). US, Japan and China all generate mobile game revenues of more than 5 billion USD each, and Asia Pacific as a whole constitutes 56% of the total global revenue (gamesindustry.biz).
As can be seen, the mobile games have matured into a significant industry, and currently is the second largest games platform by market share in the world today (superdataresearch.com).
Moreover, the mobile games market has been predicted to maintain its strong growth in the coming years and cover 38% of the global games market in year 2017 (2015.gmgc.info). Ho- wever, the players in the industry have consolidated their positions, and recently the industry has been dominated and covered by several companies that have ’frozen’ the competition with some of the leading names in the industry being Zynga, Supercell and Activision (superdatare- search.com). In the following pages there will be a short mobile game market review of Finnish and Chinese markets.
1.4.2. Chinese Mobile Gaming Industry
Gaming has become a dominant and important pastime for most Chinese internet users, and there exists many important differences related to the cultural, political, and economic factors between gaming markets in China and the West (Kshetri 2009, 158-159). The gaming industry is fast growing in China, even though it is still somewhat hampered by piracy and government control (Kshetri 2009).
While China already became Asia’s biggest online gaming market in 2006 (overtaking South Korea), it is its mobile game market that has immense potential (Kshetri 2009, 163-164).
Kshetri (2009) also notes that in 2005, China’s first mobile multiplayer role playing game, Age of Fantasy, was launched on China Mobile’s network, and since then major portals and compa- nies such as Sina.com and Shanda have moved into the market. Major game studios like Elec- tronic Arts work on mobile game versions of games they sell as packaged products in Europe, following Chinese game studios in aiming to tap the potential of new cellular technologies (Kshetri 2009, 160-161). Already in 2008, China had over 600 million mobile subscribers, and while Chinese youth are thought to be a major driving force behind the growth of the gaming industry, a lot of Chinese are unable or unwilling to invest in high-priced console and TV-based game sets, making mobile gaming the apt opportunity for growth (Kshetri 2009, 162-163).
If a company wants to tap into the potential of the Chinese market, they are facing a challenge of seeming too foreign. Chinese have been seen to prefer games that appeal to Chinese culture and have some degree of bias toward domestic products (Kshetri 2009, 164-165). This naturally creates challenges for any foreign company wishing to succeed in the Chinese gaming market and would imply certain tendencies toward the purchasing behavior of the Chinese.
1.4.3. Finnish Mobile Gaming Industry
Finland has been on the forefront of the mobile industry since the inception of Nokia to the mobile phone markets. While China is a massive market for mobile games, Finland gives an interesting comparison due to a relatively small population, yet being the home of two jugger- nauts of the mobile gaming industry – Rovio and Supercell.
According to statista.com, in 2017, revenue in the industry is forecasted to amount to a total of 39 million USD. The revenue has shown steady growth and is expected to continue at an annual growth rate of 5,8% resulting in a market volume of 49 million USD in 2021. User penetration is at 32,7% and the average revenue per user currently amounts to 25,97 USD (statista.com).
Finland is a relatively steady market in penetration, revenue and growth.
Mobile gaming industry is steadily growing in Finland, but it is still completely dwarfed by China’s mammoth 8,22 billion USD revenue forecasted for 2017 (statista.com). However, with Finland’s rich history in the mobile industry and the Finnish powerhouses of Rovio and Super- cell in the mobile gaming industry, the comparison between these countries provides an inter- esting background for study.
1.4.4. Millennial Generation’s Mobile Usage
This paper focuses on university students and it can safely be assumed that most of them belong to similar age demographic. This particular age demographic should thus be taken a closer look
at to better assess the customer behavior and attributes of the target segments of this research paper.
The acceleration of technological development and the proliferation of technology to every facet of life in the past 20 years is unprecedented, and the generation that has come of age during this time period (1982 – 2000) is commonly referred to as the Millenials (Moore 2012, 436). According to Moore (2012), this progress of technology has also brought with it a certain homogeneity across national boundaries creating similarities in attributes and behavior in Millennials globally. However, it is also argued that Millennials should not be considered homogeneous, but the homogeneity should rather be seen as an attribute in the groups as populations of study – such as university students (Gurau 2012, 103). Therefore, though Millennials share common traits, such as growing up surrounded by technological innovations, belonging to a specific group within the generation could be a better indicator of certain attributes rather than just belonging to generation Millennials.
Millennials may generally be described as being confident and self-reliant, technologically- savvy and connected, open to change and diversity, closely connected to family and social organizations, service oriented, effective at multitasking, and expectant of immediate access to information (Young & Hinesly 2012, 147). Millennials are also described as self-centered, environmentally-conscious and displaying low levels of brand loyalty while also spending more than previous generations (Gurau 2012, 103).
