An institutional perspective of consumer behaviour in industry-wide crises

Abstract

Product-harm crises strike fear into consumers and prove devastating for companies caught up in them. Previous product-harm crisis studies have mainly focused on consumer behaviour during discrete crises involving a single firm. An increasing number of product-harm crises occur at an industry-wide level. However, industry-wide crises are triggered by corporate misconduct permeating an industry. These crises differ from individual firm crises because they are attributable to institutional factors such as regulation and enforcement, industry norms, and ethical cultures. Integrating insights from institutional theory with consumer psychology theories can help us understand consumer behaviour during industry-wide crises and provide new insights for marketing research and practice. This thesis is based on three empirical papers that investigate consumers’ perceptions and judgment and their impacts on purchase decisions from an institutional perspective. The first paper develops a theoretical framework illustrating consumers’ psychological processes during an industry-wide crisis. Particularly, this paper incorporates insights from institutional theory to investigate the role of consumers’ perceptions of institutional environments, attribution, and judgment of the affected industry regarding its legitimacy in the process of trust erosion during an industry-wide crisis. Data from 534 participants support the research framework and illustrate the relationships among perceptions, legitimacy judgment, and trust. This paper indicates the important role of legitimacy judgment in consumers’ psychological processes during industry-wide crises. The second paper aims to deepen understanding of the legitimacy judgment process by investigating its content, mechanism, boundary conditions, and moderating effect. This paper includes four studies with data from 1050 participants. The results reveal the mediation role of legitimacy judgment in the relationship between the perception of the normative environment and industry trust. The information which signals that a crisis is industry-wide serves as a boundary condition for the full mediation effect of legitimacy judgment. This research further investigates the role of legitimacy judgment in different industries and indicates that the base rate of crises of an industry moderates consumers’ reliance on legitimacy judgment in trust-based decisions. The first two papers examine the influence of institutional factors on consumers by measuring consumers’ psychological constructs. The third paper measures consumers’ decision choice and tests whether it can be an output of consumers’ psychological processes under institutional influence. This paper conceptualizes country-of-origin (COO) as an indicator of the institutions of that country and tests its effects on consumers’ perceptions and purchase decision-making. Two experiments with 409 participants show that consumers adopt institutional COO cues in purchase decision-making. Consumers have higher purchase preference and lower price sensitivity for products associated with advantageous institutional COO cues. Taken altogether, the studies reported in this thesis deepen understanding of consumer behaviour from an institutional perspective. The three aforementioned papers illuminate consumers’ perceptions and judgment of institutions and demonstrate their impacts on consumers’ trust and decision-making. This research suggests that companies and governments should consider how to influence consumers’ perceptions and judgment of institutions when formulating crisis responses. This research also provides implications that companies could strengthen their perceived institutional advantages when they enter emerging markets.