Country-of-origin effect and firm reputation influence in business-to-business markets with high cultural distance

Italy is renowned around the world for its design, fashion, Mediterranean cuisine and other Made in Italy products. These products are often associated with known and famous brands, especially in the luxury sector, but many less well-known Italian firms operating in more technical industries, such as in the mechanical or electronic sectors, have a major presence in international markets. These traditional Made in Italy sectors as well as the specialized product sectors create the so-called "4 Fs" of Italian excellence (Fortis, 2005). The first group together traditional consumer goods linked to the person and the home. In almost all these areas, Italy has become the style setter, fostering virtuous synergy between the artisanship of luxury with its Renaissance tradition and entrepreneurial creativity. By penetrating the middle and upper-middle ranges of the various markets, a strong collective image has gradually established itself around the world. Specialized product sectors include the automation-mechanical-rubber-plastics sector. Despite offering excellent quality products in these sectors, Italy has a lower perceived image than other countries such as Germany. Country of Origin (COO) literature is mainly focused on consumer sectors (Business to Consumer). The abundance of literature on the subject in the industrial sector (Business to Business) is lower and among theorists, two main research streams can be identified. Some believe that COO has the same importance in the consumer market, while others assert that industrial customers, operating in a more informed way, are less likely to be influenced by it. This present contribution falls within this debate, with the aim of verifying if the COO effect really matters in BTB, particularly in business relations between firms that belong to markets with high cultural distance. China has been selected as reference to this investigation. A second objective is to identify the elements that come into play in the evaluation of Italian offers and whether there are differences of perception according to the business sector considered. The methodology used foresees, in addition to a review of the literature on COO in the Business to Business context, a study developed over three stages (the first stage is quantitative, the second and third stages are qualitative) on a sample of 338 firms in the first quantitative phase and 14 in the subsequent qualitative phases. Among the main results the evidence that sectors more associated with the traditional Made in Italy benefit most from the COO effect while COO greatly influences customer segments that are approaching specific technologies or products for the first time, confirming Han (1989). The COO effect, regardless of whether or not it is used by the company, brings with it values linked to internationally recognized “Italianness”, such as quality, craftsmanship, innovation, design and creativity (Fortis, 2005). In the sectors identified by Fortis as characteristic of Italian enterprises recognized abroad, the COO effect is always significant, constituting a reputational differential at least at the outset. It is also confirmed for other sectors that COO is relevant at the time of entry into a market when the industrial customer has no experience of the product or sector. Product/industry experience is recognized in purchasing decisions and adds value to the company's reputation or brand. The company's reputation is even more important in operations in the Chinese market where building a reputation entails product quality (as in other markets), technology and innovation (as in some other markets), trust and long-term relationships (more so than in other markets). A transition from country reputation (COO) to corporate reputation seems to ensue. In China - where relationships and trust are critical to creating long-term business relationships - corporate reputation calls attention to country reputation, intended not so much as the capacity to make or create, but as relational capabilities that are typical of Italians and thus "culture specific". This concept includes flexibility, listening, adaptability, which – according to the companies interviewed in the qualitative phase of the research- are considered emblematic of Italian firms particularly the small and medium sized. This feature of Italianness is so distinctive as to constitute a stronger competitive differential to build on. So much so that some Italian companies have started manufacturing processes in China, at times in joint ventures producing products recognized as Italian despite being manufactured in China. These considerations are especially valid for sectors where semi-finished products are components of other finished products. For other more typical Made in Italy products, relational capacity leads to a competitive advantage in relation to the creation of partnerships with distribution channels.