Millennials are a prime demographic when researching mobile game usage. A research by Moore (2012, 440) shows that compared to Baby Boomers Millennials download ”Gaming”
Apps in a vastly bigger proportion. Millennials in general use interactive media for information seeking, entertainment, increased utility and are also more likely to engage in social networks from their mobile phones compared to previous generations (Moore 2012, 440). The differences are more pronounced between Millennials and Baby Boomers than with Generation X, but it can safely be assumed that Millennials are more active in using mobile games than previous generations.
1.5. Research Structure
The structure of the research paper follows a similar model as previous published work in the field. It presents the topic from a wide perspective before narrowing down to the specific target of the research. The paper starts with introducing the field of topic and its specifics, before moving on to present the theoretical framework and the key concepts on which the research is built. Then the methodology for the research, collection of data and analysis of empiric data is explained, after which the collected data is presented and analyzed. Finally, there will be a discussion about the results of the research, comparison to earlier literature on the topic and some managerial and further research implications are presented.
After the introduction and background of the topic, the theoretical framework of the research is presented. As this research is conducting a survey on two culturally dissimilar groups and measuring their ethnocentric tendencies in their consumer behavior, the theory part consists of two main halves: Consumer ethnocentrism and cross-cultural research. Each section starts with explaining the background of the phenomenon and how the field has developed. It aims to explain where the concepts derive from and what kind of implications do they have for marketing research. After the background is explained, the theory will delve deeper into the concepts and the many dimensions the concepts might have. Consumer ethnocentrism will be explained, along with the many variables that walk hand-in-hand with it, such as consumer animosity, consumer xenophobia and the concept of country-of-origin. In cross-cultural background, what culture means will be explained, as will be how the values of a culture are formed. As this will be a comparison between two cultures, a cross-culturally valid model of measuring cultural characteristics is needed, thus Hofstede's theory of Cultural Dimensions will be presented and used when analyzing both China's and Finland's cultural features and how would those influence their consumer behavior.
This research is done via an internet survey in two countries. To measure and then analyze the empiric data collected, special tools are needed. The tool chosen is CES -tool to measure consumer ethnocentrism in cross-cultural research as CES (Consumer Ethnocentrism Scale) is specifically designed for research of this kind.
The surveyed segment receives the survey questionnaire link via an email, and the questionnaire and instructions will be presented in both of the receiving segments' native languages – Finnish and Mandarin Chinese (simplified). The Chinese questionnaire will be translated from its original English form by a language award winning native Chinese speaker, and then back- translated by a bilingual Chinese-English speaker. This is done to minimize the chance of any mistake in translation. The Finnish version will be translated by the author of this paper from the original English form and the translation verified and back-translated by two other native Finnish speakers.
Based on the theory, a model is presented how consumer ethnocentrism affects product quality perception and purchase intention. This model is tested with Covariance-Based Structural Equation Model (CB-SEM) run on both of the population samples. The results of the CB-SEM are then compared to the hypotheses presented, and the validity and reliability of the model are evaluated.
Finally, concluding the paper, ideas for future research is presented, what kind of limitations one needs to take into account when studying this research study and what assumptions can be made based on this paper.
2. CONSUMER ETHNOCENTRISM
How we perceive each other and ourselves is deeply rooted in the human psyche, and that is a complex target of study. Researching human behavior has been the objective of many academic disciplines and methods, for example, psychology, anthropology, and sociology. As a result, though consumer ethnocentrism is a concept used in marketing research, many of the concepts and features of it come from research delving in various different disciplines.
2.1. Background of ethnocentrism
The early conceptualisations of ethnocentrism were mainly used in anthropology, where the concept meant the innate inability to view ”reality” from any other view point except the one of our own culture or social group (Thomas & Hill 1999, 378). Thomas & Hill (1999, 378) further conclude that ethnocentrism is seen as a frame of reference, through which individuals who lack knowledge or experience with values of foreign background are inclined to interpret such cultures having meanings similar to those of the individual’s own culture. It represents a universal tendency to view an individual's own group as central, interpret others from a group perspective, leading to rejection of dissimilar cultural groups and accepting, straightforward, similar cultural groups (Shimp & Sharma 1987, 280). Symbols and values of an individual's own group are hold to the highest regard, while values of dissimilar cultural group are hold in contempt (Shimp & Sharma 1987, 280; Luque-Martinez et al. 2000, 1354). For instance, Chinese people, even those living abroad and being overseas citizens, might tend to be very ethnocentric and self-conscious of their own history and language (i.e. establishing Chinatowns – sanctuaries of Chinese culture), while Finnish people might tend to see their relative closeness-to-nature as a defining trait of Finns.
Social psychology defines ethnocentrism as an individual's generalised attitude where the individual believes in the intrinsic superiority of his or her own cultural or social group, and thus compares all the other cultures in relation to his or her own standpoint (Thomas & Hill 1999, 379). Thomas & Hill (1999, 379) note that this sort of ethnocentrism is thus evaluative, a tendency to judge other cultures with an individual's own culture's standards. To put it quite
appropriately, Sigmund Freud defined ethnocentrism as the ”narcissism of the group” (Luque- Martinez et al. 2000, 1354), and the antecedents are cultural openness, world-mindedness, conservatism, collectivism, animosity, materialism, salience and dogmatism (Altintas & Tokol 2007, 309; Vida et al. 2008, 329).
