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Influence of Consumer Ethnocentrism on Purchase Intentions: Case of Croatia

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Influence of Consumer Ethnocentrism on Purchase Intentions: Case of Croatia View metadata, citation and similar papers at core.ac.uk brought to you by CORE Nataša Renko, PhD Full professor Faculty of Economics and Business University of Zagreb E-mail: [email protected] Biljana Crnjak Karanović, PhD Full professor Faculty of Economics and Business University of Split E-mail: [email protected] Matea Matić, PhD Assistant Department of Economics and Business Economics University od Dubrovnik E-mail: [email protected] INFLUENCE OF CONSUMER ETHNOCENTRISM ON PURCHASE INTENTIONS: CASE OF CROATIA UDK / UDC: 659.113.25(497.5) JEL klasifikacija / JEL classification: D12, M30 Prethodno priopćenje / Preliminary communication Primljeno / Received: 30. svibnja 2012. / May 30, 2012 Prihvaćeno za tisak / Accepted for publishing: 27. studenog 2012. / November 27, 2012 Abstract In this paper the authors examine the effects of consumer ethnocentrism on purchase intentions towards domestic and foreign products, and also provides useful information on marketing implications derived from the obtained results. The purpose of this study is to determine the impact of consumers' ethnocentric tendencies on purchase intentions towards domestically produced goods and products from former Yugoslavia and European Union in a developing country such as Croatia. The research instrument was a questionnaire and the data were collected through personal interviews using the representative sample of 1000 respondents. Factor analysis and Spearman correlation coefficient were used to test the research hypothesis. It was determined that consumers' ethnocentric 529 EKON. MISAO PRAKSA DBK. GOD XXI. (2012.) BR. 2. (529-544) Renko, N., Crnjak Karanović, B., Matić, M..: INFLUENCE... tendencies play a significant role in predicting purchase intentions towards domestically produced goods and products from former Yugoslavia and European Union in Croatian market. Results indicate that consumer's ethnocentric tendency positively related to intention to purchase local products and negatively related to products from former Yugoslavia and European Union. Keywords: ethnocentrism, consumer ethnocentrism, purchase intention, Cetscale, Croatia 1. INTRODUCTION Research on the concept of consumer ethnocentrism is increasing and it became crucial in the process of understanding consumer behavior in the global market. Consumer ethnocentrism is a result of care and affection for own country and fear of adverse consequences because of high rates of import of foreign products that could cause serious problems for local economy development. Baughn and Yaprak, (1996) have showed that consumers purchase intentions and decisions were perceived as a moral reward and at the same time they enjoy a psychological goal, and finally a sense of achievement of avoiding any contact with another, different culture or country. The purpose of this study is to determine the impact of consumers’ ethnocentric tendencies on purchase intentions towards domestic products as well as the intensity of ethnocentric tendencies towards products of European countries and the countries of former Yugoslavia. The selection of countries was made on the basis of geographical proximity, cultural similarities, common history and mutual competitiveness. The objectives of this study are twofold: 1. to identify whether consumers ethnocentric tendencies of Croatian respondents have impact on their purchase intentions and 2. to examine reliability and validity of Cetscale, which was used in measuring ethnocentric tendencies of Croatian consumers. As for the impact of consumer ethnocentrism on consumers' perception towards domestic products, the results of this study revealed that consumer ethnocentrism is a good predictor of purchase intentions. The results of this research will provide valuable guidance for domestic companies that will allow them to adjust their strategic action in their home country such as Croatia. 530 EKON. MISAO PRAKSA DBK. GOD XXI. (2012.) BR. 2. (529-544) Renko, N., Crnjak Karanović, B., Matić, M..: INFLUENCE... In order to meet the stated research objectives and systematically present this empirical work, the paper was structured as follows. First, existing knowledge of consumer ethnocentrism was reviewed, serving as a basis for hypotheses construction. Methodology research included research instrument, research hypotheses and sample characteristics. Finally, in the last part of this paper, findings of research were presented as well as conclusions, limitations and suggestions for future research. 