EMERGING ECONOMY CONSUMER PERCEPTION: A SOCIAL CAPITAL EXPLANATION

The perception of product quality is an important means for consumers to make purchasing decisions based on intangible criteria, particularly when they do not have access to decisional factors available to manufacturers and supply chain members. Consumer decisions in emerging economies are further biased by perceptions regarding the intentions these manufacturers and distributors. Members of emerging economies distrust other societal members to a larger degree than found in developed countries. Distrust of other societal members is an indicator of low social capital. Social capital is considered as the accrual of trust at a social level, has no tangible value, but it generates productive activities. Social capital enables economic transactions that are impossible in its absence. In the inverse, low social capital societies do not accrue much trust and productive activities are not constrained by it its relative absence. In our paper we propose a social capital explanation of emerging economy consumer perception toward product quality. We will use a social capital framework developed by Nahapiet and Ghoshal (1998) based on: 1) cognitive capital, 2) structural capital, and 3) relational capital. We will also provide propositions that consider the following ideas. Consumers in emerging economies perceive that products made specifically for their country are low quality and these low-quality goods enter their markets from domestic and foreign manufacturers. Consumers in emerging economies perceive that high-quality products made in their country are exported to developed countries and lower quality products stay in the country for domestic consumption. Consumers in emerging economies perceive that domestic manufacturers mislead them by using foreign sounding product names and false statements on labels. They also prefer products made for developed countries. When making purchase decisions, they rely on family and friends for information. Consumers from emerging economies do not trust that manufacturer or their representatives will be honor product warranties and, by extension, they do not trust their government to protect their interests. We also will discuss why a similar concept, country of origin effect, does not address the emerging economy consumer perception deliberated in our paper. This paper contributes to the field of operations and supply chain management by focusing on perceptions of product quality in emerging economies using a social capital explanation and by developing a framework of eight propositions meant to explain in more depth certain particularities.