The role of institutional trust in country-of-origin effect: a comparative study of two milk powder contamination incidents.

Huang, Qing

Introduction

Globalization has increased the opportunities for companies to distribute their goods to consumers all over the world (Jimenez & San Martin, 2010). People within a specific country are exposed to domestic and foreign products simultaneously, which makes a certain corporation's country-of-origin a salient factor influencing individuals' brand evaluations and purchasing behaviors (Al-Sulaiti & Baker, 1998). Country-of-origin effect refers to that the image of a target country functions like an informational cue which triggers people's evaluation of products originated from that country, such as judgment of product quality, performance, or specific service attributes (Al-Sulaiti & Baker, 1998; Bruning, 1997; Hsieh, 2004). Essentially, country image results from people's perception or judgment of a particular country from various angles (Nagashima, 1970). Accordingly, an inquiry into how individuals perceive and judge the target country contributes to better understanding the mechanism of country-of-origin effect.

Previous studies on the mechanism of country-oforigin effect mainly focused on how people's judgment of the target country in terms of its political system (e.g., Schooler, 1971; Wang & Lamb, 1983), economic development (e.g., Pharr, 2005; Schooler, 1971; Wang & Lamb, 1983), and cultural characteristics (Balabanis & Diamantopoulos, 2004; Orth & Firbasova, 2003; Parameswaran & Mohan Pisharodi, 2002) influenced their evaluation of products originated from that country.

In order to synthesize these approaches, this study proposes to understand country-of-origin effect from an institutional perspective, given that institutions are rules that structure interactions between different actors in the political, economic, and cultural arena (see Meyer & Rowan, 1977).

Using two milk powder contamination incidents caused by Yili (a Chinese brand) and Fonterra (a New Zealand brand), this study conceptualizes institutional trust as people's trust in the dairy industry and government regulation in a particular country. Appendix 1 outlines the details of each case. Specifically, the difference between people's trust in two focal corporations is used to test country-of-origin effect, while their trust in the dairy industry and government regulations in two countries explains how such effect is formed. The results are expected to shed light upon the fundamental cause of the negative country-of-origin effect of China (Blecken, 2007; Roberts, 2007), as well as the positive country-of-origin effect of New Zealand (Wang & Lamb, 1983).

Literature Review Country-of-Origin Effect

Despite various definitions of country-of-origin effect, decades of research has agreed upon that a product's country-of-origin can influence people's judgments of the product (Pharr, 2005, p. 34). In other words, individuals' perceptions of the target country function as an informational cue or a signal that influences their attitudes toward or purchase intentions of products originated from that country (Verlegh & Steenkamp, 1999). Previous studies have explicated how people's judgments of the target country from different angles influence their evaluations of products originated from that country. Particularly, three approaches are summarized.

The political approach. For instance, the degree of political freedom of the target country tended to influence individuals' purchase intention (Wang & Lamb, 1983). Besides, people's jealousness, suspicion, or dissatisfaction toward the target country's regime or political system was considered as part of the reasons that explained people's biased perception of the product originated from that country (Schooler, 1971). More recent studies have also demonstrated that consumers' judgments of the political environment of the target country may influence their attitudes toward brands originated from that country. For example, consumers with high degree of ethnocentrism in socialist countries preferred socialist era brands (Brecic et al., 2013), indicating the congruence between the regime type of a brand's origin country and consumers' stereotyped perceptions of that regime played an important role in forming consumers' attitudes. Moreover, Harmeling, Magnusson, & Singh (2015) found that consumers' agonistic emotions toward a particular country, such as Chinese toward Japan and American toward Russia, contributed to their negative word-of-mouth of the product and product avoidance.

The economic approach. Generally, the target country's level of economic development was found to influence people's product evaluations (Pharr, 2005; Schooler, 1971). Individuals were more willing to purchase products originated from economically developed countries than those from developing or underdeveloped countries (Wang & Lamb, 1983). Particularly, given that the degree of the economic development of a country is a paramount factor that decides product quality and technology sophistication (Roth & Romeo, 1992; Sharma, 2011), studies have shown that consumers tend to hold less favorable attitudes toward brands originated from countries with a poor reputation in terms of sophisticated workmanship or high-quality products (Cayla & Eckhardt, 2007).

