Article Discussions1. What ar.docx

Article Discussions
1. What are the advantages and disadvantages of incremental
internationalization? (From the article: Internationalization
Process of Fast Fashion Retailers: Evidence of H&M and Zara)
Globalization has made many businesses all over the world to
adopt strategies that will give them a competitive edge over
other similar businesses. Some of them have adopted
incremental internationalization, which refers to the behavior of
firms to start operations in domestic markets and later expand
into new markets. This helps firms to establish themselves in
local markets before venturing into new foreign markets. As
such, it makes sense for a firm to first raise capital and learn the
most efficient business operations locally before it can expand
into other countries. Another advantage of incremental
internationalization is that firms are facilitated to gather
sufficient resources that enable them to come up with effective
strategies to enter the new markets. For instance, a firm
intending to operate globally should first consider setting up
operations in a stable environment that will facilitate for its
growth and sustainability. Based on the lessons learnt, it can
then identify more effective strategies when operating in other
countries. Some may argue that the model has become outdated
due to increased competition that has forced companies to seek
ways of faster penetration into new markets. However,
incremental internationalization is an effective model for firms
intending to grow gradually.. this model is also criticized as it
encourages firms to have late market entry, which may limit
their market share as other early entrants may have already
taken over the market.
2. Why are international brands first introduced as premium
brands in developing countries?(From the article: Evolution
Patterns of Apparel Brands in Asian Countries: Propositions
From an Analysis of the Apparel Industry in Korea and India)

It makes sense to attach higher prices to products so as to earn
higher earnings. This concept has been used by many
international firms, as premium brands are associated with high
quality and well–designed products. This is due to the fact that
local apparels are regarded as being inferior in quality and
design. Therefore, premium brands fetch better prices, and the
firm earns a competitive advantage over other firms producing
domestic apparel. For instance, the Tommy Hilfiger brand is
considered as a premium brand in India, and it is so costly that
the price of one item is twice a worker’s monthly income. To
support this point, most developing countries prefer wearing
international brands to their own designs. This is due to the
mentality that global brands are more superior. However,
premium pricing is only a marketing strategy to enhance a
company’s competitive advantage.
3. Which is the best method of approaching a consumer for
retail clothing? (From the article: International Brand
Management and Strategy: Apparel Market in China)
The far end of the supply chain is the consumer, who has a big
impact on the success of an apparel business. However,
approaching consumers is one of the biggest challenges that
businesses have to go through. It would help if the were to be
aware that multiple methods of communication that are
cumulated over time are the best options for approaching
consumers. When making decisions regarding clothing items,
consumers rely on pre–existing knowledge. Various
communication sources should be used to get to the consumers
so as to enhance brand awareness. For instance, in China,
consumers for apparel do not take time to search for the best
clothing items that are available, as their basis for selecting a
particular brand is due to the attributes that have been
communicated to them via various communication channels. In
other parts of the world, this strategy can also be adopted. A
company that sends a consistent message about its brand raises
consumer awareness, therefore influencing consumer purchase
decisions.

Discussion
As seen in the Learning Activities, conducting research can be a
time-intensive process. However, there are various methods that
may help you conduct research more efficiently. This evidence
can be categorized as primary or secondary sources. Primary
research is based on first-hand observations and interpretations;
in secondary research, you have to rely on another writer’s
ability to find and analyze information. It is ideal to have a
research strategy or plan in place before jumping into looking
for sources. In this Discussion, you will build your research
strategy.
After completing the unit’s Activities, respond to the following
questions in at least two well-developed paragraphs:
• Include your thesis statement for an argument for
change in your community or workplace, and identify at least
three search terms you can use in the KU Library or an Internet
search engine to find sources to support that thesis statement.
• How will you evaluate the credibility of the sources
you find, particularly those on the Internet?
• What primary sources might be helpful for addressing
questions that your secondary sources cannot answer?
Journal of Consumer Marketing
Country of origin factors influencing US consumers' perceived
price for multinational products
Jung Ha-Brookshire So-Hyang Yoon
Article information:
To cite this document:
Jung Ha-Brookshire So-Hyang Yoon, (2012),"Country of origin
factors influencing US consumers' perceived price for
multinational products", Journal of Consumer Marketing, Vol.
29 Iss 6 pp. 445 - 454

Permanent link to this document:
http://dx.doi.org/10.1108/07363761211259250
Downloaded on: 23 September 2015, At: 12:38 (PT)
References: this document contains references to 33 other
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To copy this document: [email protected]
The fulltext of this document has been downloaded 1516 times
since 2012*
Users who downloaded this article also downloaded:
Khalid I. Al-Sulaiti, Michael J. Baker, (1998),"Country of
origin effects: a literature review", Marketing Intelligence
&
Planning, Vol. 16 Iss 3 pp. 150-199
http://dx.doi.org/10.1108/02634509810217309
Ronald Drozdenko, Marlene Jensen, (2009),"Translating
country-of-origin effects into prices", Journal of Product &
Brand
Management, Vol. 18 Iss 5 pp. 371-378
http://dx.doi.org/10.1108/10610420910981855
Gerard P. Prendergast, Alex S.L. Tsang, Cherry N.W. Chan,
(2010),"The interactive influence of country of origin of
brand and product involvement on purchase intention", Journal
of Consumer Marketing, Vol. 27 Iss 2 pp. 180-188 http://
dx.doi.org/10.1108/07363761011027277
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http://dx.doi.org/10.1108/07363761211259250
Country of origin factors influencing US
consumers’ perceived price for multinational
products
Jung Ha-Brookshire and So-Hyang Yoon
University of Missouri, Columbia, Missouri, USA
Abstract
Purpose – In response to the popularity of multinational
products with limited information on countries of origins, this
study aims to explore factors
influencing consumers’ perceived prices for multinational
products.
Design/methodological approach – The study performed a 2
(COP) £ 2 (COM) within-subjects randomized experimental
research, using the USA
and China as the countries of parts (COP) and the countries of
manufacturing (COM) for cotton apparel. A total of 77 US
consumers participated.
Hierarchical multiple regression analyses were performed.
Findings – Consumers’ income level was important for
perceived prices on apparel products made in the USA and/or of
US cotton. Expertise was also

important for higher pricing of apparel made in the USA of US
cotton, while familiarity with COO labeling laws negatively
affected perceived prices
when apparel was made in China. Perceived sustainability had
the largest impact on consumers’ perceived prices for apparel
made in the USA of
Chinese cotton.
Research limitations/implications – The study used a limited
sample size and the data were collected through experimental
studies. Generalization
must be done with caution.
Practical implications – Apparel businesses may want to declare
COP, if this country could provide cues to high quality, high
price, or excellent
design. Apparel businesses that would like to promote US
products may want to target those who have a high sense of
self-efficacy and educate
consumers with COO labeling rules and regulations.
Originality value – The findings offer significant factors
affecting consumers’ perceived price on multinationl products,
providing business practice
recommendations surrounding COP and COM.
Keywords Country of origin, Perceived price, Multinational
products, Hybrid products, United States of America, China,
Consumer behaviour
Paper type Research paper
An executive summary for managers and executive
readers can be found at the end of this article.
Introduction
Today’s economy is extremely complex and intricately

interwoven with multiple key players in multiple countries.
Products that we see in the marketplace are the results of
multinational collaborations and trades. Camry, a Toyota
automobile, is a no longer a Japanese product as most Camrys
currently sold in the US are built in the US and all 2012
model Camrys will be assembled in the US (Timmins, 2011).
By contrast, a significant number of the parts used in a Ford
or General Motors car are made in foreign countries and
imported to be assembled into final products in the US. This
does not make it easy to conclude whether or not a Camry is a
Japanese or US product. Similarly, a question arises regarding
how many foreign parts are allowed in a Ford or General
Motors car while still allowing it to claim to be a US product.
To some consumers, a Toyota Camry would be still a
Japanese product, just as a Ford would be a US product.
The concept of country of origin (COO), the country where
products or services were manufactured, has recently
expanded to country of parts (COP), country of

manufacturing (COM), country of brand (COB), and
country of design (COD). Each COO offers different
information, and consumers could use these more specific
designations to evaluate product attributes based on different
COO information. Consumers are interested in knowing
COM to ensure products are safe and made in a safe manner.
Others want to know COM to exercise their support for
domestic economy and local communities. COP helps
consumers make appropriate judgments of a country’s
involvement in the overall manufacturing process, while
COD and COB help communicate added values contributed
by a country that is well known for excellence in the product
category.
The consumers demand for products made in the USA
supports past studies on the COO effect. The COO effect
refers to a consumer’s dependency on COO when formingThe
current issue and full text archive of this journal is available at
www.emeraldinsight.com/0736-3761.htm
29/6 (2012) 445–454