Ethnocentrism is also deeply rooted in sociological research (Chaudhuri & Deb 2014, 648) and the term ethnocentrism – preference for home country – is derived from social psychology (Josiassen, Assaf & Karpen 2011, 629). In sociology, the term group is at the base of most of its theories, and it is used to refer to an amount of people, from an individual's point of view, that forms a psychologial entity, and does not exclusively refer to nationalities or ethnic groups, but also to groups made up of intellectuals, scholars, artists, criminals, etc. (Luque-Martinez et al. 2000, 1354).
As the basis of research in consumer ethnocentrism derives on many theories built in sociology, the concept of group is at the centre of it. One of these theories is the social identity theory by Tajfel and Turner in year 1986, which asserts that individuals have a tendency to classify and categorize people into different groups (Josiassen et al. 2011, 629; Fernandez-Ferrin et al. 2015, 78), similar and dissimilar to an individual's own group (Chaudhuri & Deb 2014, 648).
Individuals classify themselves into groups called in-groups which are set apart from the rest – the out-groups (Shimp & Sharma 1987, 280). This classification helps in creating and maintaining a sense of identity, but may also drive a wedge between the groups of identification, generating conflict and barriers between the two groups (Fernandez-Ferrin et al. 2015, 78).
Consumers tend to make purchases based on the images and identity that they want to relate to, for example, consumers might want to be associated with a famous sports star and thus purchase the merchandise associated with the star.
Ethnocentrism is a general term that can be applied to all social groups, such as families, friends, communities, race, religion or nations, and these are not necessarily mutually exclusive. An individual may identify in multiple social groups and identities, and their ethnocentric tendencies are based on a mix of rational judgment and/or moral judgment (Fernandez-Ferrin et al. 2015, 78). The extent to which one identifies with a specific social identity then asserts the intensity of the influence of the social group on the perception of and regard for in-groups
and out-groups. Furthermore, this intensity of identification is seen to vary substantially from individual to individual (Fernandez-Ferrin et al. 2015, 78).
However, in the case of consumer ethnocentrism, the interest groups are the nations, and therefore the results and the data derived is economic in nature. According to Fernandez-Ferrin et al. (2015, 78), the division of the world into countries and nationalities means that individuals have their own group, the in-group (their own country), and the world outside are considered unrelated and as out-groups (other countries). Fernandez-Ferrin et al. (2015, 78) further adds that this division means that the products from their own country are considered in-group products, while the products from the outside are considered products from the out-group, and thus unrelated and natural tendency is to favour own group's products over their unrelated- group's counterparts.
Another theory of interest when it comes to ethnocentric behavior is the realistic group conflict theory. The theory argues that inter-group behavior is the result of functional relationships between groups, which in turn are deeply affected by the objectives, interests and desires of the groups in question (Fernandez-Ferrin et al. 2015, 78-79). When the objectives of the groups are incompatible, it may give rise to a conflict. This animosity can be generated from various different sources such as war animosity, economic animosity or diplomatic conflict. Countries which perceive another one as having wronged or committed crimes in a military conflict;
bullied or strongarmed in political or economical decisions; or otherwise having a negative impact on the country via corruption or negative diplomacy, are thought to feel animosity toward the other country (Fernandez-Ferrin et al., 2015, 78-79). This in turn can, naturally, have a negative impact on the trade and political relations in the country due to the inflamed ethnocentrism.
The theory of planned behavior is an attitude-intention-behavioral model which aims to demonstrate the degree to which an individual's social environment influences his intentions, decisions and behaviors (Luque-Martinez et al. 2000, 1355). In case this theory is applied to the context of purchasing behavior, the theory implies the consumer behavior of an individual is greatly determined by the sought after approval of the society, and, especially, the individual's closest social environment (friends and family i.e. The in-group) (Wang & Chen 2004, 391).
Consumer ethnocentrism was thus devised as an illustration of the normative beliefs (should a
foreign product be purchased or not) surrounding the appropriatiness of purchasing products from an individual's own group versus the inapproriatiness of buying foreign products (Wang
& Chen 2004, 391; Fernandez-Ferrin et al. 2015, 79). Consumer ethnocentrism should though be viewed as completely separate from political regulations on trade, such as trade tariffs, which might limit the options for domestic consumers. Domestic consumers might not have an option to buy foreign products due to politically inflated prices, so they consume domestic alternatives, but this is separate from the socio-psychological concept of consumer ethnocentrism.