The cultural approach. For example, individuals' ethnocentrism, a belief that one's own culture is superior to other cultures, tended to result in a negative judgment of products originated from different cultures (Balabanis & Diamantopoulos, 2004; Orth & Firbasova, 2003). In addition, individuals' assimilation of the target country's culture was expected to influence their attitudes toward products of that country (Lee, Han, & Nayga, 2014; Parameswaran & Mohan Pisharodi, 2002). Moreover, consumers' perceptions of country proximity, including common history, shared values, and shared languages played an important role in influencing their judgments of products from that country (D'Astous et al., 2008).

The above-mentioned three approaches illustrate how individuals' judgments of the target country in terms of its political system, economic development, and cultural characteristics influence their evaluations of products originated from that country. However, the three approaches cannot be separated from each other. In other words, people's everyday perceptions of a brand's origin country simultaneously consist of their judgments of the political, economic, and cultural features of that country. Accordingly, is it possible to find an approach to investigating the intertwined influence of a country's political, economic, and cultural characteristics on consumers' brand/product evaluations? Given that institutions are rules that structure the interactions between different social actors in various arenas (Meyer & Rowan, 1977), this study proposes an institutional approach to explore country-of-origin effect. It should be noted that people's perceptions of the institutions of a country reflect their synthesized evaluations of the political, economic, and cultural features of the country. Therefore, this paper argues that people's judgments of the institutions of the target country tend to influence their evaluations of products originated from that country.

Institutional Trust as a Preexisting Attitude

Institutions refer to rules that guide and normalize the interactions between different social actors, such as regulations, laws, contracts, social norms, etc. (Barley & Tolbert, 1997; Mcknight, Cummings, & Chervany, 1998; Zucker, 1986). Institutionalization describes the process in which actors come to take on as a rule-like status in social interactions by adhering to the rule that legitimizes them (Bigley & Pearce, 1998; Child & Mollering, 2003; Meyer & Rowan, 1977). Similarly, from a systematic view, the rule that structures a social system is implemented by different actors through social interactions (Giddens, 1990, p. 88). Accordingly, institutions as rules do not exist in vacuum; rather, they are implemented by concrete actors in various social interactions.

Based on the above-mentioned definition (Barley & Tolbert, 1997; Mcknight, Cummings, & Chervany, 1998; Zucker, 1986), institutional trust is defined as people's trust in rule implementation by specific actors. From a systematic view (Giddens, 1990), corporations are legitimized through running a business based on the industry rule, while government agencies are supposed to regulate corporations' implementation of the rule. Thus, it is through the rule that corporations and government agencies are related to each other. Accordingly, institutional trust refers to the degree to which people believe that corporations will implement the industry rule and that government will regulate corporations.

According to the research on country-of-origin effect, people's perceptions of the target country in a particular aspect exist prior to their judgments of products originated from that country (e.g., Kumara & Canhua, 2010; Reuber & Fischer, 2011). Thus, from an institutional approach, people's institutional trust can be viewed as a preexisting attitude. Given that the current study focuses on country-of-origin effect during food crises, people's institutional trust, consisting of their trust in the dairy industry's rule implementation and government regulation, tends to affect their judgments of the focal corporation that caused the incident.

Trust in the Focal Corporation as a Manifestation of Country-of-Origin Effect

Previous studies have shown that a corporation's country-of-origin can influence people's trust in the corporation (e.g., Al-Sulaiti & Baker, 1998; Jimenez & San Martin, 2010; Michaelis, Woisetschla * ger, Backhaus, & Ahlert, 2008; Rosenbloom & Haefner, 2009). Particularly, given that trust is a valuable yet intangible asset for corporations to establish and maintain good relationships with their publics (Huang & Zhang, 2013; Huang, 2008), and that trust is also an important capital to bond social actors together (Putnam, 1995), this study proposes to treat trust in the focal corporation as a manifestation of the country-of-origin effect in food incident settings.

Drawing upon two milk powder contamination incidents caused by Yili (a Chinese brand) and Fonterra (a New Zealand brand), this study argues that the gap between people's trust in Yili and Fonterra was largely caused by the difference in terms of their trust in the institutions of the two countries. Specifically, people's trust in the institutions of a particular country consists of their trust in the dairy industry's rule implementation and government regulation. Figure 1 depicts the conceptual map of the current study. Accordingly, the first research question is asked:

RQ1: Is there any difference between people's trust in Yili and Fonterra?

