The country-of-origin lie: impact of foreign branding on customers’ willingness to buy and willingness to pay when the product’s actual origin is disclosed

If you think about the last television commercial for an Italian pasta brand you have seen, are you sure it is really Italian? In many cases, especially in the food sector, neither the company nor the product originate from the advertised country, meaning that the company is pursuing a foreign branding strategy and is trying to benefit from positive stereotypes customers have about the specific foreign country. By collecting both quantitative and qualitative data through a point-of-sale intercept survey, this article assesses the impact of alleged origins on customers’ willingness to buy (WTB) and willingness to pay (WTP) if the actual origin is disclosed. The sample consisted of 200 German customers who were asked to answer questions related to one of two hedonic products they had just bought. It is empirically shown that foreign branding has a positive impact on the brand’s performance. However, as soon as customers find out that they were misled with regard to the origin of the product, both their WTB and their WTP decrease. This study contributes to the knowledge on the role of products’ origins on customers’ WTB and WTP. In contrast to the vast majority of the studies in this field, the communicated origin of the product is based on a foreign branding strategy and not on the product’s actual origin. Consequently, it was possible to manipulate within-subject variables by disclosing the actual origin of the product. The results of our study suggest that foreign branding may be a successful strategy for companies to increase their customers’ WTB and WTP. At the same time, our results raise concerns about the suitability of foreign branding as a long-term marketing strategy, unless a company can successfully maintain its foreign image. Future research opportunities include the choice of consumers with a different cultural background, of other hedonic products or of utilitarian products.     

CSR Practices and Corporate Strategy: Evidence from a Longitudinal Case Study

This paper aims to contribute to the present debate about business ethics and Corporate Social Responsibility (CSR) that the Journal of Business Ethics is hosting. Numerous contributions argued theoretical frameworks and taxonomies of CSR practices. The authors want to ground in this knowledge and provide further evidence about how companies adopt CSR practices to address stakeholders’ claims and consolidate their trust. Evidence was provided by a longitudinal case study about an Italian food company that is one of the largest producers of baby food. This company reshaped its corporate strategy along three decades through the adoption of CSR practices in order to win stakeholders’ trust about food safety and supply chain behaviour. The empirical exercise was informed by a literature review of the relevant contributions in terms of CSR business practices and levels of efforts to adopt them. In light of this review, the authors adopted for the research framework the taxonomy of business practices proposed by Spiller (2000, “Ethical Business and Investment: A Model for Business and Society”, Journal of Business Ethics 27, 149-160) and the levels of commitment towards CSR proposed by Stahl and Grigsby (1997, Strategic Management; Total Quality & Global Competition (Blackwell, Oxford)). The main findings are discussed in order to argue theoretical implications and identify further areas of research and debate.     

A simple model of income,aggregate demand and the process of credit creation by private banks

This paper presents a small macroeconomic model describing the main mechanisms of the process of creation by the private banking system. The model is composed of a core unit—where the dynamics of income, credit and aggregate demand are determined—and a set of sectoral accounts that ensure its stock-flow consistency. In order to grasp the role of credit and banks on the functioning of the economic system we make an explicit distinction between planned and realized variables, thanks to which, while maintaining the ex-post accounting consistency, we are able to introduce an ex-ante wedge between current aggregate income and planned expenditure. Private banks are the only economic agents capable of filling this gap through the creation of new credit. Through the use of numerical simulation we discuss the link between credit creation and the expansion of economic activity, also contributing to a recent academic debate on the relation between income, debt and aggregate demand.     

Time-to-market in vertically differentiated industries

This paper analyzes the optimal time to introduce a new product in a vertical differentiated market when the delay between innovation and market opening can be shortened through investments whose costs increase, the shorter the desired delay. The timing process is affected by the trade-off between being first and getting monopoly profits, and postponing entry for reducing time-to-market costs. We study the balance of these forces and how this balance is influenced by market structure. In our model, it is possible a priori to observe at the optimal solution both a quality-upgrading equilibrium (first entering the market with the low quality good and then marketing the high quality variant) and quality-downgrading equilibrium (first entering the market with the high quality good and then marketing the low quality variant) while in the existing published literature a quality-upgrading equilibrium is always observed.     

Macroeconomic Effects of Precautionary Demand for Oil

We evaluate the macroeconomic effects of shocks specific to the oil market, which mainly reflect fluctuations in precautionary demand for oil driven by uncertainty about future supplies. A two‐stage identification procedure is used. First, daily changes in the futures–spot price spread proxy for precautionary demand shocks and the path of oil prices is estimated. This information is then exploited to restrict the oil price response in a vector autoregression. Impulse responses suggest that such shocks reduce output and raise prices. Historical decomposition shows that they contributed significantly to the US recessions in the 1990s and in the early 2000s, but not to the most recent slump. Copyright © 2014 John Wiley & Sons, Ltd.     

Identification in Structural Vector Autoregressive Models with Structural Changes,with an Application to US Monetary Policy

A growing line of research makes use of structural changes and different volatility regimes found in the data in a constructive manner to improve the identification of structural parameters in structural vector autoregressions (SVARs). A standard assumption made in the literature is that the reduced form unconditional error covariance matrix varies while the structural parameters remain constant. Under this hypothesis, it is possible to identify the SVAR without needing to resort to additional restrictions. With macroeconomic data, the assumption that the transmission mechanism of the shocks does not vary across volatility regimes is debatable. We derive novel necessary and sufficient rank conditions for local identification of SVARs, where both the error covariance matrix and the structural parameters are allowed to change across volatility regimes. Our approach generalizes the existing literature on ‘identification through changes in volatility’ to a broader framework and opens up interesting possibilities for practitioners. An empirical illustration focuses on a small monetary policy SVAR of the US economy and suggests that monetary policy has become more effective at stabilizing the economy since the 1980s.     

Vertical integration,foreclosure, and productive efficiency

We analyze the consequences of vertical integration by a monopoly producer dealing with two retailers (downstream firms) of varying efficiency via secret two‐part tariffs. When integrated with the inefficient retailer, the monopoly producer does not foreclose the rival retailer due to an output‐shifting effect. This effect can induce the integrated firm to engage in below‐cost pricing at the wholesale level, thereby rendering integration procompetitive. Output shifting arises with homogeneous and differentiated products. Moreover, we show that integration with an inefficient retailer emerges in a model with uncertainty over retailers' costs, and this merger can be procompetitive in expectation.     

FROM EXOGENOUS TO ENDOGENOUS ECONOMIC NETWORKS: INTERNET APPLICATIONS

Abstract.  Economic agents' behaviour is affected by their position in a network, either exogenous or endogenous, in which they interact with a sub-set of neighbours only. The network's links, which may be generated by vertical and/or horizontal relations, or by more complex morphologies, may explain the transition between dynamic equilibria and the instability of economic aggregates. Moreover, networks shape strategic interaction among agents by determining their strategies; the problem of access and interconnection, particularly relevant in the Internet, is perhaps the best example. A two-way feedback between strategies and network structures arises instead when links are endogenous: those features are clearly shown in the mechanism underlying the formation of peering links and R & D networks.