Ethnocentrism is generated by situational and personal sources. Societal culture is the first situational factor, and it is the lens through which members of a social group perceive the world and in a way are also culturally bound by (Thomas & Hill 1999, 379). Such perception usually leads to individuals taking for granted the similarities between their own culture and the one perceived, yet at the same time accentuating and emphasizing any cultural differences, which, more often than not, the individual sees as inferior (Thomas & Hill 1999, 379). Societal lens may be quite clearly seen in how adopted children grow up to perceive the world via their adoptive parents' culture, not their biological parents'.
The second situational factor is cultural distancing which means the degree to which an individual intends to relate to an individual from another group or country which is culturally different (Thomas & Hill 1999, 379). The cultural differences may be in beliefs, ethnicity, language, social structure, communication behavior, values, concepts of time, rituals etc.
(Thomas & Hill 1999, 379; Sharma & Wu 2015, 92). Thomas & Hill (1999, 379) elaborate that the degree to which an individual experiences these differences will depend on the tolerance and acceptance (or lack there of) of the perceived differences between an individual's own culture and those of other cultures. The perceived similarities between an individual's own culture and that of another one, will develop favourable and positive feelings toward that culture, while dissimilarities will, accordingly, develop a disliking for such groups (Thomas & Hill 1999, 380). For example, Finland may easily trade and exchange with Sweden, Germany and Russia due to shared history and cultural traits. Such positive reciprocal relationship may become increasingly difficult as cultural differencies grow.
Direct cultural inter-cultural knowledge and experience (or lack there of) with cultures can alter an individual's views about different cultures on a more personal level. To correctly predict and
evaluate cultures different from one's own, needs sufficient knowledge of the culture which one encounters and interacts with and in this case, knowledge refers to the beliefs and prejudices which the individual holds about the culture, and these may be derived from personal experiences or cultural stereotypes (Thomas & Hill 1999, 380). Cultural stereotypes and personal beliefs are two distinct concepts, and when there is a lack of personal experiences, an individual tends to evaluate another culture's behavior based on the stereotypes. Hence, it can be argued that ethnocentrism is generated by the lack of direct knowledge of a culture (Thomas
& Hill 1999, 380).
2.2. Ethnocentrism in consumer behavior
Ethnocentrism is thus a complex phenomenon deriving from many socio-psychological factors, and as a concept very plural. It has evolved from a purely sociological concept to a psychosocial construct with relevance to individual-level personality systems as well as the more general social- and cultural analytical frameworks (Shimp & Sharma 1987, 280). Consumer ethnocentrism as a term was created to relate marketing and consumer behavior to the concept of ethnocentrism (Chaudhuri & Deb 2014, 648). Such behavioral patterns have become increasingly central to marketing research (Vida et al. 2008, 328), and for many years the subject of interest in both international marketing and consumer behavior (Luque-Martinez et al. 2000, 1355; Kaynak & Kara 2002, 929). What makes it of particular interest is that consumer ethnocentrism has been seen to exert a stronger influence than marketing strategies when it comes to purchasing decisions (Altintas & Tokol 2007, 309). Indeed, ethnocentrism has enormous implications on a consumer’s attitude formation toward foreign products and brands, purchase intentions and purchasing decision between domestic and foreign (Reardon, Miller, Vida & Kim 2005, 740). It is the globalization and free trade which has led to ethnocentrism becoming a prevalent topic of study in marketing.
Consumer ethnocentrism (CE) was a term created by Shimp and Sharma (1987, 280) and defined as ”the beliefs held by consumers about the appropriateness, indeed morality, of purchasing foreign-made products” (Kara & Kaynak 2002, 933; Klein, Ettenson & Krishnan 2006, 304; Altintas & Tokol 2007, 309; Garma et al. 2008, 460; Vida et al. 2008, 329; Wei 2008, 2; Tong & Li 2013, 494; Fernandez-Ferrin et al. 2015, 74). CE describes the tendency of people
to reject the purchase of foreign goods on the grounds of moral judgment, due to the act being seen as unpatriotic (Shimp & Sharma, 1987, 280; Luque-Martinez et al. 2000, 1355; Reardon et al. 2005, 740; Klein et al. 2006, 304; Wei 2008, 2; Akram et al. 2011, 292; Tong & Li 2013, 494). Consumers who express a high degree of ethnocentrism might be concerned that purchasing foreign products might lead to a loss of jobs in industries threatened by imports and overall be harmful to domestic economy (Shimp & Sharma 1987, 280; Kaynak & Kara 2002, 933; Reardon et al. 2005, 740; Klein et al. 2006, 304; Altintas & Tokol 2007, 312; Tong & Li 2013, 495). The higher the degree of importance a consumer places on whether the product is made in the consumer's home country, the higher the consumer's ethnocentric tendency (Wang
& Chen 2004, 391; Fernandez-Ferrin et al. 2015, 74). Indeed, ethnocentrism strongly influences attitude measures of foreign products including general product beliefs and willingness to purchase (Suh & Kwon 2002, 667), and foreign products might even be objects of contempt for highly ethnocentric consumers (Shimp & Sharma 1987, 280). As such, domestic companies might aim to instigate such ethnocentrism, and downplay the virtues of foreign products while praising the domestic quality to increase their sales. For example, a Finnish company might state that Finnish meat is much better and healthier than foreign.