Due to that people's institutional trust is manifested by their judgment of the dairy industry's business activities and government regulation, a set of research questions are proposed:

RQ2.1: How did people judge China and New Zealand dairy industry's business activities, respectively?

RQ2.2: How did people judge government regulation of the dairy industry in China and New Zealand, respectively?

Methods

Quantitative content analysis and qualitative thematic analysis were used to address the proposed research questions. Previous studies have frequently used quantitative methods to investigate people's trust in corporations (e.g., Jimenez & San Martin, 2010; Kabadayi & Lerman, 2011; Rosenbloom & Haefner, 2009). Accordingly, this study tries to answer RQ1 by capturing the valence of people's trust in the focal corporation as an overall attitude, varying from untrustworthy (negative) to trustworthy (positive) (see Liu, 2006). In addition, qualitative thematic analysis was adopted to address RQ2.1 and RQ2.2, so as to explore the details of people's institutional trust, namely, their judgments of the dairy industry and government regulation in China and New Zealand, respectively.

Content Analysis

Comparability between two cases

Based on the comparative logic (Landman, 2000), confounding explanations for people's trust in the focal corporation during food incidents have to be ruled out to guarantee the validity of country-of-origin effect. Previous studies have demonstrated that incident type and severity (Coombs & Holladay, 2002), the corporation's response strategy (Coombs, 1995, 2006), as well as brand name (Casalo, Flavian, & Guinaliu, 2007) tend to influence people's trust in the focal corporation in crisis settings. Accordingly, the comparability between two cases is based upon that 1) both cases belong to the same type of incident and shares similar degree of crisis severity; 2) Yili and Fonterra made a public apology and product recalls shortly after the incident broke out; and 3) both corporations had enjoyed a good reputation and possessed a big portion of the market before the incident. Accordingly, by eliminating confounding explanations, the difference between Yili and Fonterra's country-of-origin becomes the major factor that accounts for people's trust in the focal corporation.

Data collection

In order to answer RQ1, quantitative content analysis of social media posts was used to analyze the valence of people's trust in the focal corporation in two cases. Sina micro-blogging site was selected for data collection because it is the earliest established and the most influential social media site in Mainland China. Moreover, Sina micro-blogging site has been frequently used in case studies in the Chinese context (e.g., Jiang, Huang, Wu, Choy, & Lin, 2015; Tse & Zhang, 2013). As with the Yili case, the time span of the incident was from 12 June 2012 to 15 June 2012. Accordingly, the researcher put the key words "Yili" and "trust" or its synonyms into the search engine bar of Sina micro-blogging site, and obtained 172 relevant posts during the time period. (1) Despite that such a data collection method may exclude posts that implicitly expressed the degree of people's trust in the focal corporation, the tradeoff is necessary because quantitative content analysis is assumed upon manifest coding for high reliability (Neuman, 2006, p. 325). Similarly, based on the time span of the Fonterra incident, the researcher typed the key words "Fonterra" and "trust" or its synonyms into the search engine bar of Sina micro-blogging site, and obtained 193 relevant posts from 3 August 2013 to 7 August 2013. Particularly, only posts from individual account were selected in order to fully represent lay people's trust other than the media, corporation, or any other organizations' view. In total, 365 posts directly pertained to the two cases were retrieved.

Datacoding, intercoder reliability, and data analysis

Each micro-blog post served as a unit of analysis to identify the valence of people's trust in the focal corporation in two cases.

The operational procedures were developed as follows. The first step was to identify the focal corporation, namely, Yili or Fonterra. The second step was to evaluate the valence of people's trust in the focal corporation. Specifically, a positive judgment of the corporation was coded as (3), neutral as (2), and negative as (1).

There were two coders in the present study. One is the author, and the other is the author's colleague. A codebook with coding guidelines was provided for both coders. About 20% of the samples in both cases were randomly selected to check the intercoder reliability, and they were included in the sample for final analysis. The intercoder reliability for the presence/absence of the focal corporation in both cases was 1.00 (percent agreement). The intercoder reliability for the valence of people's trust in Yili and Fonterra was .89 and .91, respectively (Scott's Pi), which meets a satisfactory level for intercoder reliability in most situations (Lombard, Snyder-Duch, & Bracken, 2002).