2. LITERATURE REVIEW The concept of consumer ethnocentrism has been derived from the general concept of ethnocentrism, which was first introduced in 1906 by sociologist William Sumner. In the early eighties, Crawford and Lamb (1981) showed that buying foreign products can cause high emotional involvement especially when it comes to national security or loss of jobs. That argument offered the concept of ethnocentrism beyond psychological and social frameworks, and was recognized in the field of marketing as one of the dynamic factors in consumer purchasing choices. Consumer ethnocentrism is defined as “the beliefs held by consumers about the appropriateness, indeed morality of purchasing foreign-made product and the loyalty of consumers to the products manufactured in their home country.” (Shimp and Sharma, 1987, str. 280). Consumer ethnocentrism has a direct and negative impact on consumers' purchase intention towards foreign products. These imply that the high ethnocentric tendencies lead to unfavorable attitude towards lower purchase intentions for foreign products. According to Shimp and Sharma (1987), consumers refuse to buy foreign products because they consider that they are harmful to the national economy and cause unemployment. Herche (1992) found that consumer ethnocentrism can predict consumers' preferences to buy domestically produced goods instead of foreign and that the ethnocentric tendencies are better predictors of purchase behavior than demographic or marketing mix variables. The construct of consumers' ethnocentrism relies on the presumption that the consumers' patriotic emotions will have significant effects on attitudes and purchase intentions. Therefore, Shoham and Brenečić (2003) reported that consumer ethnocentrism had a significant impact on consumers' intentions to purchase domestically produced goods. Many other studies have examined the impact of consumer ethnocentric tendencies on purchase intentions. (Yelkur et.al, 2006; Chryssochoidis et al.; 2007; Nguyen, et al., 2008; Evanschitzky, et al., 2008; Ranjbairn, et al.; 2011) However, the results have been different depending on the characteristics of consumers and countries. Only recently, in the former Yugoslavia several studies have been conducted that have examined the impact consumers’ ethnocentric tendencies on purchasing behavior. (Vida, Damian, 2000; Ljubić, et al., 2002; 531 EKON. MISAO PRAKSA DBK. GOD XXI. (2012.) BR. 2. (529-544) Renko, N., Crnjak Karanović, B., Matić, M..: INFLUENCE... Kesić, et al., 2004.; Kesić, et al., 2005; Reardon, et al., 2005; Čutura, 2006; Dmitrović, Vida, 2007; Dmitrović, et al.; 2009). Literature suggested that consumers’ ethnocentric tendencies depend on the degree of the development of a country. The original concept of consumer ethnocentrism has emerged in developed countries where consumers generally positively evaluated the quality of domestic products (Herche, 1992; Elliot, Cameron., 1994; Ahmed et al., 2004). Recent research (Supphellen, Gronhaug, 2003; Reardon, et al., 2005; Klein, et al., 2006) have shown that the same concept is applicable in the context of developing countries. Kaynak and Kara (2002) have noted that significant population growth and increasing purchasing power of consumers in such developing countries offer market opportunities to foreign companies whose domestic markets have already reach maturity. However, several studies (Bailey, Pineres, 1997; Ger, et al., 1999; Burgess, Harris, 1999; Batra, et al., Ramaswamy et al., 2000; Balabanis, Diamantopoulos, 2004) conducted in developing countries have confirmed the existence of negative ethnocentric tendency of consumers or favoring of foreign products. However, recent research in Central and Eastern Europe have confirmed the growth of the ethnocentric tendency as a result of low culture of openness and limited cosmopolitanism (Vida, Fairhurst, 1999; Hamin and Elliot, 2006; Vida, Reardon, 2008). The measurement of consumer ethnocentrism was made possible with the development of the Consumer Ethnocentrism Tendency Scale (Cetscale). In study, Shimp and Sharma (1987) were the first to develop an effective instrument for measuring the ethnocentric tendencies of consumers purchase decision. Through work, they proved that consumer ethnocentrism can measure, explain and provide answers to why and to what extent consumers prefer domestic products instead of foreign. They characterized the scale as a measure of "tendencies" rather than "attitudes" because it also includes the explanation of consumer decisions to buy "the most appropriate product”. It can be concluded that Cetscale is a successful predictor of consumers' beliefs, attitudes, purchase intentions and decision. This scale has been widely used to measure consumer ethnocentrism tendencies in many studies within developed and in the developing countries (Luque-Martinez, et al., 2000; Kaynak, Kara, 2002; Chryssochoidis et al., 2007; Yeong et al., 2007, Wong et al., 2008, Vassella, et al., 2011; Ranjbarian, et al., 2011; Teo, et al.Mohamad,
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