q Emerald Group Publishing Limited [ISSN 0736-3761]
[DOI 10.1108/07363761211259250]
This project was completed in part through research grants,
Margaret
Mangle Research Catalyst Award and Seeding Interdisciplinary
Research
Collaboration Fund by the College of Human Environmental
Sciences, as
well as Faculty Research Grant by the Center for the Digital
Globe,
awarded to the first author at the University of Missouri.
445
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opinions on the quality of a product (Han and Terpstra,
1988). For example, when consumers see a product “Made in
USA,” compared to a product “Made in China,” they may
perceive the US product to be higher in quality and value.
Particularly when price is unknown, certain product
attributes, such as brand name or COO, are useful for
consumers to form their own opinion on what the product
price would be, in return, impacting purchase intention
(Bettman et al., 1998; Zeithaml, 1988).
Given the relationship between COO and consumers’
perceived price, the study was designed to explore factors
influencing consumers’ perceived prices for multinational
products. Using the US and China as COP and COM for
cotton apparel, the study assessed the effect of consumers’
demographic characteristics, prior knowledge, and perceived
sustainability on their perceived price. The study presents a

literature review of the COO effect and social responsibility,
the COO effect and perceived prices, and information
processing theory, followed by the research methods. The
results are discussed and the study concludes with
contributions, implications, limitations, and future research
opportunities.
Literature review
COO effects and social responsibility
The literature shows that COO plays a major role in
consumers’ decision-making processes and influences how
consumers view and evaluate product attributes (Samiee,
1994). The term COO effect refers to a consumer’s
dependency upon COO when forming opinions on the
quality of a product (Han and Terpstra, 1988). The previous
research suggests consumers’ demographic characteristics and
the economic development level of the country of origin are
important factors in the COO effect. For example, Schooler
(1971) found US female consumers evaluated foreign
products higher than US male consumers did. Similarly,
Wall and Heslop (1986) also found Canadian consumers have
a more positive attitude towards foreign products than
Canadian male consumers do. Younger consumers tend to
evaluate foreign products more favorably than older people do

(Bailey and Pineres, 1997). Educated consumers with higher
income were more likely to accept foreign products than
consumers with limited education and lower income were
(Bailey and Pineres, 1997).
The past research also suggests that consumers rate
products as higher quality if those products were produced
in countries that are more economically developed and
politically free (Wang and Lamb, 1983). Particularly,
consumers have pre-conceived ideas for different countries
and these stereotypical images of the countries affect
consumers’ evaluation on product quality. One of the
interesting findings on stereotype and the COO effect is that
consumers prefer products from their own country because
they believe domestic products have the highest quality and
pose the least risk (Hooley et al., 1988). This idea stems from
ethnocentrism, the belief in the inherent superiority of one’s
own ethnic group or culture (Hooley et al., 1988).
Ethnocentrism, coupled with 9/11 and the economic
recession in 2008, fueled patriotism among US consumers,
resulting in the heightened popularity of the “Buy Made in
USA” campaign. These consumers focus on helping domestic
economies and local communities, and, by purchasing US-
made products, they believe they help fellow Americans (Lee
et al., 2003). In this light, the COO effect has been discussed

in the socially responsible consumer behavior literature (Ha-
Brookshire and Norum, 2011).
Investigating the COO effect, however, is no longer a simple
task. Many of today’s businesses are now producing their
products all over the world, using raw materials produced in
multiple countries. Thus, hybrid or multinational products
(or products with more than one country of origin) are
common in today’s marketplace place. Yet, most industries
use a “one-country” origin designation that usually refers to
the country where the product is manufactured. This practice
makes it difficult to determine which country is a true country
of origin for a multinational product.
Therefore, some researchers have argued that multi-level
COO must be declared to reflect today’s complex supply
chain systems (Bilkey and Nes, 1982). In this light, the
concepts of country of design (COD), country of assembly
(COA), country of parts (COP), and country of manufacture
(COM) were introduced as they could be useful for
consumers’ value judgments (Essoussi and Merunka, 2007;

Insch and McBride, 1998). COD refers to the country where
the final product was initially conceptualized and designed..
COP points out the country where component parts are
manufactured. COA describes the country where the product
is partially or fully assembled, but not ready to be sold to the
end consumer COM refers to the country where the final
product is manufactured.
These multi-level COO determinations were found to affect
consumers’ evaluations on the product quality (Chowdhury
and Ahmed, 2009). Compared to a single-country COO
designation, the multi-level COO determinations are also
expected to help consumers better evaluate the contributions
of different countries, so they could choose the products that
fit their purchasing goals by using more accurate information.
For example, if one sees the US as a COP even if COM is
China, he or she may form different perceptions on the
product’s social and environmental impact than a simple
“Made-in China” label. Thus, multi-level COO designations

could help consumers better exercise their socially responsible
consumption than single-country origin determinations.
Despite the important impact of multi-level COO
determinations, COM represents COO in the US
marketplace (Samiee, 1994). Particularly for the textile and
apparel products, COO marking rules enforced by the US
Federal Trade Commission (2011) require that products
display the country where the most significant assembly
process occurred (or COM) as a COO on the finished
product (United States Department of Agriculture, 2011).
Translating COO effect into prices
Among many variables, price is usually discussed in the
literature as an influential extrinsic cue in relation to
consumers’ evaluations of product alternatives and their
purchase decisions (Veale and Quester, 2009). Studies found
that consumers use price as a predictor of quality, particularly
when they have limited knowledge of product offerings (Veale
and Quester, 2009). Consumers often formulate a natural

ordering of products according to a price scale, believing the
higher quality products are more expensive and products of
lesser quality are cheaper; or the higher-priced products have
higher quality and lower-priced products have lesser quality
Country of origin factors influencing US consumers’ perceived
price
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(Lee and Lou, 1996). This price/quality relationship is
described as the price-reliance schema (Lee and Lou, 1996).
Although the relationship between quality and price has
been highly discussed, how price influences the COO effect
has rarely been. To fill this gap, Drozdenko and Jensen (2009)
recently attempted to translate the COO effect into prices and
found that US consumers were willing to pay a 37 percent
premium for US-made shoes and a 105 percent premium for
US-made toothpastes, compared to the same products made
in China. The authors continued that the more consumers
were exposed to negative news concerning Chinese products,
the price premiums US consumers were willing to pay
increased. Similarly, Ha-Brookshire and Norum (2011) found
that US consumers were willing to pay over a 17 percent

premium for a shirt made of US-grown cotton, compared to
cotton without the COO display. All of these studies,
however, have focused on consumers’ willingness to pay,
rather than how much consumers believe that these products
should cost, that is, perceived price.
Perceived prices and information processing theory
Although previous literature review shows that COO is an
important extrinsic cue for consumers’ purchase intention
and purchase behavior, the relationship between COO and
perceived price has been little explored. Perceived price is
defined as what a consumer gives up or sacrifices in order to
obtain a product (Zeithaml, 1988). Thus, when actual price is
unknown, consumers may use other available product
attributes, such as brand name or COO, to form their own
opinion on what the product price, and therefore, quality
would be (Bettman et al., 1998). That is, when consumers
face new product attributes, they generate perceived price and
perceived quality, in return, impacting perceived value and
purchase intention (Zeithaml, 1988). The thesis that
consumers use various cues to construct their preferences is
explained by Bettman’s (1979) information processing theory
of consumer choice. Based on the notion that decision makers
have limitations on their capacity for processing information,
information processing theory suggests that consumers do not

always make perfect decisions. Rather, consumers make
decisions based on the limited information available in a given
situation.
Information processing theory further explains that an act
of preference construction is highly dependent on context and
individual characteristics. Prior knowledge is one of the
important factors in consumers’ preference construction as it
is believed to facilitate the acquisition of new information as
well as the use of existing information (Rao and Monroe,
1988). Prior knowledge is known to have two dimensions:
familiarity and expertise (Alba and Hutchinson, 1987).
Familiarity is defined as the number of product-related
experiences accumulated by a consumer, and expertise refers
to the ability to successfully perform product-related tasks,
such as quality, price, and value evaluation. Thus, prior
knowledge is defined as information held in memory about
product alternatives as well as consumers’ ability to perform
product-related tasks (Rao and Monroe, 1988).
From the familiarity perspective, consumers are more likely
to use extrinsic cues if new product attributes are unfamiliar
to them, while they are less likely use extrinsic cues if they are
more familiar with new product attributes (Rao and Monroe,
1988). The role of familiarity with new product attributes gets
enhanced if consumers have expertise in such product

