As competition in the marketplace continues to elevate, introducing a new brand becomes increasingly laden with financial risk. Therefore, many companies today resort to strategic brand alliance (SBA), allowing a new brand to leverage off an existing brand's equity (Bluemelhuber, Carter, & Lambe, 2007). SBA helps companies create new markets and provides an effective means to introduce new products or services (Cooke & Ryan, 2000). The percentage of annual revenue that the 1000 largest U.S. companies generate from brand alliance continues to increase, from less than 2% in 1980 to an estimated 35% by 2002 (Booz Allen Hamilton, 2001).
Increasingly, SBA is also a viable market entry strategy in the global economy (He and Balmer, 2006, Kippenberger, 2000 and Xie and Johnston, 2004). Ninety-three percent of U.S. companies that engage in SBA are successful (Trendsetter Barometer, 2010). SBA also outperforms other conventional business development approaches such as venture capital and mergers and acquisitions (Pekar & Allio, 1994). Given that cross-border SBA is often sought as a prime engine for growth in business (Kalmbach & Roussel, 1999) and a tactic for remaining competitive in the global marketplace, an in-depth investigation of how it works is timely. Such studies provide important implications for practitioners to consider.
SBA literature extensively investigates the concepts of product fit and brand fit. Simonin and Ruth (1998) find that product fit and brand fit are important factors in consumer product evaluation. Researchers generally find that high fit is better at generating positive consumer response than low fit (Aaker and Keller, 1990, Park et al., 1991 and Simonin and Ruth, 1998). Since cross-border SBA involves brands from different countries, researchers should understand the role of country-of-origin (COO). Unfortunately, researchers have done few studies on COO fit. This paper provides an organized theoretical approach toward understanding the effects of cross-border SBA on consumer product evaluation with a focus on COO fit. Specifically, an experimental study addresses the question of how cross-border SBA affects consumers' brand attitudes at different levels of COO fit. Findings provide needed insights into how consumers process COO information and, subsequently, evaluate brands in the context of cross-border SBA.
The results of this study generally support the existing evidence of the COO phenomenon and its effects (Cordell, 1992, Johansson and Nebenzahl, 1986, Klein, 2002, Nagashima, 1970 and Roth and Romeo, 1992). Furthermore, this study finds that the COO fit of two brands may influence consumers' perceptions and brand evaluations (Hong & Wyer, 1989) because consumers use COO fit cues as a cognitive shortcut to form their attitudes toward brands.
As H1 and H2 confirm, when the perceptions of the two countries in cross-border SBA are positive, consumer attitudes toward the host and partner brands increase significantly after the alliance. These findings illustrate that cross-border SBA may work as a quality indicator by transferring the equity of the host brand to the partner brand (Keller, 1993, Levin et al., 1996, Park et al., 1996, Rao and Ruekert, 1994 and Simonin and Ruth, 1998). In this case, the BMW 135i transfers its established brand equity to the fictitious J&K car stereo. Therefore, subjects are more likely to evaluate the J&K car stereo favorably.
At the same time, the favorable country image of Japan as a reliable manufacturer of consumer electronics affects consumer attitudes toward the BMW 135i in a positive manner. Furthermore, these results support past findings that cross-border SBA helps host and partner brands by leveraging brand equity of each other (Simonin and Ruth, 1998, Uggla, 2004 and Uggla, 2006). This study finds that attitudes toward cross-border SBA favorably affect pre- and post-attitudes toward the BMW 135i and the J&K car stereo. In particular, findings from this study suggest that the partner brand J&K car stereo is more likely to be affected by cross-border SBA than the host brand BMW 135i.
Additionally, a SBA perceived positively appears to help transfer primary associations of the host brand such as brand- and product-related attributes, benefits, and attitude to the partner brand. Therefore, SBA positively affects consumers' attitudes toward the partner brand (Rodrigue & Biswas, 2004). As seen in H4, when the COO fit is low, post-attitudes toward the J&K car stereo increase significantly. This suggests that the J&K car stereo manufactured in Mexico will benefit from the positive country image of the German-manufactured BMW. The results of this study are consistent with past findings and highlight that good images of the host brand's country-of-origin benefit the partner brand (Yasin, Noor, & Mohamad, 2007).
However, this study also observes interesting results in H3. The partner brand from a country with a negative image positively affects the post-attitudes toward the host brand BMW 135i. The results suggest that post-attitudes toward the BMW 135i increase significantly, even when associated with the J&K car stereo manufactured in Mexico. However, the amount of positive change between pre- and post-attitudes toward the BMW 135i in the low COO fit condition is smaller than those in the high COO fit condition.
One reason why H3 is not supported may be due to the initial high pre-attitudes toward the BMW 135i. In this study, pre- and post-attitudes toward the BMW 135i were 5.6 and 5.8 respectively, out of the seven-point scale. In other words, subjects display favorable initial attitudes toward the BMW brand derived from pre-existing knowledge in their memory structure. Another reason may be that the SBA stimulus ads present a visual of the BMW, but not a visual of the J&K car stereo since the stereo is part of the car. As such, the BMW car visual may create a strong impression among consumers and overpower their impression of the J&K car stereo. Past research finds that visual elements of an ad can affect brand attitudes differently, even for consumers who have the same product attribute beliefs and attitude toward the ad (Mitchell, 1986 and Mitchell and Olson, 1981). According to the dual component model, consumers can form their brand attitudes differently depending on the positive or negative valuation of the visual element. In this study, the post-attitudes toward the BMW 135i and the J&K car stereo might be strengthened after seeing a visual representation of the BMW135i even when the COO fit is low.
One further reason for the somewhat surprising result for H3 could be that, for the J&K car stereo manufactured in Mexico, pre-attitudes (View the MathML sourceX¯ = 5.4) and post-attitudes (View the MathML sourceX¯ = 5.6) toward the J&K car stereo are both positive. Different information processing patterns that individuals exercise with respect to their levels of product knowledge may contribute to this. The J&K car stereo has major features such as a 7 in. motorized flip-out wide touch screen monitor, an anti-theft removable control panel, and Bluetooth capability. Even though the COO fit is low, most subjects may evaluate the J&K car stereo in a favorable way because of those important features. Thus, product attribute information of the J&K car stereo might favorably affect attitudes toward itself and the BMW 135i.
This study provides important implications to the theoretical development and the practice of cross-border SBA in several ways. Past research deals with consumer reactions to various brand alliances. For example, Levin et al. (1996) describes the assimilation effect, the psychological process in which affect was transferred from one brand to another. Rao and Ruekert (1994) also explore the mechanism for the transference of affect between brands. Consumers' preference of a host brand is transferable to other brands (Liu, Hu, & Grimm, 2010). Considering this transference, most brands tend to associate only with other established brands to avoid tarnishing their brand images. Particularly, if a partner brand with less than favorable country image is partnered with an established host brand, affect transference will enable the partner brand to enjoy the positive country image of the host brand. Therefore, in order to be successful in the global market, it is critical for a partner brand to collaborate with a host brand having favorable country image.
For a host brand coming from a country having favorable country image, cross-border SBA is helpful in strengthening their global foundation. The results suggest that low COO fit may not be necessarily detrimental for the host brand with strong brand equity. This is an important issue to explore. However, one could speculate that the effect may be much more positive for the host brand if it partners with a brand having favorable country image. Therefore, allying with a partner brand from a country having favorable image will be a win–win strategy for host brands in the competitive global market.