Results and sources vary in cross-cultural context, yet Vida et al., found that the underying factors in ethnocentrism are socio-psychological, political, economic and demographic. (2008, 329). The effects of CE has been studied both in developed and developing countries (Vida et al. 2008, 329; Akram et al. 2011, 292), and in general some consumers have been prone to ethnocentric behavior when evaluating products (Luque-Martinez et al. 2000, 1355). In some cases, consumers express ethnocentrism and animosity toward foreign products even when a domestic alternative is not available (Wei 2008, 2). Empirical evidence suggests that the level of product involvement, perceived necessity and the extent to which the individual feels the foreign-made product might threaten the consumer's personal or economic welfare are important variables in determining the level of ethnocentrism (Reardon et al 2005, 740).
In contrast to ethnocentric consumers, non-ethnocentric consumers have a tendency to evaluate foreign products on their own merits – the utility and benefits it offers to consumers - and place less emphasis on the country of origin of the product (Shimp & Sharma 1987, 280; Watson &
Wright 2000, 1153; Kaynak & Kara 2002, 934; Reardon et al. 2005, 740). Ethnocentrism is a continuum, where at the high end of ethnocentrism, consumers believe purchasing a foreign
product is morally wrong, while at the other end, non-ethnocentric consumers might even evaluate a foreign product higher because it is produced outside of the home country (Shimp &
Sharma 1987, 280; Reardon et al. 2005, 740).
The concept of consumer ethnocentrism may improve and develop the understanding of how consumers and corporate customers compare domestic and foreign products, and what are the many factors and variables coming into play when making the purchasing decision; how and why can the various forms of bias affect the consumers judgment (Kaynak & Kara 2002, 933;
Akram et al. 2011, 292). Due to the plurality of perspectives, consumer ethnocentrism has been researched from a number of view points, such as how it relates to lifestyles, shortage of domestic alternatives, corporate identity, national identity and nationalism (Altintas & Tokol 2007, 309). A company that comprehends the challenges of ethnocentrism, and builds marketing accordingly, might then be able to achieve considerable competitive advantage.
Consumers may also prefer home-made products without being ethnocentric. If products from a particular country enjoy a very positive country image – a country being renowned for specific work, an individual from that country may prefer domestic products without having ethnocentric tendencies. An individual appreciates the qualities that the product has and the work behind it, and the country of origin does not influence the consumer's perception of the product, even if the country of origin is the individual's home country. For example, a German consumer might appreciate the meticulous, detailed approach and handiwork that goes into the manufacturing and design of German cars, and those, the product country image, being the underlying reason for purchase decision rather than ethnocentric preference. (Josiassen et al.
2011, 632). Further examples being, the Chinese might appreciate the tradition of jade, porcelain and silk handicraft in China (with such materials traditionally coming from China), and Finns might appreciate Finnish end-product in wooden buildings without either of the groups necessarily feeling ethnocentric about it.
2.2.1. Antecedents of Consumer Ethnocentrism
As the phenomenon of ethnocentrism is very robust, ethnocentrism exists even in countries where the majority of consumers prefer imported products (Fernandez-Ferrin et al. 2015, 74).
In such cases, low degree ethnocentric consumers from developing countries usually have very positive images and stereotypes of foreign products from developed countries (Akram et al.
2011, 294). For example, a consumer from China may view a Korean electronic device with much acclaim due to the relatively brandished image of Korean electronics when compared to Chinese brands.
Consumer ethnocentrism is a dynamic concept that is closely related to nationalism, conservatism and patriotism as well as to the degree of cultural openness and world-mindedness (Luque-Martinez et al. 2000, 1356; Kaynak & Kara 2002, 933; Suh & Kwon 2002, 665;
Reardon et al. 2005, 740; Wei 2008, 3; Josiassen et al., 2011, 630). Patriotism, conservatism and ethnocentrism in customers have been seen to have significant influence on the consumer's decision to buy a domestic or imported product (Luque-Martinez et al. 2000, 1355; Deb &
Chaudhuri 2014, 649), and many times they have a negative influence on the perception of the quality of the imported products (Sharma & Wu 2015, 96). An individual's pride and attachment toward their nation supplies them with the necessary motivation to prefer local brands over global brands (Deb & Chaudhuri, 2014, 649). Countries with a strong national identity may very well tend to be more ethnocentric due to their strong identity, when compared to countries with not as strong a national identity.