attributes (Rao and Monroe, 1988). That is, consumers
who are familiar and have expertise in new product attributes
are better able to assess product quality and value through an
examination of intrinsic cues. However, consumers who are
unfamiliar with new product attributes with little expertise in
such attributes are more likely dependent on extrinsic cues for
their product evaluation.
Research questions
Given that the COO effect exists and COO, particularly
multi-level COO, is an important extrinsic cue for today’s
consumers, who want to know where products are made to
exercise their support for domestic economy and local
communities, the study aimed to explore factors influencing
consumers’ perceived prices for multinational products,
which are extremely common in today’s marketplace. First,
considering its impact on the COO effect, consumers’
demographic characteristics were included in the study as
potential factors consumers may consider when forming
perceived price. Following the information processing theory,
prior knowledge was included in this study as a possible
influential factor of consumers’ perceived price. Both
familiarity and expertise were considered to characterize

prior knowledge. Finally, the perception of the social and
environmental impact, or perceived sustainability, of the
product, suggested by multi-level COO designations, was
considered a new product attribute, impacting perceived
price. Figure 1 illustrates the study’s conceptual model.
Methodology
2 3 2 within-subject randomized experimental design
For the purpose of the study, a 2 (COP) £ 2 (COM) within-
subjects randomized experimental research was designed. In
this study, COP and COM were of interest to represent the
multi-level COO designations for hybrid products. It was
believed that a separate COP designation along with COM
would affect how consumers perceived price. Two-level COO
designations were used because the COO effect tends to
become weaker if the COO construct is broken down into too
many dimensions (Tse and Lee, 1993). Cotton shirts were used
as the study manipulations. Cotton is an apparel product’s
major part. In addition, cotton meets over half of the world’s
apparel needs and almost everyone owns cotton apparel,
regardless of income, gender, and age (Kadolph, 2011).
For both COP and COM, the US and China were selected
for a few reasons. First, these countries are two of the top
cotton producing countries in the world. Second, over 50

percent of today’s cotton produced in the US is shipped to
China to be further processed into apparel, making China the
leading importer of US-grown cotton (United States
Department of Agriculture, 2011). Third, China is the
leading cotton apprel exporter to the US, supplying over 27
percent of the entire cotton apparel imported to the US
marketplace in 2008 (Cotton Incorporated, 2009). Thus, it
was reasonably assumed that a significant portion of US
cotton exported to China comes back to the US as final
apparel products. Yet, the final products bear only a “Made In
China” label, undermining the contribution of US cotton.
This phenomenon was particularly important for the study
design, because many of today’s US consumers are seeking
“Made In USA” products to help domestic economy, show
patriotism, and demonstrate their social responsibility.
price
Volume 29 · Number 6 · 2012 · 445–454
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Sample
After approval from the Institutional Review Board,
participants were recruited through advertisements in

university news media and a local newspaper in spring
2011. A large retailer’s gift card for the amount of $5 was
given to participants as an incentive. Totally, 77 participants
were recruited and completed the study. Because the study
was designed to be a set of randomized experiments with each
participant as a block, it was possible to collect all 77
responses per cell created by the combination of two COP
and two COM. This design met the sample size requirements
suggested by Hair et al. (2006). First, the minimum sample
size per cell was greater than the number of dependent
variables, perceived price. Second, the sample size of 77
exceeded the minimum sample size per cell, 20, for repeated
measures design. Third, 77 responses per cell ensured equal
sample size per cell.
Overall, 54 out of 77 participants were women and the rest
were men. This was expected as the recruitment statements
included the phrase “apparel shopping behavior” and women
seemed more interested in this study than men. A total of 56
participants indicated themselves as Caucasian, 10 as Asian

and Pacific Islander, 7 as African American, and 4 as others.
Participants ranged from 18 years old to 69 years old, with an
average age of 30.6 years. A little over half of the participants
were single or divorced and the rest were either in a
relationship or married. Approximately half of the
participants had some college or high school education,
while the rest had college degrees or graduate education.
Finally, over half of the participants indicated that they had
over $30,000 as household income. Table I shows the study
sample characteristics.
Stimuli
Four cards were created to represent four different sets of
COP and COM of an apparel product. Each card was 3
inches wide and 2 inches long, and contained the following
information in black lettering on a white background:
. 100 percent Cotton from USA. Made in USA;
. 100 percent Cotton from USA. Made in China;
. 100 percent Cotton from China. Made in USA; and
. 100 percent Cotton from China. Made in China.
Variables

The price of a cotton shirt estimated by each respondent
served as a dependent variable in this study. The dependent
variable, perceived price, was measured by a single question
asking the participant to estimate the retail price for each of
the four types of cotton shirt with different COP and COM
combinations.
Nine predictor variables were included in this study, following
the study’s conceptual model. The first block of predictor
variables, demographic variables, served as control variables
in our model. Demographic variables included the
participants’ age, gender, marital status, education level,
and household income.
Figure 1 Conceptual model
Table I Characteristics of the study sample
Characteristic Frequency Percentage
Gender
Male 22 29.9
Female 54 70.1

Ethnicity
Caucasian 56 72.7
African American/Black 7 9.1
Asian and Pacific Islander 10 13.0
Hispanic/Middle Eastern/Other 4 5.2
Age
21 and Under 24 31.2
22 to 34 31 40.3
35 to 44 6 7.8
45 to 54 9 11.7
55 to 64 5 6.5
65 and Over 2 2.6
Marital status
In a relationship 20 26.0
Single/Divorced 39 50.6
Married 18 23.4
Education level
Some high school education 1 1.3
High School degree 4 5.2
Some college education 34 44.2

College degree 22 28.6
Some graduate education 8 10.4
Graduate degree 16 20.8
Income
Less than $10,000 18 23.4
$10,000-$29,999 17 22.1
$30,000-$59,999 16 20.8
$60,000-$99,999 15 19.8
$100,000-$119,999 7 9.1
$120,000-$199,999 3 3.9
$2000,000 above 1 1.3
Note: Total number of participants ¼ 77
price
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http://www.emeraldinsight.com/action/showImage?doi=10.1108/
07363761211259250&iName=master.img-
000.jpg&w=424&h=90
The two dimensions of prior knowledge, familiarity and
expertise, were included as the second block of predictor
variables. Familiarity was then divided into two: familiarity

with COO labeling laws and familiarity with the concept of
sustainability. Familiarity of COO labeling laws was measured
to assess the participants’ procedural knowledge, while the
familiarity of the concept of sustainability was intended to
examine whether or not the participants possessed conceptual
knowledge related to the study objectives. Conceptual
knowledge refers to a person’s representation of major
concepts (Reber and Reber, 2001). It is the kind of
knowledge that cannot be learned by rote. It must be
learned by thoughtful, reflective learning, and may be
transferred between situations. Procedural knowledge is
knowing the method of manipulating a specific condition or
the technique for implementing a task. It is knowing how to
control the relevant factors for examining some phenomenon
(Reber and Reber, 2001). Responses were recorded on a five-
point Likert scale ranging from “not familiar at all, or 1” to
“very familiar, or 5.”
Expertise was measured by the scale of self-efficacy as it is
commonly used in the literature to assess one’s expertise
(Schwarzer and Jerusalem, 1995). Self-efficacy is defined as
the confidence in one’s coping ability across a wide range of
demanding or novel situations (Bandura, 1994). A 30-item
scale was adopted from Sherer et al. (1982) and Schwarzer
and Jerusalem (1995) to examine the participants’ overall

confidence or belief that they could perform what they set out
to do, or expertise.
The third and last block of predictor variables was
perceived sustainability for each stimulus card. Perceived
sustainability was designed to assess the participants’
subjective judgment on the impact of sustainability of each
stimulus when they were exposed to such stimulus. The
participants were asked to rank each stimulus in the order of
the least sustainable to the most sustainable option among the
four cards.
Data collection procedures
Upon arrival at the university laboratory, participants were
asked to complete surveys including demographic
characteristics and prior knowledge. Then, the experiment
began with the statement, “we are showing you four different
cards that represent different country of origins of a cotton t-
shirt in random order. Assuming all others are equal, please
think about which option would be the most or least
sustainable to the environment and society, and organize the
cards in order from the most sustainable to the least
sustainable. Please take as long as you wish.” Most
participants took two to three minutes to respond to the
initial instruction. This perceived sustainability of the product

