Does Lego “Build” Reputation for Denmark? Consequences of Brand Performance on Country Brand Reputation: An Abstract

It comes as no surprise that the US easily wins the competition of the world’s most popular global brands. Coca-Cola, Google, Facebook, Amazon. However, other countries have their own source of pride such as Lego for Denmark, IKEA for Sweden, Gucci for Italy. We examine how a brand’s performance affects a country’s reputation. Past research has examined country-of-origin effects (COE) whereby a brand from a country is perceived to be positive or negative based on a country’s reputation (Maheswaran et al., 2014). For example, several studies have documented how favorable or unfavorable evaluations of a country associated with a brand lead to corresponding favorable or unfavorable evaluations of the brand (Bonetti, 2014). Past research shows that several factors such as motivational (e.g., involvement) or cognitive (i.e., mental capacity) moderate COE. For example, Gurhan-Canli and Maheswaran (2000b) show that the processing goal and the type of information will determine whether country of origin is used in consumer evaluations. However, despite the significant amount of research on COE, there is scarce research on the effect of brand performance on country brand reputation. For our investigation, we examine how a brand’s performance measured by its performance (objective and subjective) influences the country’s reputation that Brand X belongs to. Unlike past research, in our study the impact is much bigger in a macro sense. We speculate that brand performance can influence a country’s reputation and risks and are more impactful for a country than a within brand relationship. We utilize two studies for exploring whether firm performance affects the country reputation. Study 1 is a panel data study that examines firm’s objective performance on country reputation. Study 2 uses an exogenous shock to examine the effect of a negative event (i.e., the Volkswagen “Dieselgate” scandal) on abnormal returns of a country’s other top brands, which matter for the economy and are in the same industry as the culprit brand. Through study 1, we find strong support that brand performance increases a country’s reputation. The analysis of abnormal returns (Study 2) indicates that the Volkswagen scandal had a negative effect on Germany’s automobile industry, which play a significant part for the economy while the non-German brands did not experience such negative consequences. This study has implications for companies and policy makers. Our findings indicate governments should closely monitor adverse events and work along with the culprit firm in managing the response post crisis. Next, we plan to test the developed framework whereby we examine the moderating effect of the industry that Brand X belongs to and visibility of Brand X in understanding the effect of Brand X’s performance on the country’s reputation.