Tong and Li (2013, 494) note that patriotism and nationalism are the antecedents of ethnocentric consumer behavior, with patriotism referring to a strong feeling of loyalty and attachment toward an individual's own country without any ill emotions or hostility toward other countries, while nationalism refers to perceiving your home country as superior to others and as a result the said country should be perched up and be dominant. As such, nationalism is similar to ethnocentrism in the sense that they both usually involve positive attitudes regarding in-groups and negative attitudes regarding out-groups. This can lead to seeing domestic products as of superior quality, but nationalistic attitudes do not always necessarily trigger negative attitudes or discrimination toward foreign products, just a preference for domestic ones (Altintas & Tokol 2007, 312). Nationalism should not be thought of as bigotry, as in some cases it might be a case of sincerely preferring and wanting to help one’s own country to succeed as well as possible.
Nationalism is a different concept from ethnic affiliation. While nationalism refers to a measure of loyalty, attachment, preference and sense of superiority regarding a nation, ethnic affiliation
is a race based concept (Vida et al. 2008, 332). An objective view of ethnicity refers to sociocultural features such as language, social networks, religion, daily practices and even the biological aspects – as in, the race. Thus, ethnicity entails a means of self-identification in which individuals categorize themselves and others into different subgroups based on ethnic labels and emotional values attached with it (Vida et al. 2008, 332). Some individuals might have considerable loyalty toward their ethnic group, and not so much toward their actual nation, while some might feel a sense of dual allegiance toward their race and nation. Due to this, there have been calls to not limit research about consumer ethnocentrism on nations, but rather conduct it on ethnic groups (Vida et al. 2008, 332). However, Finland and China are fairly monoethnic, with a clear majority of ethnic Finns and Chinese of Han origin, so, in this research, we can safely assume that in a marketing research, nationalism and ethnic affiliation are mutually rather inclusive, and no further divisions between ethnic groups need to be made in the survey.
While patriotism, conservatism, world-mindedness, collectivism, animosity, materialism, salience, dogmatism, and openness have been found as some of the antecedents of consumer behavior (Suh & Kwon 2002, 665; Altintas & Tokol 2007, 309), globalization obviously can have a strong influence on how strong of a force such antecedents can extert to globalized consumers.
Suh & Kwon (2002, 665) theorize that global openness directly affects consumer ethnocentrism.
Suh & Kwon (2002, 665) add, that this consumer ethnocentrism then in turn affect how a consumer evalutes products and how reluctant a consumer is to buy foreign products. The reluctance can be magnified if the product judgment is also clouded by consumer ethoncentrism in a negative way.
A tsunami of deregulations based on free trade has been the key in creating a new environment for consumers, wherein foreign products are easily accessible. This has seen the rise of the cosmopolitan consumers, consumers acting in a global culture and the more globalized the consumer behavior, the less does the cultural and national differences affect their purchasing behavior (Suh & Kwon 2002, 666).
While there have been studies that have found that ”cultural openness” was negatively related to consumer ethnocentric tendencies, and ”worldmindedness” has a positive effect on how willingly professional buyers buy foreign products, other studies have also debunked the concept of a global consumer (Suh & Kwon 2002, 666). This might be due to effects of globalization varying from culture to culture – the global culture has a different influence on different cultures. The unique culture and psychology in each country might determine the processes and influence of globalization on that particular country and the mindset of its consumers (Suh & Kwon 2002, 666).
The concern for the morality of the purchase can many a times lead a consumer to purchase a domestic product over an imported one, even when the quality might be of lesser standard (Wang & Chen 2004, 391). For example, Japanese consumers tend to evaluate their domestic products higher than their foreign counterparts even when the quality of the product might be worse, while consumers in the United States rate their domestic products higher only when the products are superior to competition (Wei 2008, 3).
Emotions may influence a consumer choice of purchase. Emotional factors usually imply factors which are rather independent of knowledge (Luque-Martinez et al. 2000, 1356). Luque- Martinez et al. (2000, 1356) expand that such affection can lead to a different evaluation of products based whether its national or imported, depending on the degree of ethnocentrism in an individual. The degree may vary from an individual to the next, and thus the influence of emotions, often deriving from dogmatism and patriotism, may equally vary a lot (Luque- Martinez et al. 2000, 1356). Furthermore, the degree of ethnocentrism to consumer behavior can usually be determined based on many environmental variables such as previous states, social background, age or educational level thus creating a potential bias in the establishment of ethnocentrism levels (Luque-Martinez et al. 2000, 1356; Watson & Wright 2000, 1152).
Emotions and patriotism may be closely related, and in certain traumatic events can lead to a surge in consumer ethnocentrism. National traumas, such as terrorist attacks, f. ex. 9/11 in the United States, or natural disasters like the Tsunamis in Southeast-Asia in 2004, and in Japan in 2011, may lead to an increase in ethnocentrism (Wei 2008, 3; Fernandez-Ferrin et al. 2015, 74).