was recorded from 1 to 4, 1 being the least sustainable to 4
being the most sustainable.
Next, the four cards were mixed again and presented to the
participants. This time, participants were presented with the
statement “now, we found out that a typical cotton t-shirt sold
in major stores in the US is made out of 100 percent cotton
and has a label of ‘Made in China.’ The average price of this
shirt is $40. Compared to a $40 shirt, how much do you
believe that other options would cost at a retail store? Please
indicate one retail price for each option while considering the
sustainability impact of each card.” This procedure was done
to obtain perceived price of each card, using a cotton shirt
with a “100 percent cotton, Made in China” label as a
control. The control card represents what consumers see in
the marketplace under the current COO rules. The retail
price of $40 was set to represent the medium quality, average-
price cotton apparel products in the US marketplace.
Participants took approximately two to three minutes to
complete this task for all four cards. The responses were
recorded as perceived price.
Data analysis
Four sets of hierarchical multiple regressions were performed.
Petrocelli (2003) clarified hierarchical multiple regression

analysis is useful and powerful when researchers want to test
theoretical assumptions and examine the influence of several
predictor variables in a sequential way. By doing so, the
relative importance of a predictor can be evaluated based on
how much each predictor variable could add to the prediction
of a dependent variable, over and above other important
predictors. For the purpose of the study, hierarchical multiple
regression analysis was deemed ideal as the technique would
provide the relative importance of demographic
characteristics, prior knowledge, and perceived sustainability
on the participants’ perceived prices for four different
combinations of COP and COM profiles of cotton shirts. In
addition, the relationships between independent and
dependent variables were hypothesized based on theoretical
assumptions and past research. Regression coefficients and
changes in R2 were examined throughout the analysis.
Results
Perceived price for products Made in USA with US
cotton
The mean perceived price for this card was $56.9 with
standard deviation of 25.2. As indicated in Table II, nine
predictor variables accounted for 28.0 percent of total
variance in dependent variable, perceived price. Among the
demographic variables, the respondents’ gender and income

showed statistically significant impact on the price estimate.
First, men (standardized b ¼ 20.19; p , 0.10) and affluent
(standardized b ¼ 0.37, p , 0.01) consumers provided a
much higher perceived price for the product with this type of
COM and COM designation. The incremental R2 for the
entire demographic variables was 19.3. Second, participants’
expertise showed a statistically suggestive effect on perceived
price (standardized b ¼ 0.21, p , 0.10) with an incremental
R2 value of 4.1, after accounting for demographic variables.
Third, perceived sustainability of this product has a
statistically significant impact on perceived price
(standardized b ¼ 0.23, p , 0.05) with an incremental R2 of
4.6, after accounting for demographic and prior knowledge
variables. In sum, income, perceived sustainability, gender,
and expertise were important factors for the participants
perceived price for an apparel product made in USA with US
cotton.
Perceived price for products Made in China with US
cotton
For an apparel product made in China with US cotton,
participants estimated it to be $46.9 with a standard deviation
of 17.6. In addition, nine predictor variables accounted for
31.7 percent of the total variance in perceived price. First,
participants’ income level showed a statistically significant

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positive impact on perceived price (standardized b ¼ 0.37,
p , 0.01), with an incremental R2 value of 18.5. Other
demographic variables were not found statistically significant.
In terms of prior knowledge, interestingly, participants’
familiarity with COO labeling laws showed a statistically
significant, yet negative effect on their perceived price for this
product (standardized b ¼ 20.23, p , 0.05), after
accounting for demographic variables. That is, the more
familiar the participants were with the COO laws, the lower
they estimated the value of the product if it was made in
China even if US cotton was used. Perhaps, participants put
more weight on costs related to manufacturing than on raw
materials costs, and thus, they thought the price should be
lower if the product is made in China with high-price raw
materials. Finally, perceived sustainability also showed a
statistically significant impact on perceived price
(standardized b ¼ 0.27, p , 0.05) with an incremental R2 of
5.9, after accounting for demographic and prior knowledge
variables. Overall, income, perceived sustainability, and
familiarity with COO labeling laws were important
influencers of perceived price for an apparel product made
in China with US cotton.

Perceived price for products Made in USA with Chinese
cotton
The mean price estimate for an apparel product made in USA
with Chinese cotton was $46.1 with a standard deviation of
18 and nine predictor variables accounting for 37.2 percent
(the highest of the four cards) of total variance in perceived
price. First, participants’ income level showed a statistically
significant positive impact on perceived price (standardized
b ¼ 0.24, p , 0.05), with an incremental R2 value of 17.5.
Other demographic variables were not found statistically
significant. Different from the first two cards, prior knowledge
showed no statistical significance on their perceived price,
after accounting for demographic variables. Instead, perceived
sustainability showed a statistically significant impact on
perceived price (standardized b ¼ 0.40, p , 0.01) with an
incremental R2 of 15.4, after accounting for demographic and
prior knowledge variables. This finding suggested perceived
sustainability is the single largest influencing factor on
perceived price for the product made in USA with Chinese
cotton. In short, income and perceived sustainability were
important factors for perceived price for an apparel product
made in the USA with Chinese cotton.
Perceived price for products Made in China with
Chinese cotton
The mean price estimate for an apparel product made in

China with Chinese cotton was $38.2 with a standard
deviation of 13. This price estimate was below the control
price of an apparel product with a COO label of “Made in
China” without any information on the origin of raw
materials. In addition, nine predictor variables accounted
for only 19.2 percent (the lowest of the four cards) of total
variance in perceived price. Age was the only demographic
variable with a statistically suggestive positive impact on
perceived price (standardized b ¼ 0.27 p , 0.10), with an
incremental R2 value of 7.6. Other demographic variables
were not found statistically significant. Instead, prior
knowledge was found to be significant for their perceived
price with an incremental R2 value of 9.4, after accounting for
demographic variables. More specifically, participants’
familiarity with COO labeling laws showed a statistically
suggestive, yet negative effect on their perceived price
(standardized b ¼ 20.21, p , 0.10). Participants’ familiarity
with the concept of sustainability showed a statistically
suggestive positive effect on perceived price (standardized
Table II Results of hierarchical multiple regression for
perceived prices
100% Cotton from
USA Made in
USA
100% Cotton from

USA Made in
China
100% Cotton from
China Made in
USA
100% Cotton from
China Made in
China
Mean of perceived pricesa (standard deviation) $56.9 (25.2)
$46.9 (17.6) $46.1 (18.0) $38.2 (13.0)
Demographicsb
Age 0.06 20.07 0.18 0.27 *
Gender (Female) 20.19 * 20.18 20.15 0.00
Marital status (married) 20.10 20.01 20.09 20.22
Education 0.10 0.15 0.03 0.05
Income 0.37 * * * 0.37 * * * 0.24 * * 0.07
Incremental R2 (%) 19.3 * * * 18.5 * * * 17.5 * * * 7.6
Prior knowledgeb
Familiarity with COO labeling laws 20.05 20.23 * * 20.12 20.21

*
Familiarity with sustainability 0.15 0.16 0.18 0.25 *
Efficacy 0.21 * 0.17 0.13 0.08
Incremental R2 (%) 4.1 7.2 * 4.4 9.4 *
Sustainabilityb
Perceived sustainability 0.23 * * 0.27 * * 0.40 * * * 0.17
Incremental R2 (%) 4.6 * * 5.9 * * * 15.4 * * * 2.6
Total R2 (%) 28.0 31.7 37.2 19.5
Note: n ¼ 77; aControl price was $40 for a cotton shirt with the
“Made in China” label; bEntries are standardized regression
coefficients; *Indicates p , 0.10;
* *Indicates p , 0.05; * * *Indicates p , 0.01
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b ¼ 0.25, p , 0.10). Different from the rest of the three
cards, perceived sustainability had no impact on perceived
price, after accounting for demographic and prior knowledge
variables. Overall, age, familiarity with COO labeling laws and
familiarity with the concept of sustainability were important
influencers of perceived price for an apparel product made in
China with Chinese cotton.

