The growing integration
of the global economy has had a major effect on the companies’ business
strategies to allocate resources and secure market opportunities. With the
declining in trade barriers and import tariffs, as well as the establishment of
several free trade agreements, global sources have become common strategies for
companies to reduce costs and increase profits. To achieve these objectives,
many manufacturing companies now use offshore outsourcing strategies by
relocating their production processes and sources from different countries. For
example, a Japanese TV brand might find its manufacturing process in Vietnam,
Thailand, and Indonesia but its components sourced from China, producing
so-called hybrid products.

Prior studies on
“hybrid” products reveal that each country associated with the product creates
a distinct effect on consumers’ perception on quality, thus yielding several
COO dimensions such as: country of design, country of manufacture or country of
assembly, and country of brand (COB) (Chao, 2001, Chao, 1993, Lee and Ganesh, 1999, Okechuku, 1994, Essoussi and
Merunka, 2007). For example, products with a COB from a
developed country, but manufactured in a less developed country with an
inferior country image may suffer in terms of perceptions of quality, despite
positive COO associations for the brand (Akdeniz Ar
and Kara, 2014).

In the services context, many
international service firms use offshore delivery strategies, such as overseas
call centers, to strengthen their competitiveness via close proximity to
customers, cost efficiencies or access to skilled personnel (Tate et al., 2009). Despite the benefits realized by these firms, reports of
consumers’ concerns about the service quality provided by offshore providers
are increasing (Cornell, 2004, ContactBabel, 2004, Mintel, 2007) with
offshore representatives sometimes described as less attentive, difficult to
communicate with and possessing poor skill levels (ContactBabel, 2004, Cornell, 2004). For instance, Delta Air Lines (U.S. company) suffered from customer
complaints and perceived quality erosion after relocating its call center to
India (Prada and Sheth, 2009). A similar case in educational services was reported, when the
reputation of some U.S. medical schools suffered after commenced programs in
the Caribbean (Acton, 2007). These are just a few examples demonstrating the importance of
service quality perceptions as a critical driver of customer satisfaction and
purchase intentions (Parasuraman et al., 1988, Ueltschy et al., 2007). The
link between perceived service quality and customer satisfaction is elucidated
by the expectancy disconfirmation model, which posits that expectation of
service quality serves as an antecedent of customer satisfaction, leading to
purchase decisions (Oliver et al., 1997, Oliver, 1980).

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Only few studies have attempted to reveal
the theoretical underpinning of the COO effects associated to hybrid services
or product evaluation. The most reported theories are the principle of
congruity (Osgood and Tannenbaum, 1955)) and categorization theory (Lee and Ganesh, 1999, Fiske et al., 1987). The principle of congruity posits that when incongruent and
congruent information presents, the congruent information is preferred because
incongruent information generates dissonance in mind (Osgood and Tannenbaum, 1955). Consumers will react more positively to congruent conditions than
to incongruent conditions. For example, consumers respond more favourably to
advertising that introduces congruency between a celebrity and the product than
where congruency does not exist (Kamins, 1990). According to Osgood and Tannenbaum (1955), if two incongruent objects of judgment are paired, they tend to
shift in the direction of congruence with their evaluation of the other.
Meaning that when an object with a negative perceived image is paired with another
object with a positive perceived image, the evaluation of the object with negative
perceived image will be less negative, and vice versa, the evaluation of object
with positive perceived image will be less positive. Furthermore, Jacoby and
Mazursky (1984) revealed that a combination of a weak store and a strong brand may
result in an improvement in the store image and a denigration of the brand
image. Also, Jossiassen and Assaf (2010) found that a greater perceived congruency between a country and
product enhances the relationship between product evaluation and COO image.
Similarly, Chao (2001) reported that perceived congruency positively moderates COO effects
on consumers’ product evaluation. In the context of hybrid product, the
perception of congruity is known as perceived similarity (fit) amongst the country
images of a product with multiple COO. For instance, a perceived fit between
the country of design and country of manufacture affects perceptions of product
quality, through reflection of symbolic meanings, such as prestigious brands (Essoussi and Merunka, 2007).

Categorization theory is depicted from
the brand extension literature and suggests that the evaluation of an extended
brand is a function of attitude towards its mother brand. Thus, perceptions of
the mother brand will be conveyed to the extended brand if there is a fit
between them. Similarly, consumers associate a product with its country when
assessing foreign products. For example, Japan has a strong association with
advanced technology, so the evaluation of a product made in Japan will depend
on how close the perceived fit is between Japan’s country image and the product
category. A study by Sichtmann & Diamantopoulos (2013) finds that perception of fit between COO of brand and extension
category is the key success factor of brand extension.