2.2.2. Consumer ethnocentrism in different countries
Consumer ethnocentrism is a global phenomenon, as shown by research in various countries – developed and developing -, but the extent to which the consumers express ethnocentrism in their consumer behavior, greatly varies from country to country (Kaynak & Kara 2002, 933;
Wang & Chen 2004, 392; Chaudhuri & Deb 2014, 647). Its influence varies a lot based on how technologically or economically advanced/developed the country is (Wang & Chen 2004, 392).
Even though people from developed nations tend to be less ethnocentric when compared to their developing nation counterparts (Akram et al. 2011, 294), research shows that consumers in developed countries hold the quality of their domestic products in higher regard than that of imported ones, while the reverse is true for consumers in developing countries (Wang & Chen 2004, 392).
As purchase preferences are influenced by the evaluation of the quality of domestic/imported products, the impact of ethnocentrism will be different between developed and developing nations. Consumers in developing countries have increasingly been exposed and influenced by Western culture via media, modern forms of distribution, tourism and immigrants and thus have become well acquainted with global brands, and more often than not prefering those over the local ones (Akram et al. 2011, 294). Research has shown that in developing countries, socio- economic and technological development of the country of origin and the dimension of lifestyle of the home country factor in (Wei 2008, 3). Another factor coming into play is, if the imported product is related to conspicious consumption, meaning that such a product has symbolic value in a developing country. Foreign products may have a strong symbolic weight in developing countries, and as such may vastly accentuate the discrepancy of ethnocentrism when evaluating products of different origins (Wang & Chen 2004, 392). In some cases, consumers might even associate the global image of the brand to higher quality of the product, as the product must be world class if it is globally accepted, desirable and demanded (Akram et al. 2011, 293-294).
Though ethnocentrism may be very pronounced in developing countries, the combined effect of the higher perceived quality of imported products from developed nations (Akram et al. 2011, 294) combined with the symbolic value it brings along with it, may counter the negative effect of ethnocentrism in some cases (Wang & Chen 2004, 392). The symbolic value may be inspiration behind the purchase, and this phenomenon is not limited to the leisure class – people
of all social classes engage in conspicuous consumption, bolstering their social status and symbolic wealth (Wang & Chen 2004, 393). Though China has a strong concept of ”face”, and thus symbolism and status is central to one's standing in the society (Wang & Chen 2004, 394), this case study is conducted about the mobile market, where a lot of products are available for download for free, the symbolic value of having such game on a mobile device must be as minimal as it gets. Based on this, the point of conspicious value is thus disregarded in this study.
If a product is not produced domestically, consumers have no choice, but to go for a foreign alternative. For example, in a geographically isolated country like Finland, agriculture is challenging due to the climate, thus there is no choice, but to import a vast amount of agricultural products (coffee, wine etc.). In such a case, even highly ethnocentric consumers may have favourable attitudes toward another culture - ethnocentrism does not always equal an animosity toward all things foreign, but rather a preference for domestic -, and the important question is which countries are preferred for ethnocentric consumers when domestic alternatives are unavailable (Watson & Wright 2000, 1153). In the aforementioned cases, the concept of in-groups and out-groups is central, as it has been argued that there is then a preference for countries which are culturally similar (Watson & Wright 2000, 1153), the in- groups and out-groups of countries are set in a pecking order of sorts. To put the concept into functional terms, consumer ethnocentrism presents the individual with a sense of belonging, an identity, and as such a clear perspective of what purchase behavior is appropriate and acceptable for the in-group and what is not (Shimp & Sharma 1987, 280).
2.3. Consumer ethnocentrism in transitional economies
Though it was initially researched mainly in advanced economies (Western world and Japan), consumer ethnocentrism has since then been researched in developed and developing countries as well. As China, a transitional economy, is the other part of this study, in the following, there will be some of the main features of consumer ethnocentrism in transitional economies.
Over the last 50 years, advanced nations have been the engine behind economic growth of the world, but now their slice of growth is ever shrinking, and developing and transitional economies represent the next great opportunity for global growth (Klein et al. 2006, 304).
Hence, there is an increasing need to understand the attitude transitional economy consumers have toward foreign products and goods (Klein et al. 2006, 304-305).
As was stated, in some economies foreign products are evaluated higher than domestic ones, as the the evaluation of the quality of domestic/imported products will influence their purchase preference (Wang & Chen 2004, 392). Decades of buying low-quality goods from state-owned factories has led to such a situation in China, representing this context. Previous studies in advanced nations have found consistent results that there is a strong link between ethnocentrism and judgments concerning the quality of domestic and foreign products, yet however, in transition economies there is a possibility that consumers make a trade-off between nationalism and product quality (Klein et al. 2006, 305). However, Vida et al (2008, 338) argue that ethnocentric tendencies in transitional economies will transfer directly to negative views of foreign brand advertisements and from there on indirectly toward these foreign brands.