Conclusions and managerial implications
In response to the large quantity of multinational products
with limited information on countries of origins, the study
explored factors influencing consumers’ perceived prices for
multinational products. Particularly, given the US imports
over 90 percent of its apparel from the rest of the world and
China is the leading exporter of such products, the study used
the US and China as the countries of parts and
manufacturing to assess consumers’ perceived prices.
Demographic variables, prior knowledge, and perceived
sustainability were included in the study as potentially
influential factors for consumers’ perceived price.
The hierarchical multiple regression results from a 2
(COP) £ 2 (COM) within-subjects randomized experimental
research of 77 participants in the US showed several
interesting findings. First, even for a product made in
China, consumers believe it would be more costly if the label
includes the US as the origin of the cotton origin and less
costly if the label includes China as the cotton origin. This
indicates that where raw materials were produced does matter
to consumers’ perceived prices, even if the country of

manufacturing is the same. Thus, businesses may want to
declare the origins of the countries in which raw materials
produced, if this country could provide cues to high quality,
high price, or excellent design. This added information to the
current COO would help raise the value of the products in
consumers’ mind. The government also may want to consider
establishing requirements of declaring COP in addition to
COM, as some products without COM could be deceiving or
confusing to consumers.
Second, the results showed the different factors affecting
consumers’ perceived prices for products with multi-level
COO designations. For example, male consumers with high
income, who believe they have expertise, tend to have higher
perceived sustainability on products made in USA with US
cotton, resulting in higher perceived price for such products.
Consumers with little knowledge of COO labeling laws tend
to have higher perceived sustainability on products made in
China, regardless of fiber origins. Thus, businesses that would
like to promote US products may want to target those who
have a high sense of self-efficacy and educate consumers with
COO labeling rules and regulations. The more they are
familiar with COO labeling laws and the more confident they

are in themselves, the more consumers would value US
products.
Third, the study finding showed the explanatory power
(15.4 percent) of perceived sustainability on products made in
the USA with Chinese cotton is very powerful. In addition, it
was 3.4 times greater than that on products made in USA
with US cotton. Today’s marketplace in the US is full of
cotton apparel made in China with US cotton, rather than
made in the USA with Chinese cotton. This trend can be seen
by the trade data, showing the US rarely imports Chinese
cotton while it exports a great amount of cotton to China
where most cotton is processed into apparel before being re-
exported back to the US. Given the fact of the abundance of
products made in China with US cotton in the US
marketplace, this finding offer important implications for
businesses whether they should communicate COP, COM, or
both.
Finally, overall, demographic variables had the most
explanatory powers over perceived price across the study
stimuli, ranging from 17.5 percent to 19.3 percent.
Particularly, except for products made in China with

Chinese cotton, consumers’ income was the most or second
most important factor for their perceived price of products
with US involvement as COP, COM, or both. Prior
knowledge or perceived sustainability have relatively lower
power than demographic variables, and this finding poses
challenges to businesses as to how to influence consumers for
additional values that COP might provide. After all, if
consumers do not have high income, the value of
sustainability alone may not be significant enough to change
consumers’ purchase behavior.
Limitations and future research opportunities
As most other research, this study also has limitations and,
therefore, future research opportunities. First, although the
study findings showed interesting consumer profiles for
products with different COP and COM combinations, the
study did not examine why consumers have such high
perceived value for US-made products using US raw
materials – almost twice as high as Chinese-made products
using Chinese raw materials. If we could understand why this
phenomenon occurs and what type of consumers overvalue
US-made products, businesses, policy makers, researchers,

and consumer advocacy groups would be able to help inform
consumers of the fair value of US-made products. This would
help consumers be less affected by fraud or deception that
may occur from incomplete COO labels and less turned off by
the high price of US-made products.
Second, although experimental research design was useful
to keep participants fully engaged in the study and produce
good quality data from the participants’ responses, because of
the laboratory setting, some participants might have provided
what they perceived to be socially acceptable answers. Thus,
further studies in a natural shopping environment are
recommended, where researchers are not intrusive and
participants may not feel judged by answers they provide
during the study. Third, a greater sample size in a larger
population is recommended to help generalize the study
findings. Finally, given the fact that US-made products have
different meanings for consumers from different countries and
cultures, cross-cultural studies investigating the effect of COP
and COM on perceived prices of domestic products and
foreign products would be fruitful to further our knowledge

on the COO effect.
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About the authors
Jung Ha-Brookshire, PhD, is an Assistant Professor in the
Department of Textile and Apparel Management at the

University of Missouri. Her research interests include global
supply chain and sourcing strategies, sustainable production
and consumption of textile and apparel, and firm/industry
identity issues. Jung Ha-Brookshire is the corresponding
author and can be contacted at: [email protected]
So-Hyang Yoon, PhD, is a research fellow at the Center for
Digital Globe in the School of Journalism, University of
Missouri-Columbia. Her research interests include marketing
communication, branding strategies, consumer behaviors in
multicultural settings, participatory behaviors, and the roles
of communication in social engagements.
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Executive summary and implications for
managers and executives
This summary has been provided to allow managers and
executives
a rapid appreciation of the content of this article. Those with a
particular interest in the topic covered may then read the article
in
toto to take advantage of the more comprehensive description of
the
research undertaken and its results to get the full benefits of the
material present.
Plenty evidence exists to show that consumer purchase
decisions are significantly influenced by country-of-origin
(COO) effects. Various studies have found that demographic
characteristics and the level of economic development within
the COO are especially significant. Of particular relevance is
research indicating a more positive attitude towards foreign
products among females, younger consumers and educated
individuals earning high salaries. In comparison, males, older
consumers and less educated, low earning people displayed a
lower tendency to accept these products.

Many nations have become stereotyped and consumers
typically rely on these images to evaluate products from
certain countries. There is also a strong indication that people
regard products as being of higher quality when they are
manufactured in more economically advanced nations. COO
research has likewise noted that domestic products are
typically regarded as being superior to those manufactured
abroad. For individuals with ethnocentric tendencies, this is
likelier still.
The notion of COO being a simple construct has
traditionally prevailed. However, this is no longer the case
because it has become the norm for many organizations to
source materials and manufacture their products in different
countries around the world. It is consequently feasible to
regard many products as “hybrid or multinational” in nature.
Nevertheless, the propensity remained in certain industries
to use COO as a reference to where the product was made.
This resulting lack of clarity prompted academics to clamor
for a “multi-level COO” and has given rise to additional labels

that include country of design (COD), country of assembly
(COA), country of parts (COP) and country of manufacture
(COM).
Use of multi-level COO definitions can impact on how
consumers measure product quality, some academics have
discovered. The assumption is that people are able to more
accurately assess how different nations have contributed.
However, in the US the issue is complicated by stipulations in
certain industries that COO should refer to the COM or the
country responsible for the “most significant assembly
process”. The “Made in” label may not be fully informative
and consumer decisions could well be different if they, for
instance, know which country supplied the parts. Providing
additional information is also likely to help those whose
consumption is driven by a desire to behave in a socially
responsible manner.
Plenty research has identified that consumers frequently use
price as a quality indicator. When knowledge of products is
limited, this extrinsic cue becomes even more relevant.

Consumers invariably assume that positive correlation exists
between price and quality levels. The relationship between
price and the COO effect has in comparison received little
attention. However, studies have found a willingness among
US consumers to pay substantially more for product made in
the US as opposed to the same goods manufactured in China.
These and other studies producing similar findings addressed
consumer willingness to pay rather than their perception of
how much the products should cost.
In this context, it is supposed that consumers who are
unaware of the price may use brand name or COO
information to determine their perceived price and to
evaluate product quality. Prior knowledge in the shape of
familiarity and expertise are used in a similar vein. According
to different research sources, people with prior knowledge of
new product attributes are more likely to use intrinsic cues to
judge quality and value. A reliance of extrinsic cues is
characteristic among consumers lacking familiarity or
expertise.

