Corporate reputation effects across nations: The impact of Country distances and firm-specific resources.

VerfasserSwoboda, Bernhard
PostenRESEARCH ARTICLE - Report - Abstract

Abstract CEOs are responsible for the development of a strong corporate reputation, which is increasingly used by multinational corporations as an important differentiation criterion in foreign markets. Because the effects of an often centrally managed but locally perceived reputation are likely to vary between countries, this study analyzes the moderating role of institutional distance and firm-specific resources on reputation effects in the chemical and pharmaceutical industry, two important aspects that have not been considered in consumer-centered corporate reputation research so far. The authors refer to signaling theory--advanced by institutional and resource-based thinking--and use data from 29,987 consumer evaluations of a multinational corporation in 43 countries. The results of the multilevel models indicate that distance between home and host countries weakens reputation effects on both consumer loyalty and trust, whereas firm-specific resources reinforce these effects. In particular, country experience and cultural-cognitive distance are important when managing reputations across nations because they explain high amounts of country-level variance.

Keywords Corporate reputation * Signaling theory * Country distances * Firm-specific resources * Multilevel structural equation analysis

1 Introduction

Multinational corporations (MNCs) increasingly seek to manage their corporate reputation (CR) internationally because a strong reputation is of paramount importance in local competition abroad (e.g., for attracting employees, customers, or non-governmental organizations, NGOs). For example, Procter and Gamble manages its CR across nations by evaluating consumers' responses (Lafley 2009), whereas the H. J. Heinz Company considers its CR strength when deciding to rely on its CR or making acquisitions in new countries (Johnson 2011). However, MNCs face challenges in managing their CR internationally, especially in distant countries (such as Pfizer Inc. in Latin America; Silbermann 2012), because CR--defined as consumers' overall evaluation of a firm's responsibility, strength, or quality of offers (Berens et al. 2005; Walsh and Beatty 2007)--is often centrally managed but locally perceived, and MNCs need firm-specific resources to successfully respond to dynamic local environments (such as Am way Corporation in China; DeVos 2013). This study analyses CR effects by linking them to moderators across nations. We utilize a consumer-centered perspective because the effects of CR on consumer behavior may vary as a function of country distance and firm-specific resources. In other words, many MNCs transfer their standardized CR approaches to foreign countries and assume that the transferred CR has similar effects on target groups independent of how distant a foreign country is from the home country (i.e., institutional environment) and what the resource base (e.g., country commitment or experience) in the foreign country looks like.

Scholars often study the effects of perceived CR on consumer behavior in a national setting (e.g., on trust, satisfaction, or loyalty; Andreassen 1998; Caruana and Ewing 2010; Johnson and Grayson 2005), but only a few empirical studies have addressed varying CR effects across nations so far (see the recent reviews by Ali et al. 2015; Swoboda et al. 2016; Walker 2010). The few exceptions link the varying effects to cultural differences (Bartikowski et al. 2011; Falkenreck and Wagner 2010; Jin et al. 2008; Walsh et al. 2009; Walsh and Bartikowski 2013), seldom to competitiveness, demographic, and economic differences (Deephouse et al. 2016; Swoboda et al. 2016). As the previous research merely focuses on the host country context (i.e., country differences), it remains unclear whether and how country distances (i.e., dissimilarities between MNCs' home and host countries) affect consumer responses to CR across nations. In this regard, it is important to note that there is one crucial distinction between country differences and distances. In contrast to country differences, which simply focus on the context of the host country, country distances consider the context of both the host and the home country. In comparison to previous studies (especially Swoboda et al. 2016), this study introduces the novel idea that consumers' respond become aware of country distances, which influence the effects of CR on their consumer behavior. Knowledge about the role of country distances is also important because the top management team or even the CEO located in the home country of an MNC is responsible for the CR--in contrast to single products--and may not consider dissimilarities between the home and host countries. With increasing institutional distance, however, the effects of CR on consumer behavior may change, forcing MNCs to adapt locally in order to be successful (e.g., Hultman et al. 2009). As a result, we use the signaling theory to show that the strength of the relationship between CR and consumer behavior depends on how dissimilar the host country is from the home country. For the first time, we develop the theoretical rationale that consumers respond to country distances, which influence the effects of CR on their consumer behavior.

