Effects of Brand Local and Nonlocal Origin on Consumer Attitudes in Developing Countries

Peer Reviewedhttps://deepblue.lib.umich.edu/bitstream/2027.42/142164/1/jcpy83.pd

Dancing with a Giant: The Effect of Wal-Mart's Entry into the United Kingdom on the Performance of European Retailers

The authors examine the value-destroying and value-enhancing effects of a giant player's foreign entry on incumbents operating in that region. They use Wal-Mart's entry into the United Kingdom, through its acquisition of Asda, as the empirical context. Drawing on the marketing, strategy, and finance literature streams, the authors develop hypotheses as to why some incumbents are negatively affected whereas others actually may benefit from the entry of a giant competitor. Their measure of performance impact is the change in shareholder value around the announcement date, which has recently been recognized as an important metric to evaluate the effectiveness of marketing actions. The authors find strong support for the conceptual model, which distinguishes between the seriousness of the threat to the incumbents and their capacity to withstand the threat. The authors validate their findings using three alternative measures of company performance: percentage growth in the incumbent retailer's sales, earnings before interest and taxes, and return on assets between 1998 (the year before the Asda takeover) and 2002 (three years after the takeover). The authors discuss various managerial implications of their results. By acting proactively, incumbents can mitigate the negative performance consequences, while maximally benefiting from the positive implications of a giant competitor's entry

Indirect learning: how emerging-market firms grow in developed markets

Some emerging-market firms have recently achieved substantial growth in developed markets despite having had little prior experience in these markets. What explains the performance of these firms? Building on the organizational learning literature, the authors argue that indirect learning (i.e., learning from the experience of others) plays a crucial role in explaining this phenomenon. Specifically, they propose that emerging-market firms that grow in developed markets overcome their lack of direct experience in such markets by learning indirectly through their leaders, competitors, and interfirm networks. The authors test their thesis by comparing the international growth in developed markets of a sample of emerging-market firms (116 Indian firms) with a sample of developed-market firms (160 U.K. firms). The results support the authors' thesis about the importance of indirect learning in explaining the international growth of emerging-market (relative to developed-market) firms in developed markets. The authors discuss the implications of these findings for policy makers in the areas of higher education, competition policy, and international trade as well as for managers in the areas of middle-management recruitment, competitor analysis and tracking, and managing interfirm networks

The Impact of Brand Quality on Shareholder Wealth

This study examines the impact of brand quality on three components of shareholder wealth: stock returns, systematic risk, and idiosyncratic risk. The study finds that brand quality enhances shareholder wealth insofar as unanticipated changes in brand quality are positively associated with stock returns and negatively related to changes in idiosyncratic risk. However, unanticipated changes in brand quality can also erode shareholder wealth because they have a positive association with changes in systematic risk. The study introduces a contingency theory view to the marketing-finance interface by analyzing the moderating role of two factors that are widely followed by investors. The results show an unanticipated increase (decrease) in current-period earnings enhances (depletes) the positive impact of unanticipated changes in brand quality on stock returns and mitigates (enhances) their deleterious effects on changes in systematic risk. Similarly, brand quality is more valuable for firms facing increasing competition (i.e., unanticipated decreases in industry concentration). The results are robust to endogeneity concerns and across alternative models. The authors conclude by discussing the nuanced implications of their findings for shareholder wealth, reporting brand quality to investors, and its use in employee evaluation

Unrestricted Factor Analysis: A Powerful Alternative to Confirmatory Factor Analysis

The gold standard for modeling multiple indicator measurement data is confirmatory factor analysis (CFA), which has many statistical advantages over traditional exploratory factor analysis (EFA). In most CFA applications, items are assumed to be pure indicators of the construct they intend to measure. However, despite our best efforts, this is often not the case. Cross-loadings incorrectly set to zero can only be expressed through the correlations between the factors, leading to biased factor correlations and to biased structural (regression) parameter estimates. This article introduces a third approach, which has emerged in the psychometric literature, viz., unrestricted factor analysis (UFA). UFA borrows strengths from both traditional EFA and CFA. In simulation studies, we show that ignoring cross-loadings even as low as.2 can substantially bias factor correlations when CFA is used and that even the commonly used guideline RMSEA ≤.05 may be too lenient to guard against non-negligible bias in factor correlations in CFA. Next, we present two empirical applications using Schwartz’s value theory, and electronic service quality. In the first case, UFA leads to much better model fit and more plausible regression estimates. In the second case, the difference is less dramatic but nevertheless, UFA provides richer results. We provide recommendations on when to use UFA vs. CFA