Consumer Reshoring Sentiment and Animosity: Expanding Our Understanding of Market Responses to Reshoring.

Author:Grappi, Silvia
 
FREE EXCERPT

1 Introduction

Reshoring is defined as a voluntary company decision to relocate its activities back to the home-country, after having implemented an offshoring decision in the past, regardless of the ownership of the activities reshored (Ellram 2013; Gray et al. 2013). The aim of our study is to complement existing research on reshoring in international business (IB) by (a) adopting a demand-side perspective (Priem et al. 2012) and (b) considering the effects on market responses (e.g., willingness to buy reshored products) taking into account not only the home-country characteristics (e.g., Consumer Reshoring Sentiment, CRS; Grappi et al. 2018), but also the specific country from which the company has reshored its activities. We propose that the host-country from which a company reshores plays a role in shaping home-country consumer responses. No research to date has taken into consideration this effect, and this gap calls for specific research in the reshoring context centered on consumer demand characteristics able to affect company decisionmaking processes (e.g., Siqueira et al. 2015). In order to address this gap, we use a moderated mediation approach to answer the questions "when" (i.e., under what conditions) and "how" do CRS reactions influence market responses (word of mouth, willingness to buy, advocacy behaviors). We introduce the construct of Consumer Animosity (CA) (Klein et al. 1998) into the conceptual network as the moderator variable ("when" question), and we examine the mediating emotional processes of gratitude and relief transforming reactions to reshoring into actions supporting the company ("how" question).

Literature on reshoring has primarily focused on the development of a shared definition (e.g., Ellram 2013; Gray et al. 2013) and on identifying its geographical boundaries (e.g., Dachs and Kinkel 2013) or its instigators from a firm-side perspective (e.g., Canham and Hamilton 2013; Ellram et al. 2013; Fratocchi et al. 2016; Wu and Zhang 2014). Recent research (e.g., Grappi et al. 2015, 2018) has adopted a demand-side perspective in analyzing reshoring, in response to the need for specific consideration of consumer characteristics in strategic decision-making. Nevertheless, much remains to be discovered about the role of demand factors in company decision processes. By expanding demand-side issues in reshoring decisions, we aim to contribute to IB research by interjecting new elements into the existing knowledge base about determinants of the decision to reshore. To this end, we take into specific consideration actual and potential end users of products of reshoring companies (i.e., home-country consumers). In this way, reshoring is considered a "tool" able to enhance utility for companies through emphasizing value-creation for consumers. This utility via reshoring arises as a consequence of the interplay between home-country characteristics of CRS and host-country characteristics of CA.

A recent stream of research highlights that CA drives consumer negative responses toward companies associated with an offending nation involved in disputes of different natures such as, for example, economic or political quarrels (Riefler and Diamantopoulos 2007). CA, defined as "remnants of antipathy related to previous or ongoing military, political, or economic events" (Klein et al. 1998, p. 90), has been found to negatively affect consumers' willingness to buy foreign products (e.g., Klein 2002; Klein et al. 1998). Recent studies (Antonetti et al. 2019; Harmeling et al. 2015) also show the important role of negative emotions (both threat and extreme) in explaining CA effects on consumer responses.

In our research, we advance these suggestions by proposing an extended explanatory model of market responses to reshoring, taking into consideration (a) CRS effects, (b) the role played by CA in better qualifying these effects, (c) consumer emotional reactions, and (d) relevant market responses to reshoring (i.e., positive word of mouth, willingness to buy, and advocacy behaviors). The aim is to better assess how reshoring can increase home-country consumers' perceived value of company offerings, depending on the specific host-country from which the company reshored. In other words, CA provides boundary conditions for the effect of CRS on market responses and introduces conditions governing the impact of CRS that have not been proposed before. Moreover, the introduction of emotional mediators constitutes a contribution of our research, beyond the interaction of CRS and CA. Relief and gratitude were introduced to answer the question, how does CRS influence market responses. It does this by inducing feelings of relief and gratitude in consumers enroute to impacting market responses. Adopting this demand-side perspective, we extend current understanding of the reshoring decision-making process by providing new empirical evidence on the role that demand-side issues, together with the firm-side criteria identified in previous research, can play.