Ha-Brookshire and Yoon address consumer perceived
prices for common multinational products and aim to
identify which factors influence their evaluations. Subjects
were recruited through newspaper and university news media
campaigns. Given the focus on clothing shopping activities,
that 54 of the 77 participants were women did not surprise.
Various ethnic groups were represented in the sample
containing respondents aged between 18 and 69.
Cotton shirts were selected for the research in which
subjects were exposed to one of four COP-COM designs. The
selection of China and the US for COP and COM was
determined by their involvement in cotton manufacturing,
apparel production and the import and export of the raw
materials and products.
Participants were exposed to cards depicting four types of
cotton shirt with different combinations of COP and COM.
They were asked to estimate the retail price of each one. The
study considered a range of demographic variables along with
familiarity and expertise. Familiarity was used in relation to

COO labeling regulations and to the concept of sustainability.
In addition, subjects had to rank the cards in order based on
levels of perceived sustainability and consider this while
determining the retail price. The control card used stated that
the shirt contained 100 percent cotton and was made in
China. This reflected current COO laws and what customers
see in the marketplace. The $40 price tag was deemed
appropriate for this quality of product sold in the US.
Analysis revealed that shirts:
. Made in the US with US cotton had a mean perceived
price of $56.9. perceived price was most influenced by
income, perceived sustainability, gender and expertise.
. Made in China with US cotton were on average perceived
to cost $46.9. Variables which mainly impacted on
perceived price were income, perceived sustainability
and familiarity with COO labeling laws.
. Made in the USA with Chinese cotton had an average
perceived price of $46.1. Income and perceived
sustainability were the most important factors.
. Made in China using Chinese cotton had a mean

perceived price of $38.2. The main determinants of
perceived price were age, familiarity with COO labeling
laws and familiarity with the sustainability concept.
Consumers seem to believe products made in China will cost
more when the label identifies the US as the origin of the
cotton used. When China is specified at the COP, the product
is assumed to be cheaper. Therefore, companies should
perhaps include COP information on labels when the country
in question is associated with superior quality or design and
price
Volume 29 · Number 6 · 2012 · 445–454
453
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high price. The likelihood exists that consumer would value
products more highly in such circumstances.
Marketers are encouraged to educate consumers about the
regulations which govern COO labeling. This can help in their
promotion of US products, since individuals without
knowledge of these regulations appear to rate goods made
in China as being more sustainable. Targeting those high in

“self-efficacy” is recommended.
Demographic variables were overall more influential than
perceived sustainability on perceived price of product where
the US was either or both COP or COM. A high income
appears particularly significant. However, marketers face a
challenge where lower earners are concerned. Ha-Brookshire
and Yoon assume that purchase behavior among these
consumers may not change on the basis of sustainability
value alone.
That perceived sustainability is higher for shirts made in the
US with Chinese cotton is another potential dilemma. Since
most cotton apparel sold in the US is manufactured in China
using cotton from the US, companies face a difficult decision
of what COO information to relay on clothing labels.
Future research could identify reasons for the high
perceived value of products made in the USA. Larger
sample sizes and cross-cultural studies comparing domestic
and foreign products are also suggested.
(A précis of the article “Country of origin factors influencing
US
consumers’ perceived price for multinational products”.
Supplied
by Marketing Consultants for Emerald.)
price

Volume 29 · Number 6 · 2012 · 445–454
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This article has been cited by:
1. Gargi Bhaduri, Jung Ha-Brookshire. 2015. Gender
differences in information processing and transparency: cases of
apparel
brands’ social responsibility claims. Journal of Product & Brand
Management 24:5, 504-517. [Abstract] [Full Text] [PDF]
2. Subir Bandyopadhyay. 2015. Investigating Quality
Perceptions of International Services by Chinese Consumers.
Thunderbird
International Business Review n/a-n/a. [CrossRef]
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http://dx.doi.org/10.1108/JPBM-08-2014-0683
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2014-0683
http://www.emeraldinsight.com/doi/pdfplus/10.1108/JPBM-08-
2014-0683
http://dx.doi.org/10.1002/tie.21746
Industrial Management & Data Systems
Strategic sourcing in the textile and apparel industry
Jin Su
Article information:
To cite this document:
Jin Su, (2013),"Strategic sourcing in the textile and apparel
industry", Industrial Management & Data
Systems, Vol. 113 Iss 1 pp. 23 - 38
Permanent link to this document:
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Users who downloaded this article also downloaded:
Ruth K. Shelton, Kathy Wachter, (2005),"Effects of global
sourcing on textiles and apparel", Journal
of Fashion Marketing and Management: An International
Journal, Vol. 9 Iss 3 pp. 318-329 http://
dx.doi.org/10.1108/13612020510610444
Jin Su, Vidyaranya B. Gargeya, (2012),"Strategic sourcing,
sourcing capability and firm performance in the
US textile and apparel industry", Strategic Outsourcing: An
International Journal, Vol. 5 Iss 2 pp. 145-165
http://dx.doi.org/10.1108/17538291211257592
S. Gary Teng, Hector Jaramillo, (2005),"A model for evaluation
and selection of suppliers in global textile
and apparel supply chains", International Journal of Physical
Distribution & Logistics Management,
Vol. 35 Iss 7 pp. 503-523
http://dx.doi.org/10.1108/09600030510615824
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Strategic sourcing in the textile
and apparel industry
Jin Su
The Department of Human Development and Environmental
Studies,
Indiana University of Pennsylvania, Indiana, Pennsylvania,
USA
Abstract
Purpose – The purpose of this paper is to investigate
performance outcomes of strategic sourcing,
specifically examining how strategic sourcing affects buyer-
supplier relationship, supplier evaluation,
and sourcing performance from the buying firm’s perspective in
the context of the US textile and
apparel industry.
Design/methodology/approach – This study provides an

empirical investigation of a theory-based
model integrating the resource-based view and the relational
view of strategic management. The model
is tested using data from 180 US textile and apparel firms by
structural equation modeling.
Findings – The survey results indicate that strategic sourcing
significantly impacts buyer-supplier
relationships, supplier evaluation, and sourcing performance of
buying companies. The study also
shows that supplier evaluation significantly influences buyer-
supplier relationship.
Research limitations/implications – Given that the data are from
a specific industry, the
generalizability of current findings to other industries may
require additional investigation.
Practical implications – Sourcing becomes a key strategic
consideration for textile and apparel
firms to sustain or improve their competitiveness.
Originality/value – The study contributes to the literature by
developing a research model based on
a multi-theoretical perspective and conducting a large-scale
empirical survey in the textile and apparel
industry and analyzing the model by structural equation
modeling. The dynamic textile and apparel
industry is a classical representation of global supply chain,
characterized by the industry’s significant
contribution to the world economy and international trade, the
extremely worldwide spread supply
network, and the tremendous competition in global market.
Examining strategic sourcing’s influences
in this important industry provides many valuable implications
for industrial practitioners.

Keywords United States of America, Textile industry, Buyers,
Suppliers, Channel relationships,
Sourcing, Buyer-supplier relationship, Performance, Strategic
sourcing, Supplier evaluation,
Textile and apparel
Paper type Research paper
1. Introduction
Strategic sourcing in the textile and apparel industry has
received increasing attention
over the last decade due to two important developments. First,
textile and apparel
firms have increasingly been competing in dynamic and
complex world marketplace,
considering continual changes and uncertainties in product
availability, prices,
and competition (MacCarthy and Jayarathne, 2012; Bruce and
Daly, 2011; Kumar and
Arbi, 2008; Åkesson et al., 2007). Second, the prominence of
effectively managing
global textile and apparel supply chain has increased. Business
managers are thinking
of new strategies and implementing new practices to increase
firm performance.
The textile and apparel industry is a classical representation of
global supply
chain, which is characterized by the significant contribution to
world economy and
international trade, the numerous steps and the diverse activities
in the chain, the
extremely worldwide spread supply network, the tremendous
competition in global

The current issue and full text archive of this journal is
available at
www.emeraldinsight.com/0263-5577.htm
Strategic
sourcing
23
Received 25 May 2012
Revised 10 June 2012
15 June 2012
Accepted 16 June 2012
Industrial Management & Data
Systems
Vol. 113 No. 1, 2013
pp. 23-38
q Emerald Group Publishing Limited
0263-5577
DOI 10.1108/02635571311289647
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market, the varying product and quality specifications being
managed and the volatility
of consumer preferences (MacCarthy and Jayarathne, 2012;
Bruce and Daly, 2011;
Abernathy et al., 2006). The textile and apparel industry not
only includes industrial
segments of fiber, fabric, and apparel production, but also
consists of marketing,
distribution, and retail operations of apparel and textile
products. The nature of the textile

and apparel industry and the increased pressures from fickle
consumers and uncertain
business environment are making more and more firms to
recognize the strategic role that
sourcing can play in achieving sustainable competitive
advantage (MacCarthy and
Jayarathne, 2012; Bruce and Daly, 2011; Kumar and Arbi,
2008). One method of improving
a firm’s competitiveness in managing the globally extended
textile and apparel supply
chain is through the strategic approaches to worldwide
suppliers. Going far beyond cost
considerations, sourcing decisions affect the production,
marketing, distribution and
financial strategies that a firm can put into effect. Top
management in textile and apparel
firms are developing and implementing more proactive sourcing
strategies to deal with
environmental changes, risks and uncertainties.
The objective of this paper is to investigate the role of strategic
sourcing in
improving textile and apparel firms’ performance, specifically
the effect of strategic
sourcing on buying firm’s buyer-supplier relationship, supplier
evaluation, and
sourcing performance. In the following section, the relevant
literature review is
presented; then, the research conceptual framework and the
hypotheses are developed.
Subsequently, the research methodology is described, followed
by the data analysis
and results. The paper discusses the results and implications in
Section 6. Finally, the
paper provides conclusions and future study directions.