Moreover, the magnitude of the effects of
each COO dimension varies based on the aspects of quality. For example, it was
reported that the effect of country of parts and country of manufacturing have
a stronger impact on product quality (Essoussi and Merunka, 2007, Chao, 2001),
while country of design is greater on the aspects of brand image and
functionality (Insch and McBride, 2004, Essoussi and
Merunka, 2007, Chao, 1993). Although
the effects of COO dimensions are found to be varied based on product category,
the extent to which such effects vary according to product category is still
inconclusive. Studies revealed that country of manufacture has stronger effects
than country of brand on durable products such as TVs and radios (Knight, 1999, Chao, 1993)).
However, contrary results were reported that country of manufacturing has
weaker impacts than country of brand, because consumers can infer quality more
quickly through the brand name, thus making country of manufacturing or country
of parts insignificant (Usunier and Cestre, 2007, Leclerc et al., 1994, Hui and Zhou, 2003). All
in all, the discussion above shows that COO construct is multidimensional, in
which each dimension affects differently according to situational factors and
product types. Therefore, in the assessment of hybrid product or service
quality, it is imperative to take into account the dimensions of COO construct
important to the product or service under investigation.

Substantial research has been conducted
on the effects of COO in relation to hybrid real products without discerning
whether such interactions might differ when applied to products versus services
(Javalgi et al., 2001, Al-Sulaiti and Baker, 1998). In
contrast, very little is known about the effects of COO on “hybrid”
international services (Schwartz and Bilsky, 1990, Javalgi et al., 2001, Hoenen et al., 2005) and
the role of COO specific dimensions as antecedents of consumer expectations of
quality is yet to be empirically determined (Aruan and Crouch, 2016, Srikatanyoo and
Gnoth, 2002, Aruan, 2014). This is quite surprising given the predominance of the service
sector in today’s global economy, particularly in industrialized countries
where manufacturing is diminishing as production moves offshore where labor
costs are cheaper (Gereffi, 1999). Indeed, the
service sector has experienced tremendous growth in global trade in the last
few decades (Mattoo et al., 2008, Hoekman and Mattoo, 2008). According to the World Trade Organization, over the last 30 years,
services have increased to approximately 70 percent of GDP worldwide. Across
OECD countries, services have increased to roughly 75 percent of GDP (Francois and Hoekman, 2010). Therefore, it has become imperative for services firms to understand
the best ways to appeal to consumers across international borders.

Investigating possible dimensions of COO
in the services context, this research proposes two dimensions that might have
significant importance on consumers’ quality evaluation. The first dimension is
so-called country of service delivery (COSD). The literature reports that
developed countries are known to provide better products than less developed or
emerging countries due to their infrastructure, facilities, and advanced
technology levels. Similar perceptions were also confirmed in the context of
service provision (Stanton and Veale, 2009, Ahmed et al., 2002a). However, unlike products, services are inseparable from
consumption indicating that the country where the service is delivered can be
important in the assessment of service quality expectations. The second
dimension is country of person. Researchers deemed the image of individuals who
are providing a service important in the evaluation of service quality.
Consumers may hold beliefs informed by stereotypes about individuals from
certain countries that affect their service quality evaluations (Lin et al., 2001, Fennema et al., 1990, Dee, 2005). For
example, Harrison-Walker (1995) found that patients chose physicians based on the physician’s name
because it indicated the physician’s nationality. From this cue, patients
inferred the skill and expertise, as well as the personality, of a physician. A
study by Veale and Challen (2010) revealed that the image of a country where a person was born or
trained had a significant effect on consumer expectations of quality.

This research makes a significant
contribution both to the theoretical underpinnings of the COO domain and to
business practice particularly in relation to hybrid service provision. First,
this study extends the theoretical basis for the effects of COO to the context
of services in a manner not previously explored. Although researchers long
recognized that country image affects foreign product and service evaluation,
no empirical research has addressed the magnitude of the impact of participating
countries—such as country of brand origin, country where the service is
delivered, and the COO of the person who provides the service—in the services
context. Second, from a managerial perspective, this study gives direction to
service managers and marketers for understanding how to anticipate consumers’
attitudes toward foreign countries based on the impact of COO dimensions on
service evaluation. When a firm enters a foreign market, it faces a competitive
disadvantage due to lack of knowledge of that market (Phau and Chao, 2008, Luo and Peng, 1999, Johanson and Vahlne, 1977). Thus,
this research provides alternative solutions to image problems faced by service
firms when implementing offshore strategies, especially in the context of
managing and maintaining a positive image. 


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