Country-of-Origin Effects

Country-of-origin effects concern perceptions about a country and how they influence consumers’ evaluations of products, brands, or services from that country. Differences between locations are central to the study of international business, and characteristics associated with the location of a company’s headquarters have been shown to influence firm operations when companies invest in foreign countries. However, most relevant to the corporate reputation literature, a significant portion of country-of-origin research is not concerned primarily with the directly observable characteristics of a company or its products but rather with perceptions related to the company’s home country. Accordingly, this entry explores country-of-origin effects as they pertain specifically to corporate reputation, while examining how country-of-origin effects closely align with concepts such as country reputation and country brands.

Parallel to the construct of corporate reputation, country reputation is an intangible asset that refers to the collective degree to which societal stakeholders possess feelings such as admiration and liking toward a country. Country reputation may apply to a country as a whole or to a particular element of the country. For example, Brazil may possess an overall favorable reputation or a reputation specifically related to a specific country characteristic, such as being a nice place to visit. Moreover, these reputations may vary based on the evaluator’s location. Thus, Brazil may be viewed relatively positively in the United States but less so in other countries. As such, country reputation and country-of-origin effects share a significant degree of conceptual overlap.

In the marketing literature, a brand generally refers to some feature (e.g., a name or design) that distinguishes one product from another. Similarly, a country (or nation) brand refers to the features that distinguish a particular country from others. While scholars differ in the specific features associated with a country brand, these features often include elements related to awareness of the country—its business environment, quality of life, tourism, history, and culture, among others. Given this focus, country-of-origin effects overlap with the concept of country brands.

Multiple conceptualizations of corporate reputations include “being known” as a key reputation dimension. Foreign firms are generally less embedded than their domestic counterparts in local markets, limiting knowledge about these firms and their abilities to develop legitimacy in the local environment, and ultimately corporate reputations. Given this situation, reputation assessors are more likely to utilize heuristics when evaluating foreign firms, of which country-of-origin is a commonly used tool. Country-of-origin effects simplify the process of evaluating firms and their reputations when specific firm information is difficult to access. At times, country-of-origin effects can be positive, such as the reputation of Spain as an enjoyable tourist destination, or negative, such as the negative perceptions of Spanish firms in some Latin American countries. Moreover, research has shown that accurately identifying a company’s home country is not necessary for a country-of-origin effect to exist; an inaccurate identification of a home country (e.g., associating Samsung with Japan instead of South Korea) can still influence consumer behavior.

Recent researchers have highlighted the relative lack of research on the effects of country-level institutions and other macro-environmental variables on corporate reputation. Country-of-origin effects is one such area where the relationship of a country-level construct with firm reputation deserves further exploration. For example, a meta-analysis found that country-of-origin effects were greater when subjects compared products from more developed countries with those from less developed countries. By extension, this suggests systematic differences in reputation assessments based on the development level of a firm’s country-of-origin. However, inferences like this need more substantial empirical examination.