2. Literature review
This section presents the literature on the theoretical
background of this study and the
research constructs, specifically strategic sourcing, buyer-
supplier relationship, and
supplier evaluation.
2.1 Theoretical background
Previous research suggests that strategic sourcing and buyer-
supplier relationship are
multifaceted phenomena that can only be explained by a multi-
theoretical perspective.
Terpend et al. (2008) advocate that future research needs to
recognize the limitations of
a single theoretical perspective and adopt a multidimensional
view to explain how
buyer practices and the influence of buyer-supplier mutual
efforts. In reviewing the
body of literature, we utilize multiple-theory studies, including
specifically the
resource-based view (RBV) and the relational view.
2.1.1 Resource-based view. The RBV theory (Barney, 1996;
Wernerfelt, 1984) focuses
on explaining how firm-specific resources and capabilities
characterized by value,
rareness, imitability, and non-substitutability form the basis of
sustained competitive
advantage. A firm’s resources include tangible and intangible
assets and capabilities
such as employment of skilled personnel, trade contacts, in-
house knowledge of
technology, efficient procedures, etc. (Barney, 1996;
Wernerfelt, 1984). From a theoretical
perspective, strategic sourcing is viewed by top management as
an important resource

of a firm which can be utilized to create or develop the firm’s
unique and inimitable
resources and capabilities to maintain or increase the firm’s
competitiveness
(Dobrzykowski et al., 2010; Shook et al., 2009; Chen et al.,
2004).
IMDS
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2.1.2 Relational view of strategic management. The increasing
importance of
strategic role of purchasing in supply chain management and the
rapid growth of
strategic buyer-supplier relationships across many industries
has attracted a great deal
of scholarly attention to recognize the issue of how relational
competencies generate
sustainable strategic advantage (Chen et al., 2004). Dyer and
Singh (1998, p. 660) argue
that “an increasingly important unit of analysis for
understanding competitive
advantage is the relationship between firms”. The relational
view of strategic
management argues that firms should view their ability to
manage their
inter-organizational relationships as a strategic resource for
building strategic
advantage (Cousins et al., 2008; Paulraj et al., 2008; Dyer and
Singh, 1998). Relational
view highlights the idea that inter-organizational relationships
potentially provide a
firm with access to key resources from its environment.
Strategic sourcing requires
a long-term orientation and may ultimately create collaborative

advantage and
bring about greater benefits of collaborative advantage than a
traditional non-strategic
sourcing based approach to competition (Chen et al., 2004).
2.2 Strategic sourcing
Previous literature addresses the need for sourcing to assume a
more strategic role
(Su and Gargeya, 2012; Kang et al., 2009; Paulraj and Chen,
2007; Gottfredson et al., 2005)
in this age of ever-increasing world competition. Chan and Chin
(2007) maintain that
strategic sourcing has been increasingly recognized as an
integral part of business
strategies and practices. Carr and Pearson (2002) define
strategic sourcing as the process
of planning, evaluating, implementing, and controlling highly
important sourcing
decisions in an effort to meet a firm’s long-range plans and
goals. Kocabasoglu and
Suresh (2006) identify the four key elements of strategic
sourcing: elevation of
purchasing function to a strategic level, effective cross-
functional communication and
support within an organization, information sharing with key
suppliers, and
development of key suppliers. Chiang et al. (2012, p. 53)
defines strategic purchasing
as “a demonstration of the strategic role of purchasing in the
firm’s long-term planning
and this is posited to have a bearing on supply chain agility”.
Incorporating previous
literature and considering the purpose of this study, the
theoretical construct of strategic
sourcing in this research is conceptualized by being proactive as
well as long-term focus,

having top management support, and strategically managing
supplier relationships.
2.3 Buyer-supplier relationship
In strategic sourcing, in order to manage suppliers as assets and
integrate suppliers
into the supply chain, buying firms need to make considerable
effort to develop
beneficial buyer-supplier relationship. Buying firms attempt to
interact closely with
their key supply partners to manage environmental
uncertainties. The development of
relationship-specific capabilities can lead to collaborative
advantages for both supplier
and buyer firms in the dynamic marketplace.
There has been an impressive increase in the number of
publications on buyer-supplier
relationships over the past two decades (Miocevic and Crnjak-
Karanovic, 2012;
Terpend et al., 2008). Cousins et al. (2008, p. 238) argue that
“close link between buyers
and suppliers are increasingly cited as a critical differentiator of
high and low performers
in global supply chains”. Terpend et al. (2008) provide a
comprehensive review of the
studies of buyer-supplier relationships between 1986 and 2005.
Terpend et al. (2008, p. 28)
Strategic
sourcing
25
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reveal that scholars have primarily investigated performance
outcomes and value
derived from buyer-supplier relationship and “researchers

considered more
buyer-supplier mutual efforts since 1996 than the earlier
decade”. Among the
mechanisms used by both buyers and suppliers to increase the
value derived from their
relationships, communication, information sharing, and trust are
three prominent
contributors for successful buyer-supplier relationships
(Terpend et al., 2008).
2.4 Supplier evaluation
Since suppliers represent a critical resource to a firm, the
perceptions of the buying
organization regarding its suppliers’ current and expected
performance affect the
performance of the buying firm directly and indirectly. Supplier
evaluation is a
quantification process that is linked to not only the evaluating
buyer company’s decision
process, but also the evaluated supplying company’s behavior
(Hald and Ellegaard,
2011). Supplier evaluation is a tool to communicate the buyer
firm’s perceptions of
supplier performance and capabilities (Prahinski and Fan,
2007). Buying organizations
can utilize supplier evaluation for supplier selection, supply
base reduction decisions,
supplier development and benchmarking, and development of
strong and collaborative
relationship with a group of key preferred suppliers (Cormican
and Cunningham, 2007;
Prahinski and Fan, 2007).
It is important for evaluating buying companies to have a
formal program or system
for evaluating and recognizing suppliers and tracking the

performance of the existing
suppliers. Supplier evaluation program or system can be used as
an effective way to
quantify and communicate the measurements and targets to the
supplier so that the
supplier is made aware of the discrepancy between its current
performance and the
buying firm’s expectations (Modi and Mabert, 2007; Prahinski
and Fan, 2007; Prahinski
and Benton, 2004). Buying firms use formal supplier evaluation
to communicate their
perceptions of supplier’s strengths and weaknesses and
expectations of supplier
performance and capabilities to maintain capable and high
performance supply bases
(Modi and Mabert, 2007; Prahinski and Fan, 2007).
3. Conceptual framework and hypotheses
3.1 Linking strategic sourcing to buyer-supplier relationship
Firms that consider sourcing to be strategic are likely to
appreciate buyer-supplier
cooperative relationships. In strategic sourcing, sourcing
managers play a pivotal role
in developing working relationship and effective communication
with suppliers
(Chiang et al., 2012; Kocabasoglu and Suresh, 2006; Chen et
al., 2004). A collaborative
buyer-supplier relationship is more desirable for the buying
firm in the supply market
which is full of uncertainty, risk, and turbulence. As an
important resource of a firm,
strategic sourcing drives the firm to access, acquire, or develop
additional resources
through buyer-supplier cooperation. According to this line of
reasoning, the following
hypothesis is developed:

H1. Strategic sourcing has a positive impact on buyer-supplier
relationship.
3.2 Linking strategic sourcing to supplier evaluation
Strategic sourcing recognizes the important role that suppliers
play in the buying
firm’s sourcing decision making (Chiang et al., 2012;
Kocabasoglu and Suresh, 2006).
Strategic sourcing helps the firm to identify the most
appropriate supply base for its
IMDS
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needs in today’s dynamic global market (Chiang et al., 2012).
Measuring supplier
performance is an important result of strategic sourcing
decision. Decisions regarding
the sourcing requirements and sourcing strategy will define the
set of suppliers for
initial consideration. The supplier evaluation then becomes a
matter of highly rigorous
assessment of potential supplier candidates. Strategic sourcing
influences how the
buying firms identify their key suppliers and how the supplier
evaluation programs
are designed, implemented, and used. Thus, the following
hypothesis is proposed:
H2. Strategic sourcing has a positive impact on supplier
evaluation.
3.3 Linking supplier evaluation to buyer-supplier relationship
One of the largest resources for a company is its supply base.