Thematic Analysis

In order to address RQ2.1 and RQ2.2, thematic analysis was adopted. Thematic analysis is a method for identifying and analyzing patterns (i.e., themes) within data (Braun & Clarke, 2006, p. 79). A theme captures something important about the data in relations to research questions, and represents some level of patterned response within the data set (Braun & Clarke, 2006, p. 82). The key criteria to identify a theme are relied upon its relevance to the research question (Braun & Clarke, 2006, p. 82). In this study, a theme is defined as a recurrent pattern that emphasizes a particular aspect of the dairy industry's business activities or government agencies' regulatory behaviors.

Thematic analysis can be either descriptive, namely, describing the semantic features, or interpretive, that is, interpreting the latent or underlying implications (Braun & Clarke, 2006; Clarke & Kitzinger, 2004). In fact, the interpretive approach is usually based on the descriptive approach in that interpretations of the latent implication have to be assumed upon understandings of semantic features of the theme (Braun & Clarke, 2006). Therefore, this study combines these two approaches in that 1) the descriptive approach shows how individuals judged the dairy industry's business activities and government agencies' regulatory behaviors in detail; and 2) the interpretive approach sheds light upon the underlying implications of individuals' judgment, namely, their trust in rule implementation by the dairy industry and government agencies. Particularly, inductive thematic analysis was used, so as to reduce constrains from pre-existing theoretical frameworks and to realize the merit of grounded theory to some degree (Braun & Clarke, 2006).

Unlike quantitative content analysis, thematic analysis is based upon "thick description" to some extent (Geertz, 2000; Ryle, 1949), which requires the text to contain much implicit and underlying information for analysis. Accordingly, different from content analysis, the key word for data collection only includes the focal corporation's name. Specifically, "Yili" was used as the key word for searching posts on Sina micro-blogging site from 12 June 2012 to 15 June 2012, and "Fonterra" as the key word for collecting posts from 3 August 2013 to 7 August 2013. Despite that people's judgment of the dairy industry and government agencies had been formed prior to the focal corporation's incident, it is believed that the two incidents in question refreshed people's memory and elicited their judgment based on the characteristics of individuals' episodic memory during information retrieval (Tulving, 1972, p. 385-386). Therefore, the time period for collecting individuals' judgments of the dairy industry and government agencies corresponds with the developmental trajectory of two incidents. Particularly, only posts mentioning the dairy industry or government agencies were selected for analysis. (2) Therefore, the textual corpus for thematic analysis consists of 61 posts in the Yili case and 20 posts in the Fonterra case.

The procedures of conducting an inductive thematic analysis were developed as follows (Braun & Clarke, 2006; Clarke & Kitzinger, 2004). First, the researcher read and re-read the social media posts closely for several times to summarize themes regarding people's judgments of the dairy industry's business activities and government regulation. Then, these themes were further checked for whether they suggested anything related to rule implementation, and the most relevant ones were identified as key themes. Finally, the key themes were defined and named, and their underlying implications were discussed.

Results

People's Trust in the Focal Corporation

In order to answer RQ1, independent samples t-test was used to compare the difference in people's trust in the focal corporation between two cases. The valence of people's trust in Yili (M = 1.69, SD = .52) was significantly lower than that in Fonterra (M = 2.09, SD =.51): t (166.13) = -7.50, p < .001. The result indicates that individuals perceived Yili as much less trustworthy than Fonterra.

Key Themes Constructing People's Trust in China and New Zealand Dairy Industry

As shown in Table 1, among 41 posts regarding individuals' judgments of China dairy industry's business activities, three key themes were identified: "intentional neglect of product quality" (n = 7, 17.1%), "worship of money" (n = 8, 19.5%), and "contempt for life" ?n = 8, 19.5%). By contrast, only 13 posts mentioned people's judgments of New Zealand dairy industry's business activities, among which "assured quality" was identified as a key theme (n = 7, 53.8%). Typical posts were selected to illustrate each theme.

