Perception of foreignness: benefit or liability? *.

With the advent of crisis, consumers often rally around their national leaders and economies. When South Korea was hit by its currency crisis in the late 1990s, South Korean citizens and businesses began and maintained "buy Korean products" campaigns (Schuman, 1998). Similarly, after the September 11th terrorist attack, American consumers increased their purchases of American-made products as a sign of solidarity and unity (Aeppel, 2001). These events highlight what is already widely accepted; namely, the foreignness of a product is often perceived negatively by home country consumers. Nevertheless, French wine and German cars often carry favorable country stereotypes, highlighting a continuing paradox--foreignness can also be a benefit. This study examines this paradox by looking at the underlying country attributes that create the benefit or liability of foreignness.

The importance of global sourcing continues to increase (e.g., Bozarth et al., 1998; Cox, 2001), and purchasing professionals represent key players in the value chain of multinational enterprises (MNEs). Managers, therefore, need to pay closer attention to country image, which is a key factor in consumers' perception of products (Roth and Romeo, 1992). Country image was first defined by Nagashima 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" (1970: 68).

Perceptions of national characteristics have been extensively studied in the country and product image literatures (e.g., Bilkey and Nes, 1982; Nagashima, 1970, 1977; Wall and Heslop, 1986). Numerous studies have found empirical evidence of stereotyping for or against foreign products (e.g., Bilkey and Nes, 1982; Nagashima, 1970, 1977; Peterson and Jolibert, 1995; Thakor and Katsanis, 1997). Other studies have examined product and consumer attributes, finding differences in product evaluations based on country-of-origin. Although the number of studies is limited, significant country-of-origin effects on industrial buyers' perceptions of various product attributes were also found (Insch, 2003; Ahmed et al., 1994; Maheswaran, 1994; Stewart and Chan, 1993).

Despite the extensive treatment of country image in the literature, there has been limited analysis of two components of country image: (1) industrial buyers and (2) country-specific attributes that influence country image. A disproportionate amount of research has focused on consumers. One consumer group used regularly is students, which leaves many unanswered questions regarding their level of expertise. In addition, a plethora of studies have found differences in country image and stereotyping; however, the analysis tends to focus on product or consumer attributes, or to make inferences about countries (favorable and unfavorable), without specifying the country-specific factors--especially the degree of similarity/difference and the level of technology--that contribute to the country image. As a result, our understanding of the degree to which stereotyping--based on country similarity/differences embedded in country image remains incomplete. Lastly, researchers have underscored that "who" is doing the perceiving (i.e., country of the perceiver) and "what" is being perceived (product or source country) contribute to differences in country image, yet explaining these differences with respect to country-level attributes has been overlooked in the literature.

The primary objective of this study is to answer the following research questions. To what extent do country-specific attributes--namely, the difference/similarity between the country of the industrial buyer and a source country, as well as the difference/similarity between countries' technology influence the image of various countries with respect to perceptions of manufacturing and design quality ratings of those countries? To what extent is country image influenced by the home country of the industrial buyer?

To answer these questions, we develop a framework to explain the relationship between country-level attributes and country image. In doing so, we draw upon two schools of thought--national competitive advantage and liability of foreignness. Then, we test our framework using two samples of industrial buyers, one from the United States and the other from Mexico. By doing so, we offer the following contributions to the literature. First, we develop a conceptual framework through which to examine country image. Prior studies have criticized the country image literature because of insufficient theoretical grounding. Second, we use a novel data set of U.S. and Mexican industrial buyers. Mexican industrial buyers represent a population rarely tested in the literature. Indeed, previous research on Hispanic consumers has been primarily restricted to Mexicans living in the U.S. and border cities in Mexico (Bailey and de Pineres, 1997). Moreover, we analyze industrial buyers from both a developed and an emerging country, enabling us to examine country image from two distinct perspectives, underscoring that "who" does the perceiving matters. Third, we develop the concept of benefit of foreignness, which arises from national competitive advantages and firm-specific advantages (e.g., superior technology and resources), as well as discrimination that favors foreignness.

As an added benefit, this study extends the liability of foreignness literature, which has compared domestic and foreign firms (Zaheer, 1995; Zaheer and Mosakowski, 1997). We focus on the perceptions of industrial buyers from a developed country (United States) and a less developed country (Mexico), thus providing two meaningful sets of country comparisons. Specifically, we examine these industrial buyers' perceptions of manufacturing and design quality for the United States, Mexico, Germany, Japan, Malaysia, Brazil, and China. Thus, we contend that liability and benefit of foreignness can apply to both the firm and its products and create a theoretical link between the country image and liability of foreignness literatures.

Rigorously testing perceptions of foreignness is both important and timely. "Buy domestic" campaigns indicate the growing relevance of country image cues (CICs) to national governments and trade associations as these campaigns accentuate the importance of product origins and highlight origin differences between products. These "buy domestic" pressures are not only aimed at consumers, but manufacturers as well (Schuman, 1998). We focus specifically on perceptions of manufacturing and design quality because CICs directly and uniquely impact these perceptions.

The remainder of this article contains a presentation of three hypotheses, followed by a description of the methodology used in designing, administering, and testing the survey data collected. Next, the statistical results are presented. The article concludes with a discussion of the major findings of this study, including the limitations of and future opportunities for this research.

HYPOTHESIS DEVELOPMENT

National Competitive Advantage

Nations succeed in particular industries because their home environment is the most forward-looking, dynamic, and challenging (Porter, 1990). Porter (1990) pointed out that French wine, German beer, Swiss watches, and Italian ceramic tile represent national industries that are globally recognized for the quality of …