Strategically managing
suppliers from evaluating, recognizing, and tracking suppliers
through supplier
certification provides information about the buying firm’s
perceptions regarding the
supplier’s performance, which in turn will influence the
supplier’s commitment to
the buying firm and the buying firm’s effort in supplier
development program
(Prahinski and Fan, 2007; Prahinski and Benton, 2004).
Supplier evaluation is an
effective communication strategy that a buyer undertakes to
improve a supplier’s
performance and/or capabilities to meet the buyer’s short- or
long-term supply needs.
The practice of supplier evaluation is aimed at improving
communication between
buyers and suppliers and strengthening the buying firm’s
relationships with key
suppliers so that risk of opportunistic behavior is limited.
Therefore, the following
hypothesis is formally stated:
H3. Supplier evaluation has a positive impact on buyer-supplier
relationship.
3.4 Linking buyer-supplier relationship to sourcing performance
The value of buyer-supplier relationship is well documented in
the supply chain
literature. The RBV and the relational view of strategic
management explain value
extraction in buyer-supplier relationships (Terpend et al., 2008).
Strong relationship with
suppliers benefits the buying firm in the long run, fostering an
environment of mutual
support, improving flexibility and responsiveness among supply

chain partners, and
providing value to the ultimate customer (Miocevic and Crnjak-
Karanovic, 2012;
Terpend et al., 2008; Paulraj and Chen, 2007). Better
information sharing and higher
levels of collaborative communication between a firm and its
suppliers can increase
both buyer and supplier performance (Paulraj et al., 2008) due
to increased operational
efficiency and better coordination from both buyer and supplier
firms. Therefore,
this leads to the following hypothesis:
H4. Buyer-supplier relationship has a positive impact on
sourcing performance.
3.5 Linking supplier evaluation to sourcing performance
Measuring supplier performance is an important approach to
modifying a buyer firm’s
managerial behavior, and aligning the relationship with the
strategic and operational
goals of the buyer firm (Cousins et al., 2008). Based on RBV, it
is apparent that
supplier’s capability, skills, and technologies can be an
inimitable resource that has
a significant impact on business performance. Supplier
evaluation will help change
supplier behavior which is aligned with the evaluating
company’s interests and
improve supplier capabilities and performance; furthermore this
in turn will benefit the
Strategic
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evaluating buyer firm (Prahinski and Benton, 2004). Therefore,
based on this logic, we
propose the following hypothesis:
H5. Supplier evaluation has a positive impact on sourcing
performance.
3.6 Linking strategic sourcing to sourcing performance
Chen et al. (2004) demonstrate robust support for the links
between strategic purchasing,
customer responsiveness, and financial performance of the
buying firm. Paulraj and Chen
(2007) provide empirical support that there is a positive link
between environmental
uncertainties and strategic supply management initiatives
(strategic sourcing is a key
ingredient of strategic supply management), and their findings
further support the link
between strategic supply management and buyer performance.
Chiang et al. (2012) find
that strategic sourcing is significantly related to the firm’s
supply chain agility.
Following the preceding discussion, we expect the following
hypothesis:
H6. Strategic sourcing has a positive impact on sourcing
performance.
3.7 Conceptual model
Grounded on the RBV and the relational view, the research
conceptual model was
developed based on the linkages between strategic sourcing,
buyer-supplier
relationship, supplier evaluation, and sourcing performance.
The theoretical model
postulated is shown in Figure 1, which includes the above six

hypotheses.
4. Methodology
4.1 Research design
A survey instrument was used to collect the data and test the
proposed hypotheses.
The items tapping the theoretical constructs were developed
based on an extensive
Figure 1.
Model integrating the
structural and
measurement models –
SEM representation
H6
H5
H4
H3
H2
H1
E8
E13
E12
E11
E1

Strategic
Sourcing
V1
V2E2
E3
V9 V10
E9 E10
E4 E5 E6 E7
V3
V4 V5 V6 V7
V8
V11
V12
V13
Buyer-
Supplier
Relationship
Supplier
Evaluation
Sourcing

Performance
IMDS
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literature review of the managerial and scholarly literature to
establish the content
validity of each construct and associated scales. Feedback on
the initial design was then
obtained from academics familiar with empirical research in
study domain and senior
managers. A revised survey instrument was finally pre-tested by
nine purchasing
managers for content validity. Where necessary, questions were
reworded to improve
validity and clarity. Our discussions with academic and
industrial professionals
strengthened the fact that the choice of the indicators
adequately measured each construct.
To increase measurement accuracy, multiple indicators were
used for each latent
variable considered (Raykov and Marcoulides, 2000) and
existing scales were employed
where possible. A five-point Likert scale was used with “1 –
strongly disagree” and
“5 – strongly agree”. The three items that measure strategic
sourcing were developed
by referring to Carr and Pearson (2002). They capture the key
concept of strategic
sourcing including strategic orientation, relationship
development with key suppliers,
and top management support. The four items of buyer-supplier
relationship construct
was adopted from Carr and Pearson (1999) including buyer-

supplier loyalty, frequent
face-to-face communications with key suppliers, high corporate
level communication
on important issues with key suppliers, and the buyer’s
influence on key supplier’s
responsiveness. The measure of supplier evaluation was adopted
from Carr and Pearson
(1999). The three items in the construct include formal supplier
certification program,
formal system to track the performance of the suppliers, and
formal program
for evaluating and recognizing suppliers. The three items
measuring sourcing
performance were developed from discussion with industrial
managers and literature
review, focusing on contributions of sourcing to the overall
success of the firm and to
the firm’s bottom-line profit, and sourcing’s value-creating
outcomes.
4.2 Data collection
Dillman’s (2000) “tailored survey methodology” was followed
for data collection from a
random sample of 660 firms in the US textile and apparel
industry in order to increase
the response rate. All the recipients of the survey were selected
carefully and were
believed to be the most knowledgeable about sourcing of textile
or apparel products for
their companies with titles such as purchasing/sourcing
manager, buyer, etc. The
cover letter of the survey also stated:
If you feel that you are not the most qualified individual at your
company to fill out the
survey, please forward this to that person and encourage him or

her to complete the survey.
To ensure that the most appropriate professionals fill out the
survey. Multiple contacts
by mail, e-mail and follow-up phone calls were implemented for
each firm during data
collection. A thank you e-mail message or a thank you letter
was sent to every company
who returned their survey. During the data collection, 21 firms
reported that they were
not in the textile and apparel industry any more. Finally, a total
of 181 questionnaires
were returned by mail, e-mail or fax, representing 28.3 percent
response rate. 180 were
usable responses for examining the relationships in the research
model.
5. Analysis and results
A comparison was made between the respondents who
responded immediately with
those who responded after follow-up steps were implemented to
examine non-response
bias. t-tests were performed on the items included in the
research model. No statistically
Strategic
sourcing
29
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significant differences were found among the early and late
respondents, indicating
that non-response bias was not a problem in this study. To
investigate the
relationships in the conceptual model, structural equation
modeling (SEM) analysis
based on the maximum likelihood estimation method was

carried out using LISREL 8.8.
5.1 Descriptive statistics
Table I presents a summary of the descriptive statistics of the
respondents. About
45.3 and 54.7 percent of the respondents were from the textile
industry and the apparel
industry, respectively. About 49.2 percent of the responding
firms had annual gross
sales less than $100 million, about 27.6 percent had annual
gross sales $100-$500 million,
and about 14.4 percent had annual gross sales over $500
million.
5.2 The measurement model
Table II provides the correlation matrix and the descriptive
statistics of the variables in
the measurement model. Evaluation of the measurement model
was conducted using
confirmatory factor analysis to examine the relationships
between the indicator
variables and their respective underlying factors. Table III
shows the fit indexes used
in assessing measurement model fit. A satisfactory fit is
achieved for the measurement
Characteristics Frequency Percentage
Industrial sector
Textile industry 82 45.3
Apparel production 66 36.5
Apparel retailer/wholesaler/distributor 33 18.2
Geographic areas distribution (top eight states)
North Carolina 55 30.4
California 26 14.4
Georgia 18 9.9

Pennsylvania 10 5.5
South Carolina 9 5.0
Ohio 9 5.0
New York 8 4.4
Massachusetts 8 4.4
Number of employees
Less than 100 28 15.5
100-249 39 21.5
250-499 29 16.0
500-1,000 32 17.7
Over 1,000 51 28.2
Missing 2 1.1
Annual gross sales (US$)
Less than 5 million 13 7.2
8-24.9 million 31 17.1
25-49.9 million 19 10.5
50-99.9 million 26 14.4
100-500 million 50 27.6
Over 500 million 26 14.4
Missing 16 8.8
Note: Total respondents n ¼ 181
Table I.
Descriptive statistics
of the respondent firms
IMDS
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