Excerpt 1 (intentional nelecit of product quality)

"For dairy products made in China, if they taste rich, it is because food additives; if they claim to be light, it is because they are intentionally diluted. The frequent occurrence of product quality incidents has destroyed my trust in China dairy industry. Don't blame me for choosing foreign brands. The poor quality of China-made dairy products forced me to do so." (@Hiris_ss, 2012-6-15, 22:24)

"Dairy corporations in China spent millions or even billions on advertising each year to promote sales. If they had used part of the advertising expenditure to improve product quality, there would have been less product incidents! Celebrity endorsement or prime time advertising would never save brand reputation if product quality was not considered as priority." (@TianshijiajiaHQ, 2012-6-15 22:15)

Excerpt 2 (worship of money)

"Dairy corporations in China have long been misguided by their obsessions with money. It is their worship of profits that caused the poor quality of their products." (@Ladianxiaoxingmami, 2012-6-15, 12: 45)

"The Yili incident refreshes my memory of the melamine crisis caused by Sanlu several years ago. Food safety has not been improved in China in recent years. Profits rather than product quality is the rule of thumb that drives the dairy industry in China." (@Wujunzizai, 2012-6-15, 09:54)

"Dairy corporations in China are not reliable. Since power and money have become the only criterion for success, it's commonplace that food safety incidents have been frequently happening in China in recent years."(@Kuailedehaoyun, 2011, 2012-6-15, 09:10).

Excerpt 3 (contempt for life):

"Yili refreshes people's memory of poisonous milk powder products. Why did dairy corporations in China harm the kids in infancy!" (@Zhulongxunlaywer, 2012-6-15 16: 14)

"Domestic dairy products have again been stuck in a food safety scandal. Does the large population of China justify their contempt for life?" (@Henrongyijiushihuale, 2012-6-15 19: 33)

"Since the Sanlu incident, dairy corporations in China kept making problematic products that poses threat to kids' lives. In order to protect children from unnecessary harms, we propose to boycott China-made milk powder products!" (@Tengcun-jiadian, 2012-6-15, 11:07)

Excerpt 4 (assured quality):

"New Zealand dairy products have long been famous for 100% pure. This makes consumers outside of New Zealand markets trust New Zealand products." (@Longjianghealth, 2013-8-5 08: 57)

"Many Chinese consumers treat New Zealand dairy products as the role model of products with guaranteed quality and high safety. " (@Luoriyao, 2013-8-5, 9: 00)

"I went to the yearly-held food show in New Zealand several days ago. The quality of food products, especially dairy products, makes people believe they are eating healthy food. Choose New Zealand products and you are assured food safety. (@Zhuanshuchongchong_kiko, 2013-8-7 15: 56) "

Though incidents regarding product quality may occur due to uncontrollable or external factors (Coombs, 2004, 2006), "intentional neglect of product quality" shows that incidents would have been unnecessary if corporations had not initiated such an intention.

Accordingly, "intentional neglect of product quality" indicates that China dairy industry has failed to avoid unnecessary harms, which goes against the caring principle for corporations (Schwartz, 2005, p. 32). Besides, "worship of money" shows that China dairy industry has been trying to gain maximum profits at any cost, which breaches the justice principle, defined as sound and convincing reasons for corporations' business activities (Raiborn & Payne, 1990, p. 884). Moreover, "contempt for life" demonstrates that China dairy industry has not shown enough respect to basic human rights, such as individual health or even children's life, which violates the respect principle (Schwartz, 2005, p. 32). By contrast, individuals' judgments of New Zealand dairy industry differ from those of China dairy industry dramatically. The "assured quality" theme shows that products of New Zealand dairy industry have been well qualified, suggesting that they have fulfilled the competence principle by showing corporations' ability and reliability to operate in a qualified manner (Raiborn & Payne, 1990, p. 884).

As previously mentioned, caring, justice, respect, and competence reflected by each theme are four ethical principles that guide corporations' business activities (Raiborn & Payne, 1990; Schwartz, 2005). Ethical principles are rules that normalize corporations to gain social acceptance by differentiating the right from the wrong (Raiborn & Payne, 1990; Weaver, Trevino, & Cochran, 1999). Apparently, the first three themes imply that China dairy industry has failed to implement ethical principles, leading to people's distrust in rule implementation by dairy corporations in China. In comparison, the fourth theme indicates that New Zealand dairy industry has successfully implemented the ethical principle, contributing to people's trust in rule implementation by dairy corporations in New Zealand.

Key Themes Constructing People's Trust in Government Regulation in China and New Zealand

As Table 1 shows, in the Yili case, 20 posts mentioned Chinese government agencies' regulatory behaviors, among which one key theme was identified, namely, "ineffective regulation" (n = 13, 65.0%). In the Fonterra case, despite that only 7 posts involved people's judgment of New Zealand government's regulatory behaviors, "effective regulation" (n = 3, 42.9%) as a key theme was identified considering that the importance of a theme is not necessarily dependent upon quantifiable measures, but rather on whether it captures something important in relation to the research question (Braun & Clarke, 2006, p. 82). Typical posts were selected to describe and interpret each theme.