Moreover, although it has been shown that resources such as country commitment or experience are known to affect internationalization processes and performance abroad (Johanson and Vahlne 2009; Delios and Beamish 2001), little is known in the consumer-centered CR research about whether and how such resources affect local consumer responses to MNCs' CR. In fact, to the best of our knowledge, only Swoboda et al. (2016) have used country experience as a control; however, that study does not develop a theoretical-based link between country experience and consumer behavior. In this study, we argue for the first time that consumers become aware of those resources and that they influence the effects of CR on their consumer behavior.

Based on the identified research gaps, we aim to move the literature forward by analyzing whether and how institutional country distances and firm-specific resources in a country moderate the relationship between MNCs' CR and consumer behavior in terms of loyalty (i.e., the intention and readiness to buy offers and to establish a good relationship with a firm; Oliver 1999) and trust (i.e., the expectations held by consumers that a firm is dependable and can be relied upon to deliver its promises; Sirdeshmukh et al. 2002). Analyzing both outcomes in this study is beneficial because they provide insights into the stability of the moderation results, given that scholars have widely considered them to be outcomes of CR effects (e.g., analyzing both, Walsh and Beatty 2007; or their relationship, Jin et al. 2008) and because trust represents a more attitudinal construct and loyalty represents a more behavioral construct.

We offer valuable contributions to the literature over and above previous studies by providing broader institutional and resource-based conceptualizations of moderators to further contextualize CR effects. First, although these aspects have been widely acknowledged in international business research to affect the relationship between various corporate strategies in international markets, they have not been considered in consumer-centered CR research so far. As a result, we advance the recent findings of Swoboda et al. (2016), who systematically explore various institutional country differences but call for an analysis of country distances and firm-specific resources.

Second, we further develop signaling theoretical reasoning in consumer-centered CR research (referring to the call by Connelly et al. 2011) by differentiating between directly visible and silent, perhaps unconsciously visible CR information that is shaped by MNCs' home country environment and local activities. This differentiation constitutes the theoretical base for our rationale on the moderating roles of institutional distance and MNCs' resources. Finally, when working in heterogeneous contexts, it is beneficial for MNCs to know to what extent transferring a strong CR is affected by different institutional distances and firm-specific resources in host countries and to learn how to increase their reputation payoffs abroad.

The remainder of this study proceeds as follows. By developing new theoretical rationales in accordance with the signaling theory, we derive hypotheses on the role of distance and firm-specific resources in the CR-loyalty/trust links. We test these hypotheses with data on consumer evaluations of a corporation in the chemical and pharmaceutical industry by using multilevel structural equation modelling (SEM) and discuss the results and avenues for further research.

2 Theoretical Foundation

Signaling theory suggests that signals provide credible information to transaction parties that reduce information asymmetries because information is not available to all transaction parties in an equal manner (Spence 1973; Kirmani and Rao 2000). Scholars understand CR to be an important MNC signal that delivers information about ownership, resource allocations, or the quality of offers and that is perceived by consumers as a decisive information cue in decision-making situations (e.g., showing strong behavioral CR effects across nations; Bartikowski et al. 2011; Swoboda et al. 2016). We further argue that CR signals comprise two types of information about an MNC: information that is directly visible to consumers through MNCs' products, reports, or communication in general (Fombrun and Shanley 1990; Erdem et al. 2002), and information that is silent, unconsciously visible through MNCs' local activities, for example (e.g., Basdeo et al. 2006). Theoretically, it is therefore reasonable to differentiate between explicit information that is directly manageable for an MNC and visible to consumers and tacit information that is hardly manageable and...

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