Is product origin a premium or a discount

Abstract

The disagreement among the international business scholars regarding the Country-of-Origin (COO) effect has hindered practitioners from establishing appropriate positioning strategies. Moreover, the extant literature has focused on the direct effect of COO on sales, while COO’s role as a moderator has largely been overlooked. This paper revisits the COO concept and investigates whether COO of an imported product is related to the additional revenue from product publicity. Specifically, this paper posits that cultural distance between the focal country (importer) and the exporting country is negatively correlated with the revenue for those exporters’ product that is gained from product publicity. The author borrows text mining skills and cosine similarity score to exploit a large unstructured dataset of widely available news articles and the Korean box office data in an 8-year time frame (2008-2015). The author finds sufficient evidence that product publicity effect is weaker for imported movies from more culturally distant countries from the focal country, suggesting that marginal effect of the product publicity is discounted by cultural distance. Moreover, due to the dilution of COO effect, the proposed COO Effect is not observed when using the traditional word-of-mouth measure. The findings give valuable managerial insights to the retailers that they should consider the interplay among COO, cultural distance, and promotion channel choice when seeking sales promotion through the fast-changing platform environments. This paper is among the first empirical studies that investigated the effect of product publicity and its interaction with COO on the financial success.