Excerpt 5 (ineffective regulation):

"Is it that hard to regulate dairy corporations in China? Dairy corporations would not have taken the risk of producing poor-quality products if regulations had been more effective!" (@Yixiangzhiyi, 2012-6-15 15:23)

"Ever since the melamine incident caused by Sanlu in 2008, food safety scandals have been frequently occurring in China. It can be traced back to that government regulators are too softhearted to execute laws." (@Qiuzhimagazine, 2012-6-15, 11:50)

"Food safety lays the foundation for individuals' everyday life. Recurrent food quality problems in China have made people doubt about the government's ability to regulate." (@vivianjjun, 2012-6-15 09: 44)

Excerpt 6 (effective regulation)

"We should follow the example of the effective regulatory system established by New Zealand government. Such a regulatory system contributes to the effective execution of laws and policies, such as penalty for the focal corporation's unethical behaviors and compensations for victims. "(@Sichenghaitao, 2013-8-7 16: 19)

"Because government agencies regulate the dairy industry strictly and effectively in New Zealand, dairy corporations are pushed to perform ethical behaviors. Otherwise, corporations would be punished severely for violating laws or policies." (@Kunmiaomaio, 2013-8-7 08: 42)

"Because the regulatory standard set by New Zealand government for dairy products is much higher than that in China, we trust New Zealand dairy products more than China-made products."(@Chunkunqiufa_xy, 20138-7 10: 59)

Either "ineffective regulation" or "effective regulation" indicates individuals' judgment of government accountability in terms of regulating the dairy industry. Government accountability refers to how the government fulfills its obligation to serve the general public's interests (Cheung & Leung, 2007; Guo, 2003; Zheng, 2003). Regulating corporations' business activities through policy making has long been considered as a core part of government accountability (Shaffer, 1995). Since corporations are driven to make profits in fierce market competitions (Reidenbach & Robin, 1991), the government has the accountability to regulate corporations' business activities to protect consumers from potential harms resulted from corporations' unethical behaviors (Holcombe, 1994).

Chinese government agencies' ineffective regulation suggests that they have more or less failed to realize accountability by leaving consumers vulnerable to problematic products, thus leading to public distrust in them. Moreover, Chinese government agencies' ineffective regulation demonstrates a lack of external force to guarantee dairy corporations' implementation of ethical principles in China. In comparison, "effective regulation" shows that New Zealand government agencies have fulfilled the accountability through effective law execution and policymaking, contributing to people's trust in them. Furthermore, New Zealand government agencies' effective regulation indicates a qualified external force to facilitate dairy corporations to operate ethically in New Zealand. [See Table 1]

Conclusions and Discussions

The significant difference between the valence of people's trust in Yili and Fonterra demonstrates that country-of-origin effect did exist. Besides, people's distrust in China dairy industry and Chinese government agencies, as well as their trust in New Zealand dairy industry and New Zealand government agencies explain such effect. From an institutional perspective (Bigley & Pearce, 1998; Child & Mollering, 2003; Meyer & Rowan, 1977), the focal corporation is related to the dairy industry and government agencies through the rule, and whether people trust the focal corporation thus depends on whether they trust rule implementation by the dairy industry and government agencies. Generally, the rule is directly implemented through the dairy industry's business activities and indirectly facilitated by government agencies' regulation. Particularly, it is people's distrust in rule implementation in China, manifested by China dairy industry's unethical behaviors and Chinese government agencies' ineffective regulation, that results in people's distrust in Yili. On the contrary, it is people's trust in rule implementation in New Zealand, shown by New Zealand dairy industry's ethical behaviors and New Zealand government agencies' effective regulation, that contributes to people's trust in Fonterra.

Theoretically, to extend previous studies explaining the formation of country-of-origin effect (Balabanis & Diamantopoulos, 2004; Parameswaran & Mohan Pisharodi, 2002; Pharr, 2005; Roth & Romeo, 1992; Schooler, 1971; Wang & Lamb, 1983), this study proposes an institutional approach by focusing on the role of institutional trust in country-of-origin effect. Institutions as rules implemented by particular actors explain country-of-origin effect from a structural perspective (Bigley & Pearce, 1998; Child & Mollering, 2003; Meyer & Rowan, 1977). Moreover, institutional trust highlights that the sustainable development of a corporation depends largely on people's trust in other corporations in the same industry and government regulation, which echoes that trust is a valuable social capital generated and accumulated from well organized interactions among different social agents (Misztal, 2001; Pavlou, 2002).