Klein et al (2006, 316) found in their research of Chinese and Russian consumers' ethnocentrism, that such consumer ethnocentrism research can be conducted with the same methods as in advanced nations. Klein et al. (2006, 316) conclude the Chinese were found to be ethnocentric, yet at the same time view domestic goods as inferior to imports. Wang and Chen (2004, 392) found the same results, that Chinese consumers, like most consumers in developing countries, regard imported products as superior to the domestic ones.
2.4. Country-of-Origin
Consumer ethnocentrism as a concept is mainly about preference (or lack thereof) for all things domestic. Country-of-origin instead refers to where the product comes from, which country gets associated with the product, and thus it is an important variable factoring in on the purchase decision (Knight 1999, 151). It has been defined by Nagashima in 1970 as ”the picture, the reputation, the stereotype that businessmen and consumers attach to products of a specific country. This image is created by such variables as representative products, national characteristics, economic and political background, history, and traditions” (Knight 1999, 151).
This image may also be viewed as reflecting consumers' generally held perception of a particular country's quality of products and nature of the people, and country-of-origin effect
implies any bias the consumer may hold regarding the country of origin of the associated product or service (Knight 1999, 151-152).
With globalization consumers are increasingly exposed to products from various different countries, and as such, how consumers perceive products from a country, the effect of country- of-origin cues are more salient (Garma et al. 2008, 456). The majority of studies about country- of-origin have explored its efffect on consumers' perception of quality, attitudes toward a product and their purchase intentions, and has since, due to globalization of production, expanded from ”made in” or ”assembled in” concepts to also include ”designed in”, ”parts supplied by” etc., representing the plurality of cues consumers may take in when evaluating products (Garma et al. 2008, 457-458; Tong & Li 2013, 493 – 494). For example, a product might be designed in USA, have the components manufactured in Japan, and the product assembled in Vietnam.
When consumer ethnocentrism is involved, the relationship between country-of-origin and the quality image of imported products is especially strong, and therefore the country-of-origin is an important consideration when researching ethnocentrism in consumer behavior and vice versa (Luque-Martinez 2000, 1356; Wang & Chen 2004, 391; Reardon et al. 2005, 740; Tong
& Li, 2013, 494). The country-of-origin is the cue that activates the consumer's ethnocentric tendency, and as such ethnocentrism implies the home-buying portion of the effect of country- of-origin (Tong & Li 2013, 494). However, the impact of country-of-origin on a customer's attitude is not universal, as the overall attitude of the customer also depends on other factors – animosity, ethnocentrism and cosmopolitan – and varies across consumer groups (Deb &
Chaudhuri 2014, 648). Furthermore, the country-of-origin effect can be varied though with experience with a product from the country in question, personal experiences with the country, knowledge, political beliefs, ethnocentrism or fear of the unknown (Knight 1999, 152).
A significant portion of consumers are interested in country-of-origin information before the purchase decision, and as such the country-of-origin cue helps consumers to develop a perception about the quality and thus beliefs about product attributes. Consumers have a tendency to purchase products from technologically-advanced nations over less-developed nations if they perceive the quality to be better, and in such purchasing scenarios product's country-of-origin often serves as the cue that activates a consumer's ethnocentric tendencies
(Kaynak & Kara 2002, 931; Wang & Chen 2004, 393; Garma et al. 2008, 458). Willingness to buy domestic or imported products is influenced by both ethnocentrism and quality judgment, and in these scenarios might create a systematic bias in favor of products from developed countries (Kaynak & Kara 2002, 931; Wang & Chen 2004, 393; Garma et al. 2008, 458).
Country image is often used as an information cue to estimate the quality of the product when consumers do not have a vast amount of experience with the products of said country (Kaynak
& Kara 2002, 931; Suh & Kwon 2002, 668). The effect of country-of-origin tends to diminish in the presence of other product cues, and previous experience or prior knowledge may also have a moderating effect on the influence of country-of-origin (Knight 1999, 152).
In developing nations, consumers will be less ethnocentric when considering a product from a higher origin nation because of the positive image of the country-of-origin. Even ethnocentric consumers may positively evaluate an imported product if it is associated with a country with a better image (Wang & Chen 2004, 393). This positive stereotype is understandable since these countries are perceived as having high levels of economic and technological development (Garma et al. 2008, 459).
The country-of-origin may also give a negative cue to the consumer. Some products produced in developing nations, might suffer due to the burden of its country-of-origin being associated with its quality. To combat this, for example, Haier, a Chinese brand, has spent millions of dollars on mass media to promote its brand in USA and Japan, and in the process deliberately played down its Chinese origin (Fan 2006, 376). Some countries may also face negative perceptions due to their political decisions, for example Israel getting widely critisized for its treatment of its Palestinian minority which in turn might have some consumers opting not to buy Israeli products or services.
Country-of-origin effect exists in both product assessment and decision making processes, and can influence cognitive responses, product evaluations and broader beliefs about products (Garma et al. 2008, 459). It entails both cognitions – emphasizing attributes – and affect – the country's people (Knight 1999, 151).