Our work provides guidance for international managers operating in different countries and evaluating reshoring decisions. Our findings suggest the importance of considering not only positive sentiments that home-country consumers share towards reshoring, but also the effects that international disputes and tensions may have on the same consumers in terms of animosity toward the host-country, as well as accompanying emotional reactions. Although many companies might not consider CA that home-country consumers feel toward the host country when making location decisions, there may be cases where animosity is so strong amongst consumers (Antonetti et al. 2019) that it could affect their consumption decisions and company image and reputation that it should be taken into account. For example, CA has been found to contaminate perceptions of product quality (Antonetti et al. 2019). This might allow managers to more accurately detect adverse opinions toward the host-country from which they are reshoring, and thus help in determining if and when to leverage this information (e.g., by communicating the identity of the host-country or not) so as to capitalize on the positive responses of the home-country market.

The remainder of the paper is structured as follows: We initially review the reshoring literature, examine past research on CA, and then build a foundation for the central role played by emotions in this context. The empirical assessment of the proposed conceptual framework is presented next. We conclude by discussing theoretical and practical implications of our work.

2 Conceptual Background and Hypotheses

The relevance of reshoring has exploded in the past few years. Although data on reshoring are fragmented and it is still difficult to map the phenomenon (Gray et al. 2013), some empirical research has added to our understanding of the nature of reshoring (e.g., Dachs and Kinkel 2013; Fratocchi et al. 2016; Kinkel 2012). Recently a data base (https://reshoring.eurofound.europa.eu/) has emerged with the aim of monitoring reshoring in Europe. Alongside these developments, which are primarily descriptive, other research has focused on the decision-making processes of reshoring companies, adopting a firm-side perspective. The key factors of cost advantages (e.g., labor cost gap reduction) and benefits connected to specific resources and competences (e.g., higher level of production quality) came to light as pivotal input in decision-making to reshore (for a detailed review, see Barbieri et al. 2017; Grappi et al. 2018).

The numerous findings provided by existing research, on firm-side aspects of reshoring overlook demand-side worth. Recent studies have begun to consider the value of demands-side considerations. One study revealed that consumers share positive beliefs about reshoring (i.e., reshoring increases consumer perceived value of the company's offers), that lead to positive market responses (Grappi et al. 2015). More recently, Grappi et al. (2018) introduced the concept and value of CRS, defined as an appraisal structure of consumers formed by relevant, generalized, long-term positive beliefs connected to reshoring. They also demonstrated that CRS is related to criteria pertinent to strategic management decisions by showing that CRS affects consumer willingness to reward the reshoring company as, for example, by influencing decision to buy its products (i.e., reshoring increases utility created within the company's value system).

Despite these contributions, there is still a need to deepen the knowledge base about how demand factors complement the existing literature on reshoring. This call provides the main motivation for our research. Although recent studies have advanced our understanding of how reshoring impacts market responses, they suffer from some limitations. First, no research to date has examined possible effects of the host-country from which a company reshored. Previous research on offshoring proposed that specific characteristics of the countries involved (e.g., cultural distance) affect offshoring (Musteen et al. 2017; Pisani and Ricart 2018) and suggested taking into consideration the country where the company delocalizes activities (i.e., the host-country) in order to better understand market responses (Durvasula and Lysonski 2009; Thelen and Shapiro 2012; Thelen et al. 2011). Building on this intuition, we propose that the country from which a company reshores is instrumental in shaping the home-country consumers' evaluations. In order to address this gap, we introduce the construct of CA (Klein et al. 1998) into the conceptual framework when considering reshoring from a demand-side perspective, with the aim of examining the specific influence the host-country has in shaping market responses to reshoring. Second, in order to better capture the underlying mechanisms of such responses, we introduced the role played by individual...

To continue reading

REQUEST YOUR TRIAL