Methodologically, a case study design allows the researcher to explore how country-of-origin effect functions in reality by retaining the holistic and meaningful characteristics of real-life events (Yin, 2009, p. 4), which is usually hard to achieve through situation-free surveys (e.g., Rosenbloom & Haefner, 2009). Moreover, thematic analysis summarizes the characteristics of rule implementation by specific actors by interpreting the underlying implication of individuals' judgments of the dairy industry's business activities and government regulations. Such an inductive approach not only adds a qualitative dimension to country-of-origin effect research dominated by quantitative methods (Peterson & Jolibert, 1995; Verlegh & Steenkamp, 1999), but also explains the mechanism of country-of-origin effect from a grounded perspective.

Practically, in order to facilitate the sustainable development of corporations, attentions should be directed toward how to improve the image of a corporation's country-of-origin. To echo Wang & Lamb's (1983) call that a comprehensive understanding of the mechanism of country-of-origin effect could be used to develop countervailing strategies, this study offers suggestions based on that corporations and government agencies are linked to each other through institutional rules. Particularly, rebuilding institutional trust in China is of great significance to minimize the negative country-of-origin effect of China-made products. According to the hierarchy of ethical behaviors during business activities (Raiborn & Payne, 1990), corporations in China are suggested not only to perform minimally or basically socially accepted behaviors, but also to initiate ethical performance proactively. Meanwhile, government regulations in China need to be strengthened to facilitate corporations to act ethically to conform to policies and laws (Perry & Zenner, 2001; Shaffer, 1995). To sum up, the realization of corporation ethics and government accountability is the fundamental driving force for generating a positive country-of-origin effect of China-made products.

Given that it is an exploratory study on country-of-origin effect from an institutional approach, future research is suggested to look into the casual relationships between people's trust in different institutions of particular countries through survey or experiment. Moreover, to increase the generality of the findings, future studies are advised to incorporate more product categories.

(1) The synonyms of "trust" ("xinren") in Chinese include "xiangxin", "xinxin", "xinlai" "chengxin", and "xinyong".

(2) The dairy industry is operationalized as any dairy corporations except for the focal corporation, or the entire industry in general.

Correspondence to:

Qing Huang

School of Journalism and Communication

The Chinese University of Hong Kong

Shatin, N.T., Hong Kong

Email: q.huang0224@gmail.com

Tel: +852-39437713

Fax: +852-26035007

Qing Huang The Chinese University of Hong Kong

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Appendix 1.

An Overview on Two Incidents

Time                Yili               Time            Fonterra

12 June    Some milk powder          3 August   Some products were
2012       products were said to     2013       said to contain
           contain excessive                    botulinum bacteria.
           amount of mercury.

13 June    Yili began to recall      4 August   Fonterra began to
2012       problematic products      2013       recall problematic
           and proactively                      products.
           investigated the
           possible causes of
           the contamination,
           promising to take care
           of the issue in an
           appropriate manner.

15 June    Yili apologized for       5 August   Fonterra made an
2012       the incident and          2013       official apology and
           promised to make all                 promised to control
           efforts to deal with                 the problem in 48
           the relevant issues                  hours.
           after the product
           recall.

Note. Given that Fonterra explicitly announced to control problems in
48 hours (i.e., two days), the time period for data collection in the
Fonterra case is from 3 August to 7 August 2013

[FIGURE 1 OMITTED]

Table 1.

Comparisons in Key Themes Constructing People's
Institutional Trust between Two Cases

                   The Yili case               The Fonterra case

                       N = 41                        N = 13

The dairy     Intentional neglect of     Assured quality (n =
industry      product quality *          7, 53.8%)
              (n = 7, 17.1%)

              * Worship of money
              (n = 8, 19.5%)

              * Contempt for life
              (n = 8, 19.5%)

                       N = 20                        N = 7

Government    * Ineffective              Effective regulation
agencies      regulation (n = 13, *      (n = 3, 42.9%)
              65.0%)

Note. Among the textual corpus for thematic analysis, some posts
did not indicate any themes. This is why the number of valid
posts for identifying key themes is smaller than the sample size
of the textual corpus.